DOES THE YEAR 2000 signal the end of the 20th century or the beginning of the 21st century? We'll let the purists argue that one; in the meantime, we've selected 21 industry voices to guide us toward the future, into the year 2000 and beyond.
Featuring several founding fathers of the shopping center industry, the panel also includes individuals selected on the basis of their expertise in various disciplines: development, retailing, finance, management, leasing, marketing, design and. We asked each participant the same five questions related to the past, present and future of our industry.
In the pages that follow, this select group shares its views on the retail industry, discussing successes and failures in the 20th century and envisioning shopping centers of the future. Due to space constraints, we present here the response to only one question from each of our 21 voices.
However, because of the substantive information, the complete text is posted on SCW's website, scwonline.com. Please visit the site and engage in the insights, analysis and opinions of our panel of experts.
Greatest Achievement Steven J. Guttman President and CEO Federal Realty Investment Trust, Rockville, Md.
The development of Country Club Plaza in Kansas City. This was the first shopping center development in the United States, and, interestingly, it has all the characteristics of what I believe will prove to be the model of the ultimate shopping venue of the 21st century.
Laurence C. Siegel Chairman and CEO The Mills Corp., Arlington, Va.
I call it "retail as theater" - merchandise and its presentation coming to life in a multi-dimensional format. When I was a kid my father worked for John Wanamaker's in Philadelphia, where the downtown store had a Christmas show with water and lights that brought a certain vibrancy to the department store, and drew tremendous traffic.
Today, great merchants like Johnny Morris at Bass Pro, Mickey Drexler at the Gap, and Evan Cole at ABC Carpet and Home have found a way to give voltage to their products and store environments. From that energy comes consumer interest, longevity, the emergence of true brand value, and, ultimately, profitability.
Whoever thought, 100 years ago, that stores would feature fishing ponds or cooking kitchens or rock-climbing walls or Internet kiosks? Today, these amenities are part of the hook that keeps a busy consumer interested and enthusiastic.
Melvin Simon Co-Chairman Simon Property Group, Indianapolis
The 1960s marked a radical change in the way retailers related to their customers. The growth of suburbia fueled by the demand of returning GIs for affordable housing for their families may well have provided the demand for change. But what really made it possible was the development of regional and interstate transportation systems.
Also, development of the mass media, offering retailers the opportunity to market to an increasingly diverse population base, resulted in a larger, more dynamic industry than would otherwise have been the case.
Changing Marketplace Phil Engelke Vice President/Director of ID8 RTKL Associates, Baltimore
People are not shopping purely as recreation or purely for existence; they are looking for meaning and context as well as a good. Today's consumer is infinitely more educated, more worldly and more sophisticated. This is a function of our hyper-charged cultures as much as anything, but there is an aging population out there that is expecting much, much more than is now offered. And, as a result, our business strategy has been developed to reach those consumers in meaningful, experiential ways without dumbing down the product or talking down to the consumer.
Jeanne Jackson President and CEO Banana Republic and Gap Inc. Direct San Francisco
The current trends in customer behavior have not only influenced but also driven the current strategy at Banana Republic. The casualization of the workplace has created a need for modern clothes that are versatile. At the same time, style is becoming more democratic: All customers expect - and in fact demand - style and quality at a good value in an easy shopping environment, whether that environment is a store, a catalog or online.
Michael S. Rubin President MRA International, Philadelphia
We are at the threshold of two demographic tsunami waves: Boomers are redefining the lifestyles of maturity, while Generation X is redefining the nature of work and leisure time. In turn, the lifestyles and consumption patterns being shaped by these two demographic groups are influencing and being influenced by the exuberance of Generation Y for sophisticated design and experiential retail.
At MRA our business strategy is centered on three precepts: There's a huge gap between consumer wants and retail, dining and leisure products; there's a shift from product-based shopping to lifestyle-based exploring; and there's a hunger for identity, community and expression in emerging patterns of consumption.
Marianne Waggoner Executive Director of Retail Services CB Richard Ellis, Los Angeles
With increased competition and a higher cost of doing business, retailers have had to become more dependent on demographic data to understand patterns and trends when selecting sites, relocating stores, making inventory decisions, and deciding what changes are necessary to enhance performance. Without knowing its customers and understanding their buying habits, a retailer is sure to fail. Customer and competitor data is the foundation upon which sales forecasting and site-selection strategies are built.
