Winter 2012 Mall Programs Nurture Retail Growth
In a stagnant economy, mall developers are trying new strategies to kindle retail entrepreneurship and drive traffic to their centers.
Thirty years ago, incubation of specialty retail merchants meant holding onto successful tenants until they were ready to move from a cart to a kiosk or inline store. Today, incubation for some real estate developers is about the importance of protecting property assets and giving back to the community so that everybody wins. The retailer wins by testing the waters—operating a business at a fraction of the cost—and the developer wins by adding innovative operators to malls that are finding alternate ways to drive revenue. In an effort to bring new and unique products to a center, some companies are forming partnerships that simultaneously teach, mentor and incubate a retail business. Whether it is a “reality TV-like” competition or simply nurturing an entrepreneur, specialty retailers are being introduced into the shopping center business, one concept at a time.
Three years ago, Washington, D.C.-based developer Madison Marquette saw the writing on the wall. As the economy in the San Francisco Bay area slowed, the company identified ways of creating a sustainable program that brought new and relevant retailers into the leasing pipeline and sustained existing ones. One of the first such programs is called “Retail Star.”
The Retail Star program has two objectives: find new and creative retailers and create a series of events that drive traffic to the properties. The leasing and marketing teams decided a reality-television-like program was the proper vehicle. Contestants work to impress a judging panel comprised of local leaders, retail experts and members of the Madison Marquette leadership team. Just as in reality television, they go through a series of elimination rounds, the last couple of which are hosted as public events at the mall. Whitney Livingston, VP of Marketing Services at Madison Marquette, says the reality show concept was a great fit for the competition. “It was around the time that the American Idol show was at its peak and people were really interested in the show, so it seemed like the perfect format for us,” Livingston says. The program began at Bayfair Center in San Leandro, CA with 50 applicants. Most recently, with over 125 entrepreneur applications for the 2011 competition, the program has expanded to include Bay Street, an outdoor lifestyle center in Emeryville, CA. One winner was chosen for each center.
When the contest was limited to just Bayfair Center, the grand prizewinner received a package of prizes valued over $200,000. The award included a $25,000 check from Madison Marquette; free rent for one year; a “move-in ready” store of approximately 1,400-2,000 square feet; free consultations with architects and designers; training courses and a three-year free membership to the local Chamber of Commerce. This year, with expansion into Bay Street, the prizes for winning there are different—up to $5,000 in seed money from Madison Marquette and a rent-free RMU for one year.
Sarah Skotvold, Marketing Manager at Bayfair and Bay Street centers, says that even if the program ultimately crowns only one or two winners, it has helped put a lot of other retailers in business. Many of the applicants benefitted from the exposure and were able to secure small business loans enabling them to become temporary tenants at the centers.
Each year Madison Marquette has partnered with the local Chamber of Commerce and SCORE, a non-profit that assists retailers in finding financing. SCORE is a resource partner with the U.S. Small Business Administration, and has been mentoring small business owners for more than forty years.
In 2009, Ben Wanzo, a former schoolteacher who also ran an afterschool program, launched his first store as the winner of the Retail Star program. “Teachbar” brings together a café and the classroom—the concept offers tutoring in a café for ages 3 to adults. Wanzo says the idea came to him when he saw the value of cafés and how much people loved being in them. He reports that things are going well and that the concept is still strong. “We have tutors on staff and we also offer complementary programs like goal workshops to help people set goals on a monthly basis,” he says.
Wanzo enjoyed the competition that lead to his win. “[The competition] gave me a leg up and my concept was validated by the judges. It was a rewarding experience,” he says. As a teacher, Wanzo admits he knew nothing at all about retail. He says that since his win he has learned the importance of “developing systems, processes and routine; and, having a staff that understands customer service.”
Zara’s Wigs, a specialty wig store, opened its doors after the second Retail Star competition. It specializes in custom wigs for cancer survivors and often offers private appointments for customers.
Each year, based on the center’s available space, the program’s requests for applicants shifts. This year, the focus of the competition was on food retail and it led to “Sweet Abundance,” a specialty cake bakery that opened in the food court at Bayfair.
Amiee D’maris with her “Eco Chic Pet Boutique” won a spot at Bay Street Emeryville.
Who wants to be in the mall?
Tough economic times call for unique solutions and that is what Provenzano Resources provided to a center that was undergoing a major renovation during the recession. “It is like digging for gold these days because it is hard to find new and unique products that are not another sunglass or cell phone operator,” says Deborah Kravitz, Partner in Los Angeles-based Provenzano Resources. Last year, her firm teamed up with Capri Capital Partners, the owners of Baldwin Hills Crenshaw Plaza, and the Los Angeles Urban League to create a contest called “Who Wants to be The Next Entrepreneur Star.” The grand prize was eight months of free rent and four months at 15% rent.
