One of the strangest beliefs I’ve encountered in my 18 years in the shopping centre industry is that retailing is an easy business to succeed in. I make this statement not on the basis of any scientific survey, but rather on the fact that I see so many people doing it who are obviously ill suited to the task and would be far more usefully employ elsewhere – let’s say, driving a truck. Buying a job is sometimes easier than applying for one, and so there is no shortage of folks willin
g to put up their life savings or money borrowed from an unvigilant bank officer to take on a franchise or open their own shop.
Neither, unfortunately, is there a shortage of franchise operators willing to set these people out to dry.
Ironically, often the biggest risks are taken not by people who are blameless for not knowing better, but by those who definitely should – large international chains.
It is this perpetual risk taking by established retailers that gladdens the landlord’s heart and makes him sleep sound as a bug in a rug.
There are few things a shopping centre operator loves more, after all, than new concepts by retailers who have been around a long time.
They are usually creditworthy, they have retailing know how, the potential to multiply, and inject new blood into the shopping centre, giving people another reason to visit.
Unfortunately, they are not always, or even often, successful.
Yet despite this low strike rate, there are some retailers you just can’t keep from coming back time and again.
A poster child for this is Tesco, the British food and general merchandiser that ranks second only to Walmart in annual retail sales.
Tesco entered the US in late 2007, grandiosely, loudly, and with the kind of chest thumping self belief that wouldn’t have been out of place when the British Empire was at its very zenith.
Basing itself in headquarters within easy earshot of LAX, Tesco quickly set about opening more than 200 small format grocery stores under the moniker, Fresh & Easy, many in neighbourhood shopping centres in California and Arizona, bringing the concept head to head with some of the strongest local competitors.
Ironically, in a neighbourhood shopping centre just a stone’s throw from its headquarters in El Segundo, a gleaming Fresh & Easy was being soundly thrashed by the local Trader Joe’s.
Five years and $1.6 billion later, it was all over. Fresh & Easy was pronounced a failure, Tesco sold up to a bottom feeder and scurried out of the market as fast as its little legs could carry it.
I made the following comment in my blog at the time: “Tesco was a stunning failure in the US and a reminder to all international retailers that overwhelming success in one’s domestic market coupled with intensive market research prior to entry into a new market do not guarantee success in the latter”.
But you just can’t keep retailers like Tesco down.
It is now back trying to crack the US market, but the interesting thing about this new attempt is that it is with apparel and not with food.
This should once again quicken the pulses of America’s ever alert shopping centre owners.
Tesco has been tinkering for some time with F&F, a full range apparel line at the value end of the market.
As with Fresh & Easy, Tesco will not mess around, reportedly planning to open seven stores – all in regional shopping centres – on the US east coast before the end of the year.
There are precedents for food retailers spinning off apparel lines. A good example is Joe Fresh, a value clothing concept created by Canadian grocery chain, Loblaw, in 2006.
Joe Fresh now has 16 standalone stores in its native Canada and six in the US, all in New York. It is also available in around 650 department store shop in shops across the US.
Joseph Mimran, the designer who created Joe Fresh for Loblaw, is also behind the Mix ‘cheap chic’ apparel line launched in 2011 by Australia’s very own Coles. It’s a small world. So far, Mix, unlike Joe Fresh, has stayed in the supermarket aisles and not experimented with freestanding stores.
Walmart, of course, has for years had its own private label brand clothing brand, George, which is a huge seller, but has so far not come to anything as a freestanding concept.
For shopping centre owners to start getting excited about the burgeoning interest of grocers in launching their own fashion lines, Tesco’s experience with its F&F brand in US shopping centres will need to be a lot more positive than its earlier tilt with Fresh & Easy.
If it fails, and concepts like Joe Fresh and Mix stay primarily within the department store or supermarket, it’s a net minus for property, which doesn’t want still more cut price competitors for the fashion specialty shops that pay so much of the rent.
Michael Baker is principal of Baker Consulting and can be reached at michael@mbaker-retail.comand www.mbaker-retail.com.