Retail sales growth over the next five to 10 years will come from two dominant consumer segments: aging baby boomers and ethnic groups. By analyzing these population segment growth rates at the local market level, a profile emerges that might predict future dominant demographic types by market and successful retail formats.
Michael LaRue Principal LaRue Associates, Deerfield, Ill.
Several changes have occurred in the past decade or two that fundamentally influence retail strategy. Those influencing our business include:
* The continuing shift toward two-income households has created a time-stressed shopper who no longer has time to spend hours each week going from store to store. That drove the rapid expansion of big-box, category-killer stores, which have garnered increasing market share from conventional shopping center retailers.
* The city has re-emerged as a desirable place to live. Empty-nesters, younger families and professionals are choosing to live in the city, creating a demand for housing and places to shop. While the suburbs still offer growth opportunities, retailers no longer view them as the "only game in town."
Accordingly, our business strategy includes a far greater emphasis on urban cores as suitable sites for new retail stores. In addition, we continue to focus on assisting superstore operators such as Meijer, with their highly successful 230,000 sq. ft. general merchandise and grocery concept, and similar superstore retailers as they grow their Midwest presence.
Lessons Learned Anthony W. Deering Chairman of the Board and CEO The Rouse Co., Columbia, Md.
We've learned several lessons from failed retailers and shopping centers:
* Retailing is, and always has been, dynamic - management must be current and hands-on;
* Your offerings must be authentic - the consumer isn't fooled for very long;
* The bifurcation of the middle class created opportunities at the extremes of the income spectrum, but there was too much supply of space and product for a declining middle class; and
* Good projects can overcome tenant and/or department store failures - often ending up better off.
Parker W. Neely Jr. Principal Centurion Development Corp., Cornelius, N.C.
The most notable lesson to be learned from failed retailers is that the herd mentality is more often wrong than right. In the 1980s, many prominent shopping centers failed to thrive due directly to a combination of poor location strategy and market expansion that wasn't matched to existing operating resources. Development was swept along almost mindlessly by retail expansion fueled more by abundant capital and credit than by market demand.
Developers now know, as they should have known then, that the availability of cash is not a rationale for unchecked growth. It's a hard lesson to learn, but with the benefit of hindsight the development community should see clearly that cash is no substitute for good locations and low occupancy costs.
A serious concern I have today is that many of the real estate and development professionals of the '90s are again riding a crest of optimism and may be doomed to repeat some of the history of the '80s, particularly if they stop focusing on the basic attributes for retail success.
Rapid expansion is both the best and worst of plans for retailers. As a retailer, if you lack adequate growth capital, or overpay for your real estate to meet objectives, or if you fail to provide the operating infrastructure to meet new store growth, you will fail.
It's equally important to acknowledge that your business is retailing, not real estate. Examples abound of national retailers being led by their real estate department's desire to build real estate empires and then running out of capital on which to grow. That trend put pressure on every aspect of their business and put many otherwise successful retailers out of business. In short, know your business and focus on it.
Mace Siegel Chairman The Macerich Co., Santa Monica, Calif.
In the retail business, bankruptcy has been a way of life throughout my 50 years. We have seen the death of variety stores (except for Kresge), many discount department store companies, catalog stores, home centers, etc. The constant weeding out is evolutionary. When the real estate is properly located, bankruptcies can create excellent opportunities to replace departed tenants with far better merchants. However, when the location is poor, the property may have to be converted to a different use other than retail.
A. Alfred Taubman Chairman The Taubman Co., Bloomfield Hills, Mich.
Of the very few regional malls that have failed, management must take a large share of the blame for initially making poor decisions regarding location and failing to keep the properties fresh and competitive in an ever-changing environment. Our industry has seen that failing to offer customers the stores and merchandise they demand will leave a center vulnerable to competitive development and serious market share erosion.
Of course, scores of retail concepts have come and gone for myriad reasons over the past 100 years. But there is one lesson in particular that should never be forgotten: There can be no true off-price merchandise without full-price goods.
Too many times we have seen strong retail brands all but abandon their full-price strategy to capture increased volume in off-price venues. This has proven to be at best a short-term solution to sagging sales, ultimately destroying even the most trusted brands. A delicate equilibrium will always be essential to maintaining the attractiveness of respected products and merchandise.
