For many retailers, road doesn't lead to Wichita
07/25/2012 9:43 PM
07/25/2012 9:43 PM
There's an old axiom in merchandising: "Rooftops, then retail." That axiom vanished earlier this decade as retail sales skyrocketed and revenue-hungry retailers began "greenfielding" — dropping in new stores where subdivisions might be built. Then the housing market tanked, the "rooftops" didn't get built, many of those stores failed and retailers grew risk-averse, making new stores tougher to land.
That doesn't mean that the top 10 targets that Eagle readers identified in an online poll won't land at key high-traffic spots in Wichita; it just means they'll take a little longer.
"Be patient," said Greg Schuster, vice president and principal at Cassidy Turley, a national site selection firm.
"If you look at the sheer number of stores national retailers are adding, it's significantly less. When you combine that with the lack of capital available for developers who'd put a project together, that's two key ingredients not working in anyone's immediate favor, in Wichita or across the country."
Jeff Berg, a site selector with Lane 4 Property Group in Kansas City, Mo., said retailers are being opportunistic in where they choose to go.
"The keys today are stability, a proven sales history at a location," he said.
"Companies don't need or want to take on a huge number of new stores right now, so they're going to cherry-pick the best deals around the country and try to take advantage of landlords who need a tenant and might even be willing to take a loss to get them in."
Big-name national retailers like the Cheesecake Factory want a guaranteed return from a new store, brokers said.
That can run the gamut from specific revenue requirements — as high as $9 million annually for the Cheesecake Factory, brokers said, about twice what the top-performing Wichita restaurant produces — to the size of the metropolitan area the business will draw from.
Retailers look internally as well. How does a city fit into their product distribution system? Will a new store fit into nearby locations to best leverage advertising dollars?
There's also location: If there's no high traffic count, there's no store, regardless of the size of the city.
And if the retailer is a franchise operation, the availability of commercial credit becomes an issue. Generally, the financing options for franchisees aren't there today, the brokers say.
And then there's the city itself: What's the unemployment rate? What's consumer confidence like? Are new homes being built?
Witness Dave & Busters, which has specific market requirements: 1 million square feet of retail within a quarter-mile of its restaurant, 100,000 office workers within three miles and 500,000 population within 10 miles, said Jeff Wood, the company's chief development officer.
"In the near term, we are focused on major metro areas in which we currently lack store presence: Boston, San Francisco, Seattle, Orlando, etc.," Wood said.
It's a similar story at Joe's Crab Shack, said spokeswoman Kristen Temple.
"When looking for Joe's Crab Shack sites, there are typically three main factors we take into consideration: population of the surrounding area, easy access to the location and demographics that match our most frequent patrons," Temple said.
Jerry Jones, Slawson Co.' s vice president for commercial development, said the criteria vary by company. But Wichita's going to have to grow — or wait out the larger markets — to land many of the big-time retailers.
"A lot of them have a cutoff of a million people, and it's arbitrary to some extent," he said. "It's a line we fall under and won't get over for quite a while. Those retailers and restaurants have a lot of markets to penetrate before we come up."
If a city can fit into these criteria, a successful retail recruitment is still going to take years instead of months, said George Laham, developer of the east-side lifestyle center Bradley Fair.
"A lot of these people on your list want to be in larger markets," Laham said. "More people, more volume, more profit. That's the model right now —'We'd rather open our fifth store in the Chicago market than our first store in Wichita' — because of management, distribution, marketing. Just more bang and more economy for the buck."
But that doesn't mean that Wichita's key high-traffic spots, like Rock Road, aren't attractive to national retailers, Laham said.
"It is a patience game and a persistence game," he said. "It took me four years to get the Gap at Bradley Fair, and they were the second national (retailer) out here. That opened the floodgate to the nationals, and all the nationals talk.... They all want to be together."
The retail crash
Schuster, the national site selector, said much of retail's rise and fall in the past decade is tied directly to the explosive — and ultimately unsustainable — housing growth across the country.
When the growth stopped, beginning in fall 2008, retailers saw their sales numbers plummet and focused back on metro areas with established revenue track records, Schuster said.
"There's less appetite for risk in opening a new store, and retailers are a lot more strategic today than they were," Schuster said.
So where does Wichita realistically fit in our readers' wish list?
Some, like Cheesecake Factory, are a big longshot until the area doubles in size, brokers say.
Others, like Apple Store, are two or three years away once the aggressive computer-maker fills up top-tier markets.
"It's not just Wichita right now. The whole market is bad," said Berg of Lane 4. "Places that used to be hot like Phoenix and Las Vegas are being avoided like the plague. The only area that is as strong as it used to be is Texas.
"I don't think Wichita has fallen off anyone's radar. You've just always been a (smaller) market."