 |
 |
 |
 |
 |
 |
 |
 |
Shopping Centers Today -> November 2007
 PRINT THIS STORY: |
  CHANGE TEXT SIZE: |
LANDLORDS DEBATE ENTERTAINMENT’S PLACE, AND PROPERTY RIGHTS ENCOURAGE EMERGING ECONOMIES
Brands in need of Band-Aids
Brand image is paramount in retailing, and it rises and falls across the board, says James R. Gregory, CEO of research firm CoreBrand. “Mighty brands are falling hard, while many obscure brands are seen rising to significant new heights,” Gregory said, pointing to his firm’s corporate branding index, which has for 16 years tracked some 1,200 U.S. brands across 47 industries. According to the index, such titans as Kroger, Macy’s (formerly Federated Department Stores) and Safeway have seen brand equity decline, while Best Buy, Bed Bath & Beyond, Dollar General and Target have enjoyed significant gains.
Specifically, Target’s brand equity is on track to contribute about $9.13 billion to its market capitalization this year, representing 18 percent of its total market capitalization, the index says. That’s up from 15 percent in 2002. Dollar General grew its brand equity contribution from 4.75 percent of market cap in 2002 to 8.5 today, a 79 percent jump. Macy’s, meanwhile, has watched brand equity drop from 4.6 percent of market cap in 2004 to 1.97 percent today. Will the name change from Federated to Macy’s help? It’s possible, says Gregory. “The answer is entirely dependent on whether management has learned the lesson about the importance of the corporate brand,” Gregory said. The U.S. retail sector generates an overall average of 11.54 percent of market cap directly from its “corporate brand,” versus 6.79 percent for the average company in the CoreBrand index.
Fun’s function
Entertainment is crucial to the success of malls in many parts of the world, especially in emerging economies, but irrelevant in the U.S., panelists said at the ICSC World Summit, in Cape Town, South Africa, last month. Wave pools, ski slopes and the like help differentiate malls and keep families coming back, said Ian Watt, executive director of Cape Town-based Old Mutual Investment Group Property Investments. Such entertainment concepts will be important to the new malls being planned in China, India and other markets where consumers live in cramped spaces with few entertainment options, he said. “It’s all part of forming an emotional connection with the customer,” said Rashid Doleh, CEO of Dubai, United Arab Emirates-based Emaar Malls.
This contrasts sharply with the American experience. Americans do not respond to skate parks or elaborate fountains in their regional malls because they already have many entertainment options — home theaters, sophisticated video game technologies, amusement parks and more, said William S. Taubman, COO of Taubman Centers. Consequently, U.S. consumers do not expect the local mall to be an entertainment hub. The U.S. is littered with empty boxes that were supposed to be entertainment uses and failed, he said. “It’s been tried and tried,” Taubman said. “The industry wasted billions of dollars building so-called entertainment centers that are now empty or have been redeveloped. Our customer wants brands.”
Meet the new anchors
Nontraditional anchors are becoming more and more important to U.S. regional malls, a Merrill Lynch equity analyst told attendees at ICSC’s Research Conference, in Toronto. Of the new regional mall space slated to open between this year and 2009, 36 percent will contain a nontraditional anchor (including discounters, sporting goods stores and warehouse clubs), up from 20 percent in 2003, said Craig Schmidt, vice president of securities research and economics at Merrill Lynch. Traditional department stores are still the most important anchors, occupying about 61 percent of the new regional mall space set to open between now and 2009, he said. That is down significantly from the 74 percent that department stores occupied in 2003. Behind the trend is the slowed growth of department stores and the willingness of other mall anchors to accept new co-tenants, conference panelists said. One downside is that nontraditional anchors tend to mail out fewer sales fliers and ads than traditional department stores, said William T. Ross, vice president of asset management at Forest City Enterprises, and this could mean lower traffic for a shopping center.
Good deeds
The shopping center industry needs to encourage the establishment of government-recognized property rights in emerging and Third World countries, says Hernando DeSoto, president of the Lima, Peru-based Institute for Liberty and Democracy. Government-sanctioned property rights are the key to successful capitalist economies, but a huge portion of the world operates without them, hampering new development, DeSoto says.
“If people don’t have property rights, they can’t have addresses,” he said, pointing out that formal addresses are needed for bank accounts and forms of personal identification. About 90 percent of Africans, like 70 percent of Latin Americans, have no formal property rights, DeSoto says. DeSoto addressed his comments to last month’s ICSC World Summit, in Cape Town, South Africa.
 | Current Issue November 2008 |