Most Admired John Bucksbaum CEO General Growth Properties Inc.,
Martin Bucksbaum is my most admired person in real estate. Martin continually strove to create a better project, one that incorporated the needs of customers, retailers and investors to be successful for all.
Martin Bucksbaum worked carefully with these constituents to avoid building projects that would not be successful or ones that were not necessary. Martin built when the demand warranted, and not because there was money available. He had a keen sense for understanding the benefits of real estate for both the owner and the user, and to me this is what made him so special.
Michael D. Beyard Vice President and Senior Resident Fellow Urban Land Institute (ULI), Washington, D.C.
The retailing industry has seen numerous admirable individuals and admirable projects over the years. But I think that the true sign of greatness is someone whose ideas, concepts and tangible contributions - in a word, vision - outlives contemporary critics, changing fashions, cyclical trends and revisionist history.
Using this definition, the list of potential visionaries shortens considerably. Jesse Clyde (JC) Nichols, a founder of the Urban Land Institute in 1936, is my choice. While perhaps you might see an inherent conflict of interest in my selection, I think his lifetime contribution, not just to the retail industry but to the community-building profession as a whole, justifies the honor. Sharing top billing is his greatest creation, Country Club Plaza, in Kansas City, Mo.
JC Nichols was a community builder, in the most profound sense. He had a vision of community that is as relevant today as when he first espoused it in the early part of the century. His vision included a public commercial realm that largely disappeared from American cities when downtowns collapsed in later years, and that never really existed in most new suburban towns that grew up alongside.
His vision, brilliantly articulated in Country Club Plaza beginning in the 1920s, was to view communities holistically, as places for people not only to live but also to interact in a public environment that provided for their daily needs. The environment for shopping that he created as the centerpiece of his planned community is still a place of beauty and culture. It is timeless in its appeal and in its idealized vision of a commercial town center in which all aspects of life intersect.
JC Nichols' specific innovations are almost beside the point but must be mentioned. At Country Club Plaza he inaugurated the first stylized architectural theme in a shopping center along with the first unified management policies, signage coordination, parking stations, and landscaping amenities including numerous fountains and plazas.
But it is the tout ensemble of the place that is his greatest contribution; he created a community, an environment of the highest quality that reflected a gracious way of life. What JC Nichols achieved in Country Club Plaza more than 70 years ago is what every shopping center developer is trying to re-create today. It is the gold standard of American retail development.
Kathleen Nelson Managing Director TIAA-CREF, New York
There are a number of outstanding trailblazers in the development of the modern mall complex. It is impossible to name them all, but I think that Martin and Matt Bucksbaum, Ed DeBartolo, Ernie Hahn, Dick Jacobs, Jim Rouse, Mel Simon and Al Taubman all made very great contributions. I admire the work that each has done.
Naming one person is difficult, but I would say that Len Farber gets my vote. Len Farber heads the Leonard L. Farber Co., originally out of Hartsdale, N.Y. He started his development career building A&P strip shopping centers. He developed a relationship with Sears in the '50s and '60s, building freestanding Sears stores, which later evolved into Sears-anchored enclosed malls. He also built relationships with other department stores, such as Allied, Associated Dry Goods, JCPenney, Montgomery Ward, etc. The first enclosed malls he developed were in: Bakersfield and Northridge. Seeing the tremendous growth opportunities in Florida, he developed Pompano Fashion Square and Orlando Fashion Square, among others.
While Len Farber is one of the pioneer shopping center developers, I believe his greatest contribution was spearheading the organization of all the various disciplines - developers, department stores, retailers, lawyers, architects and, of course, lenders - into the powerful industry that we know today as the shopping center industry.
Lee Wagman President and CEO TrizecHahn Development, San Diego
Retailers: * Sam Walton, Wal-Mart- for being the Henry Ford of retailing.
* Stanley Marcus, Neiman Marcus - for showing that shopping can be exciting.
* Millard Drexler, The Gap - for transforming stores into a globally admired brand.
Centers: * Faneuil Hall, Horton Plaza, Forum Shops - for showing how to expand the traditional shopping center form into an entertainment destination.
Design: * James Rouse, Ernie Hahn, Al Taubman and Mel Simon - for providing brilliant entrepreneurial examples to our industry.
