quality to save money. While great
product remains the most important
driver for consumers in choosing where
to shop, price is now a close second,
replacing service for many retailers.
This is forcing retailers to re-examine
their reliance on category dominance
or past positioning to determine when
consumers want high quality and when
product only needs to be “good enough.”
The rise of fast fashion apparel retailers
and the multiplicity of choices made
available by Amazon and other e-tailers
have forced retailers that want to
continue to be relevant to answer these
questions and determine where to target
specific improvement efforts and how to
allocate resources to what really matters.
Research on the Manhattan retail market
five years ago showed that the retail
landscape had changed dramatically
and had become a microcosm for
more broadly applicable retail trends.
Shopping areas that had targeted
a specific demographic and that
traditionally had been geographically
segregated now had mixtures of stores.
Fifth Avenue, the most expensive retail
street in the world with rents above
$3,000 per foot, had been a carriage
trade location. Now, it reflected the
convergence of luxury, bridge, specialty,
and fast fashion retailers. A new dynamic
shopping experience was emerging.
SoHo had also reflected that
convergence trend, with Bloomingdale’s
sitting side by side with luxury boutiques,
fast fashion, and specialty retailers.
Times Square, the theater/entertainment
district, saw an influx of huge flagship
retailers for specialty brands, from
American Eagle to H&M and Sephora.
Lower clothing prices, made possible
by competitive pressures and the
introduction of inexpensive fashionable
clothing offered by mass merchandisers
that sourced in foreign countries
that have inexpensive labor, made
the latest fashions available to all.
Shoppers are increasingly willing to
shop multiple retail segments through
multiple points of access. Customers
have changed how and where they
shop. The customer who at one time
was loyal to Saks or Neiman Marcus
now will also shop at Zara, H&M,
or Uniqlo to complete her look.
The in-store shopping experience now
must be even more compelling to lure
shoppers away from their desktops
or mobile devices. Retailers have
become or are becoming omnichannel
in an effort to stay competitive.
Attracted by the world’s largest consumer
market, foreign chains are expanding
into the U.S. as a key component of their
global strategy. They view the city, with
its huge metro market supplemented
by 58 million tourists in 2015, as the
launching pad for their U.S. invasion, and
they have all established a beachhead in
Manhattan with global flagship stores,
both in terms of store size and capital
investment, as part of their strategy.
New York is a showcase to the world
and allows global retailers to create
brand awareness cost-effectively.
Before this invasion by international
retailers, retail had been dominated
by U.S. chains focused on the
North American market, except in
the luxury/designer segment. This
international retail invasion is altering
the dynamics of U.S. retail (Figure 1).
These international retailers are highly
profitable and have strong balance sheets
with little or no debt. Strong cash flow
allows them to finance expansion, invest
heavily in infrastructure, and play for the
long term in developing new markets.
They originated in smaller countries
whose populations cannot sustain
seemingly unlimited growth as
the U.S. can. To continue to grow,
these retailers had to look at how
to expand internationally and to
create brands that resonate and are
accepted in multiple markets. They
understand that they must adapt to
the marketplaces in which they trade,
while maintaining their brand essence.
While most of the major international
retail chains have been focused on
ARRIVAL OF MAJOR PLAYERS INTO THE U.S. Figure 1
1985 1989 2000 2006 2015