The team enlisted a distinguished group of local judges, mentors and instructors. The competition was launched with an open house at the mall and invited prospective entrepreneurs to participate.
To qualify to compete, the contestants were required to take a rigorous educational program consisting of eight consecutive, weekend classes. The classes were taught by Vermont Slauson Economic Development Corporation, a non-profit organization concerned with business development and training in the south Los Angeles area. The coursework taught prospective retailers how to develop a business plan, hire employees, the basics of visual merchandising and how to operate a retail merchandising unit in the mall.
Over 60 prospective retailers enrolled in the classes and at its completion 28 entrants qualified. “The people who attended the workshops had great ideas,” Kravitz says. “These were people we had seen before [through prospecting for the center] but they couldn’t afford to rent space in the mall.” By removing or lessening the rent barrier, the competition allowed for new concepts to flow into the mall.
As part of the competition, the mall hosted a public event where the contestants gave presentations before a panel of judges. “The caliber of the entrepreneurs was phenomenal,” Kravitz says. Three finalists were chosen; each won an expense-paid trip to Las Vegas to attend the 2011 SPREE tradeshow where PRI hosted a dinner for them.
As a final task, each had to develop and set up their business on an RMU. Capri Capital Partners was so impressed with the caliber of the finalists, they asked, “What would you do if we made them all winners?” And, they did just that offering first, second and third place awards. The Los Angeles Urban League also honored the contenders at a black tie dinner where the winners were announced.
The first place winner was Barbara Lawson, a full-time administrative assistant and mother of four, who in her spare time hand paints decorative glassware. The second and third place winners were Mimi’s Handmade Body Butter Lotions and Artistic Expressions Art & Jewelry. The second and third place winners also received concessions in rent.
Canadians are getting into the act too. The Centre, a Morguard Investments property located in Saskatoon, Saskatchewan created a retailer contest with “MOMpreneur,” a national Canadian magazine. The center initiated the idea and sold it to the magazine that in turn supported the center’s efforts by linking their websites for contestant registration. The magazine allowed the center to use its name and trademark in all in-mall promotions.
Janine Senick, specialty leasing manager, worked with her marketing manager, Leanne Tameling to create the 2011 competition; they were so pleased with the outcomes that they are repeating it this year. The initial program had two goals: first, create an avenue for entrepreneurial mothers to grow their business or launch an idea; and second, create a competition that would build awareness of the specialty leasing program at the center.
Every ounce of creative support for the competition came from this center’s duo, both young moms themselves. “We didn’t want to make moms feel uncomfortable. Every thing we did we were careful to not deter their interest,” Senick says. The competition included in-mall events followed by a judged contest. “We [hosted] a ‘Mom’s Marketplace’ and all the contestants were allowed to showcase and sell in the mall for one week for free,” Senick says. The weeklong event was a way to entice and reward the prospective retailers, and as Tameling reports it had the added benefits of driving traffic and free publicity—there was television coverage of the event.
The Centre Mall had 20 applicants offering a variety of products and services from health and fitness products, baby products to counseling services.
Celeste Bodnaryk, owner of Sphere-Licious, was this year’s winner. Her most popular products are decorated chocolate cake balls on sticks, a concept that has become increasingly trendy. The cake balls are approximately the size of a quarter and can be eaten in two bites. Bodnaryk won three months’ free RMU rent, with visual merchandising support and ongoing mentoring provided by the mall retailers. Senick says that while the cake balls were delicious, Bodnaryk’s business plan was equally yummy. “It was her great business plan that set her above the rest,” Senick says. The operator is still producing cake balls and running her business from her home. Her family commitments made it difficult for her to continue operating with long retail hours. “I know the knowledge she gained was worth a million dollars,” Senick says.
“We are getting other businesses in the city behind us and we have had more inquiries as a result of our effort,” Senick says. “The business community’s support has opened up new doors for our center.”
For the next go-around to start this month, the team plans to expand the program to “Moms, Dads and Kid-preneurs” and will use Junior Achievement’s help to showcase talented youths. Junior Achievement promotes, among other things, literacy and work-readiness skills and empowers young people to own their economic success. MOMpreneur Magazine is not scheduled to be involved this year. “The local business community’s interest was peaked when they heard about the program and now, everyone in the community wants to be a part of it,” Tameling says. Winners will be announced in the spring.
In today’s challenging economic environment, the pressure is on to help retailers stay in business and incubation programs do just that. As Livingston points out, these programs nurture more than just one winner. “Every year after the Retail Star competition, we have businesses that did not make it through the process as a winner, but they started on their own and we offered creative rent structures,” she says.
The challenge with all incubation programs will be to make them scalable in order to grow more retail store openings. “I think it has to grow organically. The bigger issue is creating ongoing training and development for retailers,” Kravitz says. “Doing incubation programs in major cities and partnering with large non-profits like the Los Angles Urban League and maybe trade shows and other groups can help develop retail ideas and retailers.”
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