Kevin R. Roche President and CEO FRCH Design Worldwide, A Waypoint Co., Cincinnati
One must think of the early innovators such as Marvin Traub of Bloomingdale's, Stanley Marcus at Neiman Marcus, Frederick Lazarus of Federated Department Stores, Edward DeBartolo and Mel Simon, and Charles Lazarus of Toys 'R' Us.
In my circle of experience over the past 25 years, my top-of-mind list is the following:
* The Gap because it innovates within its focus. The Gap truly believes less is more.
* The Limited for sheer creativity and intuitive genius.
* Federated Department Stores for the spirit to grow and evolve, looking beyond its immediate industry.
* The Mills Corp. for the development and creation of the outlet center as an entertainment-leisure destination.
* Ralph Lauren for teaching us the power of branding.
* Disney, Warner Bros., Universal Studios and Discovery Channel for introducing entertainment content to the retail industry.
* Nike for defining a lifestyle.
* Starbucks for taking a basic staple and commodity of the world and building a lifestyle-branded destination and integrated experience.
* Home Depot for the creation and defining of an industry, and the humility and understanding of the need to continue to re-invent oneself.
* Amazon.com for the wake-up call.
Looking Forward Charlotte Ellis Senior Vice President of Marketing and Public Relations Konover Property Trust, Carey, N.C.
It combines the physical space with the virtual space. The shopping center of the future will be found both down the street and in my house, a combination of the convenience and intuition that the Internet can offer and the brick-and-mortar center nearby. We're just beginning to explore this at Konover Property Trust with truefinds.com, our online shopping site for branded merchandise.
The ideal center of the future will have stores that know me as a shopper, just as the grocer on the corner knew my grandmother. It will allow me to use technologies like UPC codes and the Internet to stock my closet and pantry and to save time.
But, because there's a strong biological need to gather with others, I'll always want the brick-and-mortar option, too. I'll want to touch and feel and try some purchases. And, yes, I'll want to exchange items at the nearest store, but I want to park at the front door.
At some point soon, the computer will function more like the television. I'll be able to turn it on with the remote, and a home page tailored for me will be accessible all the time. It will have the weather forecast, information about school lunch menus, my personal calendar, a reminder of my doctor's appointment, a way to schedule a haircut without using the phone. It will also allow me to reorder groceries or pantyhose before I run out.
The stores I shop will know my size and preferences, and they'll use the computer to help me buy more things and have them delivered to my house. Stores that aren't in my market will be in my house, and I'll have more choices than ever before.
Janet Grove Chairman of Federated Merchandising Group, New York Federated Department Stores Inc., Cincinnati
Shopping centers of the future need to break the mold and rethink the destination as a total-day experience. They will incorporate more spa and gym and personal care needs, doctors/dentists/eye exams, food and multi-entertainment complexes.
They will offer activities for both adults and kids. It will be a one-stop experience with easy entry and exit. The flow between activities will make the adventure hassle-free. Customers will be able to go for an hour and take care of a couple of things - or stay all day, get their tasks accomplished and have fun, too.
Ron Jobe Vice President of Construction EMJ Corp., Chattanooga, Tenn.
Easy accessibility by all modes of transportation. Includes a lounge area with available audio/video/reading area; self checkout and free home delivery of goods purchased on request; interactive demonstration/training areas for tools, sporting goods and appliances being contemplated for purchase.
James Ratner Executive Vice President Forest City Enterprises, Cleveland
I don't think there is any ideal shopping center of the future. To the contrary, in the future, the ideal shopping center will have no standardized format. It will be custom-made for each individual community. It will contain a mix of traditional and non-traditional tenants in a very unconventional physical space.
The new shopping centers we're now developing in Richmond, Va., Atlanta and San Francisco are all completely different. One is a regional shopping center with a very unusual layout, with a large entertainment complex in the center. In Richmond, Va., we're developing a four-department-store center that is not enclosed. In San Francisco, we're doing a seven-level, hotel-and-retail center where entertainment is a major focus.
What I think we've finally left behind in the 20th century is the idea that there is a single idea or single format that will work in all markets. The great challenge for all of us is the reality that each center we're doing now is unique. The age of the cookie cutter - stamping out shopping centers like we've stamped out automobiles - is gone. Each product will have to be individually conceived, created and implemented for a specific market.