When Sytek’s Design owner Charlie Sytek was ready to launch his decorative bio-fuel fire business, LookAtMyFire.com, the only thing missing was a location. But even in a time when the commercial real estate market was upside down, finding affordable space for a young retail business proved difficult.
Sytek eventually found a space at the Home & Design Idea Center in North Scottsdale. The Idea Center showcases a collection of more than 200 companies offering interior design services, remodeling, landscaping, gardening, home décor and furnishings. Each of the companies at the Idea Center has its own fully constructed showroom, with everything from complete kitchen set-ups to flooring and lighting selections. Homeowners looking to remodel or build can experience interactive displays and discover products in their own setting, all under one roof. A vendor in turn can take advantage of the low overhead offered by the full-service facility, including marketing, networking and events.
“Before finding the Idea Center, I had searched the surrounding areas for a retail showroom and found that the expenses of upgrading and servicing a space, marketing and advertising a location, along with the economic timing, presented quite the daunting expense,” Sytek says.
Sytek’s experience with the Home & Design Idea Center is an example of the new ways retailers are joining forces to help each other survive the economic downturn and fill some of the Valley’s increasingly empty retail spaces. Retailers are coming together at large facilities such as the Idea Center that are operated by a third party, or forming their own co-ops.
“We realized right from the start that retailers would see us as a great reduction in their day-to-day burdens. They simply set up a small storefront with us, pay one basic rent, and we do everything else,” says Michael Atkinson, owner of the Home & Design Idea Center. “We have many companies that opted out of their oversized showrooms to operate more cost efficiently at the Idea Center. We saw several companies close their doors and then open with us. We were told that we were the answer. They had shopped around for retail space in North Scottsdale, but the rates were not affordable to them.”
Two years in the making, the Idea Center officially opened its doors in October, becoming one of the first such centers in North America. The concept behind the Idea Center is based on one that has operated successfully throughout Australia and Europe.
With 40,000 square feet of showroom space, the vendors at the Idea Center have their own kind of executive office suites with access to a staging area, conference rooms, computers, fax machines, copiers and Internet service. In addition, the Idea Center develops marketing campaigns for its vendors that run across all media platforms — a major advantage for business owners who otherwise wouldn’t have the wherewithal to conduct such significant advertising.
Cutting retailers’ overhead is just one step in the battle to keep them competitive; getting consumers not just to visit retailers, but also to spend quality time with them is crucial in this economy, as well. Mark Stapp, director of the W.P. Carey School of Business’ Master of Real Estate Development program at Arizona State University, says the beyond-the-mall trend of one facility housing several retailers in a specialized setting could inspire more consumer traffic.
“(Consumers) can see many more products at one time really efficiently in an environment that’s more enlivened. It becomes an event,” Stapp says. “I think we are going to see more integration of public uses with retailing opportunities to create more synergy and activities that bring more people together for various reasons. Retailers can align themselves with certain things. Developers don’t have to rely on a retail mix of users in order to be able to underwrite a project.”
For example, in order to drive more consumer traffic to the Idea Center, the facility hosts a variety of events, such as educational seminars and vendor meetings. The Idea Center also partners with the local chapters of the American Society of Interior Designers, the National Association of the Remodeling Industry and the International Furnishings and Design Association to host meetings in which the groups work together to bring about common goals.
“With our weekly visitor count now at 500 per week, there are only a few single, home-related operations in Arizona that can claim that kind of number,” Atkinson says.
Another all-in-one center called POOL currently is being developed in Mesa. On their Web site, the creators of the center say they hope to house retailers and restaurants, as well as meeting spaces for community groups.
While some entrepreneurs like Atkinson are creating the destination facilities that retailers are using, other businesses are taking a more ad hoc approach to the trend.
Michael A. Pollack, president of Michael A. Pollack Real Estate Investments in Mesa, points to one tenant who ended up doubling his carpet company’s retailing square footage by joining forces with two other companies.
“We’ve had a carpet company that had leased 6,500 square feet with me for six or seven years and proved it could pay the rent in good times and in bad times. They were smart enough to notice that space right now is cheap,” Pollack says. “The floor covering company teamed up with a window company and then a company with countertops, and they made one joint business. There’s an example of someone that works hard and combined resources. I think we’re going to see more consolidations, more and more partnering coming, more strength in numbers, having someone to help share the overhead.”
Technology that makes the shopping experience easier for consumers also is playing a part in the survival of all types of retail stores, big and small, says Anita D. Bhappu at the Norton School of Family & Consumer Sciences at the University of Arizona in Tucson.
“There are several technology types of retailing service implementations that people are working with; a lot of mobile commerce, mobile coupons to try to draw the customer to a store, offering consumers innovative services and value discounts that are delivered in a manner that is more convenient,” she says. “I’m not sure how much of this is related to the downturn, rather than the changing face of the consumers’ desires. Retail, just like every other industry, has to innovate to survive.”
Leveraging new technology has been a priority of the Idea Center from day one. Visitors are greeted and registered at the reception counter and issued a hand-held scanner. Visitors’ demographic information is recorded and transferred electronically to a central database. Every vignette in the Idea Center has its own unique bar code number that is used to identify it. When visitors scan this bar code, it generates and records company information. After browsing the center at their leisure, and without any sales pressure, visitors are given a take-home tote bag with the vendor brochures they selected.
At the end of each business day, a report is generated and sent to Idea Center vendors, allowing them to view details about the visitors who scanned their products, creating a sales follow-up opportunity.
“Having a pipeline of leads to refer back to is great for any business,” says Steve Randazzo, owner of Randazzo’s Homes Systems, a retailer at the Idea Center that installs entertainment and automation systems for homes and businesses. “We have received over 100 leads, allowing us to work our marketing ideas in order to take these leads to actual sales.”
And driving sales is the type of relief retailers need, something no amount of rent cuts can accomplish, says Gordon Keig, vice president of Kornwasser Shopping Center Properties in Phoenix, and the Arizona/New Mexico state director for the International Council of Shopping Centers.
“I’m not sure the low rents are helping any struggling retailer, therefore, they’re in a pinch. Landlords are trying to help. We’ve lowered our rent for certain retailers, helping struggling retailers stay alive, but sooner or later they have to drive sales,” Keig says. “A lot of those rent renegotiations are temporary, not permanent.”
Pollack agrees, saying that while his company has no hard and fast rules about which tenants will receive rent relief, most will not see their leases re-negotiated.
“The good news is, I think we’ve been through the worst. I think we walked through the valley of the shadow of death. I’ve never seen anything like it,” he says. “I’m very hands-on with my retailers. Most are telling me that people are not as worried anymore. As a whole, people feel that it’s coming to a stabilization.”
Atkinson also is seeing that sense of consumer security bear fruit for his Home & Design Idea Center and its vendors.
“We are beginning to see repeat guests, people visiting from different parts of Arizona just to see the concept, and a lot more are coming from out of state and Canada who either have or will have second homes here in Arizona,” he says. “People are now beginning to start the home projects they were only contemplating last fall.”
For Sytek of LookAtMyFire.com, the Idea Center has allowed his company to flourish at a time others are foundering.
“With the exposure as evidenced by our (scanner) click count per day, I feel like we are the anchor tenant, kind of like Nordstrom or Macy’s — that’s how many lead clicks we’ve been getting,” he says. “With these leads and other events associated with the HDIC, our sales have nearly tripled since we partnered with the center.”