Urban Retail Planning 101: How to fit a big-box into a small space

NEW YORK —In the never-ending search for sustainable growth, many big-box retailers are re-examining their traditional one-size-fits-all real estate philosophy and suddenly doing an about-face. Instead of building exclusively in the path of suburban sprawl, a strategy that has served the sector well—especially the discount sector—for the better part of the last 50 years, the nation’s largest retailers are starting to expand into a market long considered off the big-box retail radar: downtown.

Despite the numerous costs involved in pursuing an urban growth strategy, retail companies are starting to look at downtown markets as both growth opportunities and a means of reaching an underserved population, according to Neil Stern of Chicago-based McMillan/Doolittle. “Big retailers have tended to take their box and simply ‘wedge’ it into an urban space, not making the concessions to unique spaces and the unique needs of a city customer,” he said, adding that in the urban space the challenge is “to defy the cookie-cutter box mentality.”

One company that has hinged its entire strategy on defying the big-box cookie cutter is Target. And in the wake of recent news that the company is finally—after many years of rampant rumors—entering the Manhattan market, it’s about to defy those rules once again. David Blumenfeld of the Blumenfeld Development Group, the company currently constructing Target’s future location in Harlem, said he believes the Harlem Target that is scheduled to open in early 2009 will be a streamlined 135,000-square-foot supercenter format designed for tighter real estate markets. (A typical SuperTarget is closer to 175,000 square feet).

Stores adapt to the tight Manhattan real estate market not only with smaller floor plans and different layouts, but also with merchandise tailored to neighborhood needs. Before The Home Depot opened its doors in Manhattan in 2004, for example, it conducted 13 focus groups to determine what area consumers were looking for. They stocked more items like fitness equipment, green goods designed for balconies or rooftop gardens and office furniture. They also made almost everything in the store available for home delivery.

Whole Foods is also a great example of adapting well to Manhattan, according to Stern. The company plans each store individually, allowing it to be customized to each location. In its stores in dense urban markets, for example, it provides more prepared foods and designs checkout aisles fit for baskets instead of carts.

Adapting to the urban landscape will also be part of JCPenney’s strategy when it opens its doors in Manhattan in early 2009. Its first store in the borough will reside on the lower levels of the Manhattan Mall and will have a direct subway entrance to increase its visibility, according to spokesman Tim Lyons.

Perhaps the best example to date of a traditional big-box store adapting to the New York urban environment is that of Best Buy. For a company best known for its all-under-one-roof electronics mega-stores, the Manhattan market was certainly not without its challenges when the company first entered in 2002.

“A company must be able to tailor its assortment, look and feel for the communities it serves,” said James Damian, Best Buy senior vp of visual merchandising and store design, at the time. A lot of big-box stores have ignored that. Our success [here] will be measured by how well we can establish that.”

As he predicted, the company’s success in its now three full-line Manhattan stores has been a product of a level of flexibility in design and adaptability (such as multilevel and/or basement locations) seldom seen in traditional suburban chain retailing. The company has also demonstrated its flexibility in Manhattan by setting up 1,000-square-foot Best Buy Mobile stores, a nine-unit test of mobile-communication boutiques under the Best Buy moniker.

Not everyone chooses to conform to the Manhattan landscape, however. IKEA’s first store in the New York area will do the exact opposite. The store, which is set to open in Brooklyn in 2008, will be a standard IKEA size with the same product mix offered in every IKEA store. Instead of adapting and going into Manhattan, IKEA has decided to bring Manhattan to it by transforming the Red Hook location into a destination, said spokesman Joseph Roth. The location will offer supervised childcare and restaurants and customers will be ferried from Manhattan or shuttled from the nearest subway stops for free.

Though Roth said IKEA is unlikely to move into Manhattan any time soon, success in the boroughs can often motivate a move into the city, as in the case of JCPenney whose stores in Queens and The Bronx have been two of its most successful. Costco, which has stores in Brooklyn, Staten Island and Queens, had originally eyed Target’s future Harlem location, yet bowed out when the real estate premium proved too daunting.

Despite years of holding the “downtown” urban market at arms length, it seems big-box may finally be heeding the call of the urban siren. “The [Manhattan] boroughs have done exceptionally well with big-box retail,” Blumenfeld said. “The sales in all of these areas are almost double the rest of the national chains. Naturally, Manhattan is the next logical target.”