From Pop-Up Shops to Escape Rooms, Minneapolis Embraces Experiential Retail

The retail sector in metro Minneapolis continues to adapt to changing consumer preferences, fast-moving economic opportunities and new state laws. Over the course of 2017, the retail real estate market showed positive growth in every category. Absorption of 1.4 million square feet surpassed the 1.3 million square feet of deliveries, according to CoStar Group.

The rising cost of construction, low vacancy rate (3.1 percent) and increasing rental rates are creating new barriers to entry for retail businesses.

Lucas Gaughan, Gaughan Cos.

Lucas Gaughan, Gaughan Cos.

The aforementioned factors, along with a newfound confidence in the rising economy, are causing landlords of all magnitude to become more selective with the quality of tenants they accept. Landlords will continue to become more reserved with regard to the tenant allowances they provide for new tenants.

We have seen retail giants such as Walmart and Target add new services that emphasize both value and convenience and bring shoppers back for quick fill-in trips. Minneapolis-based Target Corp. announced the public rollout of its Target Restock program, a next-day delivery service for household essentials that is designed to compete with Amazon’s Prime Pantry.

After being beta-tested by its employees, the program is currently only available in about nine markets, but plans are to slowly expand coverage across the country. Target is aiming to compete on both price and speed — charging $1 less than Amazon and offering next-day delivery by leveraging its own stores as shipment centers.

Starbucks takes an aggressive approach with the hopes of capturing even more market share. Other competitors defend their ground as companies, such as Tim Hortons and Dunkin’ Donuts, and take a bullish approach to market penetration, according to CoStar.

With over 500 stores and an indoor theme park, Mall of America in Bloomington reaps the benefits of renovation and expansion. Owner and manager Triple Five Group has a future plan for expansion, which should prove to yield even greater results. Other malls, such as Rosedale Center in Roseville, have taken a similar approach.

Ownership at Rosdeale is completing a two-year renovation and expansion that brings new life to the mall’s long-term tenants and overall atmosphere. A new 125,000-square-foot Von Maur store joins the directory lineup at the 1.1 million-square-foot mall.

All about the experience

The demand for experiential brick-and-mortar retail continues to grow and is finding its way into all types of retail in the form of either new concepts, or existing concepts seeking to adapt.

An example of a new concept, which is quickly finding a home within Minnesota, is escape rooms. These real-life puzzles are redefining how people play games together. The escape rooms provide a fun and stimulating experience, which allows for team building and problem solving. One of the most popular escape rooms, The Escape Game Minneapolis, is located within the Mall of America.

Some existing concepts that are leading the charge in providing experiential shopping include Ikea, Toms and House of Vans. These businesses are allowing their customers to test products within their retail facilities.

Ikea provides sleepovers for its customers so that they are able to test and enjoy products before purchasing. This luxury experience also includes a massage and salon.

Toms has introduced virtual reality headsets into 100 of its stores. Since the company donates shoes to those in need, customers can “see” the impact of their purchase.

Most notably, London-based House of Vans has created an interactive experience for their patrons with a convergence of art, music, BMX, street culture and fashion. The 30,000-square-foot building holds a cinema, café, live music venue, art gallery, and the most distinctive feature of the building, a concrete ramp, mini ramp and street course.

A Bloomington, Minnesota-based company that recently implemented an interactive retail model is hockey gear supplier Bauer. The retail experience is called “Own the Moment.” This store offers all of Bauer’s latest innovations under one roof. Personal fit experts guide customers through a one-of-a-kind process, customizing gear based on level of experience and style of play. In addition, an indoor rink provides the opportunity to try gear on the ice to ensure the best fit for the customer.

Opportunity in pop-up shops

With the fast moving trends of the modern day, retailers must quickly respond to the ever-changing demands of their customers.

One concept of brick-and-mortar sales, which has allowed retailers to effectively grow their brands and revenues while keeping overhead low, is that of the pop-up store. This trend allows retailers to open in brick-and-mortar locations for short periods of time. Historically popular among seasonal businesses, the concept is now resonating with a wide variety of vendors.

Some of these pop-up stores will acquire vacant retail bays, usually with shopping malls, for short amounts of time. Others will integrate with more permanent retailers and set up shop within their locations. Time and long-term visibility are two factors that are lacking in pop-up stores. It is very important for the retailers to engage their customers through alternate marketing platforms to inform them of the new locations and times of sales. Social media has begun to play a significant role in retaining these customers.

An example of a Minnesota company that uses the pop-up concept is Jax Warehouse, a discount retailer. This business does a terrific job of communicating with its devoted customers and informing them of pop-up sales.

— By Lucas Gaughan, vice president of commercial accounts, Gaughan Cos. This article originally appeared in the March 2018 issue of Heartland Real Estate Business magazine.

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