Chicago: a study in urban retail - Brief Article

DSN Retailing Today, August 6, 2001 by Laura Heller

Bullish property market attracts concepts old and new

CHICAGO -- As the third largest retail market in the United States, Chicago is host to some of the most profitable retail properties in the country. Spurred by a residential building boom and the availability of large plots of land from former industrial sites, this city offers a unique array of innovative retail concepts--well worth a side trip for attendees of this week's International Hardware Show and DSN Retailing Today's annual SPARC Awards.

To put the size of this market into perspective, Neil Stern, a partner at McMillan/Doolittle, a Chicago-based retail consulting group, estimated that the Greater Chicago area registers $115 billion in annual retail sales, $67 billion of which is generated by the mass market. Although the surrounding towns and cities contribute greatly to the overall magnitude of the market, Chicago proper offers one of the nation's most compelling examples of high-volume retailing in a dense urban environment.

Sears and Crate & Barrel both call Chicago home, and each has recently opened a new or redesigned flagship store within walking distance of downtown attractions. Sears returned to State Street this summer (after an 18-year absence) with a 250,000-sq.-ft., four-level store at the corner of State and Madison--specifically tailored to an ethnically diverse, urban customer base. This location operates a Unity Square Afrocentric gift shop and is a good example of a retailer that skillfully caters to multiethnic shoppers, something Sears has long been exemplary at.

Crate & Barrel renovated its flagship Michigan Avenue location earlier this year, something the company undertakes periodically at all its units. While most of the changes will only be apparent to regular shoppers, the unit is a sparkling example of the chain's merchandising prowess. Seasonal product and furniture displays beckon window shoppers on one of the most heavily traversed retail corridors in the country, and each product grouping is pristinely displayed and maintained in spite of heavy traffic at this high-volume location.

On the North side of town, in the neighborhood of Lakeview, is Crate & Barrel's experimental prototype CB2, a concept it hopes to soon rollout to other urban areas and college towns. The format has been open since January 2000 but was recently expanded. It now features more product unique to CB2 than crossover merchandise with its parent stores.

The store is geared toward younger shoppers and meant to attract the children of Crate & Barrel's core demographic. The colorful trendy housewares and home decor competes with product from IKEA, and the small selection of furniture is targeted to dorm and apartment dwellers.

Slightly south of Lakeview lies an area that has become a mecca for national chains. The Clybourn Corridor runs from North Avenue on the south to Ashland on the north.

Elston Avenue, which runs parallel, is generally considered to be part of the district. The area was once home to several manufacturing facilities. As they left the city, large plots of land became available for development -- a unique situation in any urban setting.

Retailers have flocked here en masse.

Home furnishings chains Pottery Barn, Z Gallery, Restoration Hardware, Cost Plus World Warehouse, the Container Store and Crate & Barrel are all clustered on a single block on North Avenue with a Crate & Barrel outlet nearby. The Whole Foods at North and Sheffield is one of the busiest in the chain, as are the Home Depot and Best Buy stores nearby.

"Actually it's tied with our Naperville store [a Chicago suburb] for busiest," said John Curley, Chicago district manager for Best Buy. The unit receives 2,000 customer visits per day, about double that of an average store.

It's a similar story with The Home Depot, which, according to spokesman Tom Gray, is among the busiest in the nation and one of the first units to remain open for 24 hours, forced by customer demand. The Home Depot is scouting locations nearby to help take the pressure off the single unit and plans to open an Expo Design Center in the area in 2002. (One unit is already open in West Suburban Schaumburg, along with Sears' competitive The Great Indoors, just a 10-minute ride past the airport).

Target operates one of its busiest stores here on Elston Avenue, and has had to expand twice to accommodate the crowds. The retailer has had such success with this urban location it is reportedly looking to open several more locations throughout the city.

A Circuit City, remodeled to reflect the company's newest format, is next door to Target. Across the street is The Great Ace. The only such format in the country, this store takes up where hardware leaves off, offering lighting, futons, RTA furniture and additional housewares targeting urban dwellers. Costco also opened its first city location here this spring.

But while retailers seem to be ringing up sales like crazy, operating in an urban environment such as this certainly presents some challenges. Shrink can be high, inventory and customer service levels difficult to maintain and diversity in the workforce is a must.