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World Summit

‘Who’s who’ in real estate gleans expansion tips in Shanghai


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The ICSC calls the summit its “World Cup,” with a prestigious line-up of speakers.

Booming drums and clashing cymbals welcomed retail real estate moguls to Shanghai. Apple’s co-founder Steve Wozniak was among the notable speakers. But it turns out he waits in line for his iPhone like everyone else.

The 2012 Retail Real Estate World Summit kicked off with a bang. Actually, it was a thunderous boom of drums and crashing cymbals. The Chinese welcome ceremony served as an effective wake-up call for the nearly 1,200 people attending the International Council of Shopping Centers conference in Shanghai on international retail expansion.

The retail real estate sector sees more than its share of industry conferences. ICSC alone hosts more than 300 each year. But the World Summit is a unique event held just once every four or five years. The ICSC calls its September event the “World Cup” for education and networking, with a prestigious line-up of programs and speakers. 

“It is really a gathering of who’s who of the dominant people in retail real estate,” says Brad Hutensky, ICSC chairman and president and principal of Hutensky Capital Partners in Hartford, Connecticut. The roster of speakers included Apple co-founder Steve Wozniak, and executives from top retail and real estate companies such as Nike, Gap and the Hard Rock Café.

Shanghai franchises

Shanghai is gaining interest from a growing number of international franchise brands, as this retail strip shows.

The conference shines a spotlight on international expansion, a hot topic for many restaurant and retail brands. Franchisors facing saturation and slower store growth in the United States are looking beyond their own borders. 

Wozniak on line

The World Summit featured 76 speakers from regions around the globe. A highlight was hearing Apple co-founder Steve Wozniak talk about how he designed the first computer, and how his good friend Steve Jobs was able to take his pioneering products and create one of the most iconic brands in the world. 

Despite the landmark Apple store crowded with shoppers just blocks away at Shanghai’s IFC Mall, Wozniak was the first to admit that he is no retail expert. He said he’s just a computer geek who likes to build things. He credits the late Jobs with the savvy skills and drive to take his products and transform them into an iconic brand. Wozniak’s story was an inspiration to entrepreneurs everywhere about what a good product, and a good partnership, can ultimately achieve.  

Steve Wozniak

Steve Wozniak said he was in an Apple store in Brisbane when the iPhone 5 hit. 

It was surprising to hear that Wozniak is still just a regular guy who stands in line at the nearest Apple store like everyone else to buy the latest iPhone. “I never accept early products from Apple. I want to live life like a normal person does,” said Wozniak. No matter where in the world Wozniak happens to be, expect to see him at the nearest Apple store. “I actually wait in line overnight at stores whenever we introduce a new product,” he said. (If anyone was in Brisbane, Australia, when the iPhone 5 was released, you might have bumped into him there.) 

The summit highlighted a number of hot new retail concepts that might someday land alongside Apple, or perhaps on the Franchise Times Top 200 list of franchisors. Along the same lines as Color Me Mine and Build-a-Bear, Make Meaning Inc. is a new interactive concept where shoppers can choose from a variety of interactive craft-making items such as jewelry, pottery, soap, candles and even cakes. The company has four locations open in New York, Massachusetts and Arizona. They plan to open 17 stores in 2012 and 20 to 30 more per year beginning in 2013. 

Two new food concepts piquing interest are Pie Face and 4Food. Pie Face is an Australia-based bakery café that opened its first U.S. location in New York in January. The concept features a variety of pies, both meat and dessert. Not sure whether you might be biting into a blueberry or mincemeat? Bakers draw a “face” on each pie with a different expression or flavor of icing so diners have an edible label as to what’s inside.

4Food is a healthy quick-service concept that lets customers create and even name their own custom build-a-burger. Diners choose toppings from a variety of healthy and fresh options. For the bun, how about multigrain, pumpernickel or pressed rice? Standard add-ons are lettuce, tomato and onion. Now for the donut-shaped meat patty. (Less meat in the middle translates to fewer calories.) Sure, they have beef, but why not spice things up with wild salmon, lamb or baked egg?  Once you have your sandwich built, you can give it your own name—like Angela’s Veggie 2 or the Wolverine Burger—and share your custom creation with friends via Facebook, Twitter or the 4Food Menu Board. If your sandwich is a hit, it can earn you points and even free food. 

