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Urban expansion and 'masstige' defining retail success.

In recent months, many retailers have been battered by the economy and a notable downturn in consumer confidence. However, many have managed to buck the trend and prosper. These retailers generally have two things in common -- they have a strong sense of their brand identity and who their customer is. But they're also willing and able to adapt that vision to make it work in an urban environment, which is key to a brand's continued evolution, as is the ability to introduce new concepts.

Coach is a great "small box" example of a brand that has stayed true to its identity. As one of the few retailers to post consistent sales gains since Sept. 11, Coach has continued to expand in the U.S. by sticking to its core brand competency -- providing luxury accessories to consumers in local markets. It also hasn't succumbed to price-cutting, an affliction that strikes many a retailer in tough times but can also lead to a severely diminished brand identity. While cost-cutting may work as a short-term fix to lure customers, it's an impossible way to grow a profitable business long-term.

Of those retailers that are succeeding in the current climate, a great many of them fall under the category of "masstige" -- brands and products that have high-end, prestigious characteristics but with prices and locations that make them accessible to a mass consumer audience. Masstige brands have particular appeal to urban consumers, who are always striving to be trendy but aren't above a bargain. Target was one of the first to push masstige with its introduction of Mossimo and Michael Graves products. Sephora is also a great example, as it offers high-end beauty products at accessible prices in a large number of locations, many of them urban, streetfront properties. Other burgeoning masstige retailers include Kohl's and Wal-Mart. These retailers are all in various stages of understanding that today's consumer may have a Prada bag, yet buy Nike sneakers, and Joe Boxer underwear from Kmart all at the same time. As a result, the prognosis for Target and Wal-Mart remains strong, especially as they evolve their brands into urban markets.

On the other hand, the prognosis for other big box retailers remains questionable. As Kmart emerges from bankruptcy, it faces a number of formidable challenges, key among them logistics. The most important factor in successful retailing today is the ability to get product on the shelves when customers need it. Kmart has not been successful at this. Wal-Mart, however, has set the standard and it's one of the keys to their continued success. Sears is another that is at an important crossroads. The company has quite simply lost its franchise to the big box appliance and electronics retailers of the world, like Best Buy and Circuit City, which are learning to thrive in urban markets, something Sears has not been able to duplicate. The Lowe's and Home Depots of the world, along with Kohl's and Target, have further eroded the Sears brand identity. For Sears to survive, it must define who and what it is and find a way to communicate that to customers.

In the coming months, expect even more consolidation among discounters and department stores. Also expect more expansion by Target, Kohl's, Wal-Mart, Best Buy and Home Depot, especially in urban markets. The ability to bring these brands to urban consumers while retaining their core identity will truly separate the companies of the future from those of the present and past. It will be an interesting time.
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Author:Hodos, Richard
Publication:Real Estate Weekly
Geographic Code:1USA
Date:Apr 30, 2003
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