LOS ANGELES — Price per square foot and profitability is still important, but there’s more that goes into assessing a business than ever before.
As industry executives mull themes of retail real estate disruption during the International Council of Shopping Centers Next Generation conference taking place here downtown, one executive made calls to look beyond digital and e-commerce when it comes to being proactive about maintaining relevance in the market.
“We as investors and also landlords have to look at a lot deeper messaging than what we used to look at, which are the retail operating metrics — sales per square foot and profitability — in assessing whether a [brand] has legs or not. We have to look at retail as a vehicle for the overall brand experience and media to tell the story of the brand,” said Lion Capital principal Sherif Guirgis. “So there really just has to be a lot more flexibility in terms of how we look at the overall picture of what a business is.”
Lion Capital, which focuses on consumer brands, counts investments in companies such as AllSaints, luxury footwear brand Buscemi, John Varvatos, Alex and Ani, Authentic Brands Group and Perricone MD. Exits include American Apparel and Jimmy Choo.
“We’re really seeing a transformational shift…and nobody knows what’s coming,” Guirgis said. “So it’s really the ability to react to that and make sure that we’re in tune with how the industry’s changed. I think we’ll ultimately look back at this time period as the transition of when retail moved from what it was to what it’s going to be. And I think that people really focus on e-commerce and it’s as simple as people can shop for all their clothes and all their stuff online…but to us it’s not as simple as that because there’s plenty of retail businesses that have been disrupted by plenty of companies that don’t have strong e-commerce capabilities.”
Placing a store in a highly trafficked, Class A center doesn’t guarantee success anymore.
“Today, we’re spending 10 times more of our energy on the brand focus and the consumer focus,” Guirgis said. “We’re doing a ton of work in terms of industry research — engaging consulting firms, doing consumer surveys to understand which brands are really resonating with the consumer because, to us, that’s what informs the long-term growth potential on an omnichannel basis.”
Heritage brands and retailers that are attempting to play catch-up simply by building out a digital and e-commerce presence are missing the mark, Guirgis contended. He pointed to examples of brands Lion Capital has invested in as examples that there’s nothing wrong at brick-and-mortar for those that can effectively sell their story to consumers.
AllSaints is pushing shop-in-shop concepts within parts of its wholesale channel, and in places where it’s tried the concession model, has seen at least double growth in sales.
“That tells you that customers need that education, particularly when it’s a fast-growing brand that they may not be as familiar with,” Guirgis said.
There’s also Buscemi, the luxury men’s and women’s footwear and accessories brand launched in 2013. The company sells shoes made in Italy priced from $800 to $1,000 and sold in places such as Neiman Marcus, Barneys New York and Bergdorf Goodman. It’s now eyeing its own small footprint retail in high-end markets for its next steps.