Smart Shoppers

Madison-area consumers are patronizing innovative, independent retailers who provide quality, affordability and value.

A study by L.E.K. Consulting shows affluent consumers, those with annual incomes above $150,000, are the only ones spending more today than before the recession. They’re also the only group planning to increase spending in the near future, and an L.E.K. executive believes the findings show wealthy consumers’ spending is pulling the U.S. out of the recession. 

Blake GeorgeBut Blake George, principal at Lee & Associates, and Mike Herl, vice president of brokerage services for Inland Companies, both of which provide commercial real estate services, don’t see ultra-wealthy spenders as the major driver of Dane County’s retail market.
Even in the best of times, Dane County didn’t have a tremendous amount of very high-end retail, George opines. “In other markets it’s a bigger part of their economies,” he says. “We’re smart about how we spend our money—people do a lot of research before they buy—and I see that trend continuing.”

Mike Herl Those with money aren’t necessarily going out on spending sprees, Herl agrees. “I see them investing in businesses, doing angel lending and things like that to stimulate growth. So in those ways people with money are the ones who will stoke the flames to get the overall economy going.”

Affordable Products

And when it comes to upper-to middle-income consumers, quality and value are the keys. “The two have to go together,” George emphasizes. “For instance, Don’s Home Furniture has done very well through the recession.”

The store’s primary target demographic is women aged 30–50 who are employed and have discretionary income, and are very educated buyers, he notes. “They know they’re getting great value from the $500 they spend on a dinette set,” he says. “They could spend $1,000 somewhere else, but would they really get enough additional value to justify it? If they see value they’ll remain loyal and be repeat customers.”

These consumers, unless directly and dramatically affected by the recession, have continued to spend, but at a slower pace. “They may not reserve the presidential cabin on a cruise, but they may take two lower-priced trips,” says George. “It’s the same with the products they’re buying. They may still go to Chalmers Jewelers, but they’ll spend $200 instead of $1,000.”

He’s seeing more new retail tenants with affordable products for which there’s still a strong consumer demand, but fewer with high-end discretionary products. “And retailers of discretionary items are changing their product lines and moving into more affordable items,” George continues. “A jeweler might advertise ‘200 products under $200.’ Maybe instead of marketing a two-karat diamond ring they’ll market a half-karat one with eight baguettes that make it look like two karats. Retailers have gotten savvier to survive or have closed up.”

Online Shopping

One savvy technique Herl is seeing is smaller storefronts and an increased focus on Internet sales. “Online shopping is here to stay, especially when people are familiar with the products and don’t need to go out and take a look at them,” he says. “People are doing a lot more comparative shopping, and even if they end up buying at a store, they often do online research first.”

And adding web-based shopping can help retailers cut costs. “If your sales increase through your online channel, you can get volume discounts through your suppliers and it helps your brick-and-mortar outlet too,” says George. “It gives clients another way to reach you—with our aging population, people want that convenience.”

Independent Local Businesses

Another trend Herl has observed is more independent, locally owned businesses moving in and national chains moving out. “That’s where the majority of the action is these days,” he says. “Corporate stores have pulled way back and are trying to ride the economy out, while entrepreneurs are the ones coming up with new ideas.”

The same thing happened about nine years ago, he notes. “And then we went through a huge stage of corporate franchise stores coming in—the retail community went from 80 percent mom-and-pop shops to more than 80 percent nationals or repeat franchisees,” he says. “But since the market has fallen off, a tremendous number of people have lost their jobs, or they’ve taken early retirement and have a little cash to play with, and are opening small businesses.”

Entrepreneurs are signing shorter, one- or two-year leases and taking the plunge, George affirms. “They can get into space cheaper now and put a lot of sweat equity into a business,” he says. “It could be someone who lost a job at a computer company opening a computer repair business, or someone who always wanted to own a restaurant starting one—necessity is the mother of invention.”

People in Dane County like to buy local, notes George. “And this entrepreneurial trend gives them more choices. The increased competition will lead to better prices and hopefully better service.”

Sidebar: Synergy Attracts Shoppers

Visitors to the Hatchery Hill Towne Center in Fitchburg can rent a movie at Blockbuster, stop for a cup of coffee at Panera or a burger and a beer at the Great Dane, buy a bouquet at Buffo Floral and a card at Sue’s Hallmark, shop for groceries at Copps, and more. “When people park here, they can go around to all the shops and find pretty much anything, says Mike Herl, vice president of brokerage services for Inland Companies, which manages the center from its on-site office.

Herl does all the leasing at Hatchery Hill. “With the sheer variety at this mixed-use center—retail, a large office component and the third-floor apartments—we’re 92 percent full,” he says. “We look for synergy among tenants, targeting those we think will it well among the others here.”

The center stayed mostly full throughout the recession, with a few businesses coming and going. “We work with our people here,” says Herl. “If we know a good tenant’s industry has been hard hit, we like to see what we can do to help provide short-term relief.”
Like most retailers, those at Hatchery Hill have cut back a bit on inventory and are focusing on what’s popular with their customers.

“There’s more attention to customer service,” Herl notes. “A retailer might do a special order for a customer and call them when it arrives. They’ve gotten a little leaner and smarter.”

Judy Dahl is a contributing writer to Madison Magazine.

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