Not such a small world

Real estate opportunities were at the heart of this conference, and the main question for many brands is where in the world to locate. The BRIC countries—Brazil, Russia, India and China—are on the short list for many companies due to the combination of sizable populations and a growing middle class. 

Last December, Ernst & Young released a report forecasting that the global middle class would reach 5 billion people in the year 2030 with an increased spending power of $56 trillion. In addition, by 2030 as much as 40 percent of that global middle class spending will come from Asia, where today it represents a mere 10 percent

Hearing about some of the notable growth markets, ranging from Cartagena (Colombia) and Chengdu (China), makes you want to have your world almanac handy. It also proves the point that narrowing a short list of expansion options to one country, as well as selecting cities and specific markets within those countries, is a huge job. China alone has 160 cities with a population over 1 million. 

“Someone once told me that Asia is a market where if you are not focused, you can spend all of your time in airplanes and not accomplish anything,” noted World Summit speaker Allen Smith, CEO of Prudential Real Estate Investors in Madison, New Jersey. One of the keys to success is to focus on a market and stay focused so you don’t end up “running in circles.”

Retail Real Estate Momentum Index

Retail Real Estate Momentum Index
Top 20 markets, arranged in four tiers top to bottom

A research study released by international consulting firm Jones Lang LaSalle identifies 20 markets with the strongest retail real estate momentum. Countries in the top positions are China, India, Indonesia, Turkey, Brazil and Vietnam. The emerging markets of Peru and Kazakhstan also feature in the top 10. 

The Maharaja Mac

One dominant theme at the World Summit, especially for food and beverage operators, is to adapt the product to fit the local culture. In India, for example, the cow is a sacred animal in the Hindu religion. You would think that would make it a tough market for McDonald’s to sell hamburgers. Instead, McDonald’s tweaked its menu to include items such as the Maharaja Mac—a chicken version of the Big Mac, and a McVeggie, a vegetarian burger. Potatoes (aloo in Hindi) are popular in India, and the McAloo Tikki is a vegetarian sandwich featuring a patty made out of potatoes, peas and spice.

Domino’s Pizza has found tremendous success in India. The chain, which entered the country in 1996, just celebrated its 500th store opening in September. Domino’s has modified its menu to appeal to Indian customers, and it is probably one of the best-performing chains in India, noted Neel Raheja, president of K Raheja Corp., a real estate company based in Mumbai. Domino’s accounts for 70 percent of India’s home delivery pizza market.

The World Summit highlighted countries such as China and India for their opportunities, challenges and rapid growth. “We have seen a transformation of the Indian retail market over the last 10 years,” said Raheja. By all accounts, India still has very little “organized retail” – the shopping centers, malls and High Streets that companies are used to seeing across the United States, Canada and Europe. “The term I like to use in India is organized chaos. Somehow things get done, and eventually you will find the right solution,” he added.

A host of international brands have entered India just in the last two years. Some key changes in the country are encouraging that growth. For example, India has gone from one TV channel to 100 channels due to relatively inexpensive access to cable television; more Indians are exposed to Western culture and brands. There also has been a shift from a cash-based economy to the use of credit cards. In the past, 70 percent of the retail economy was driven from cash sales; now more than 70 percent comes from credit cards, added Raheja.

Many speakers emphasized the challenges in emerging markets. The rewards can be very high, but there is no “free lunch,” as one speaker pointed out. “I’ve been in the business for 25 years and I know what it takes to deal with a project,” said Hutensky. 

It took Michigan-based Taubman Centers seven years to build its operations in China before the real estate company was ready to invest, for example. “The numbers are very compelling, but you have to be able to make the financial and time commitment in order to be able to do that,” he said. 

 


 

IFA convention to offer international advice

Whether you’re just now setting your sights on expanding internationally or you’re an old hand at it, check out the international seminar at the International Franchise Association’s convention February 17-20, 2013, in Las Vegas.

William Edwards, CEO of Edwards Global Services, will moderate “How to Effectively Evaluate the Opportunities and Risks for International Expansion,” with Jeff Brimer, Faegre Baker Daniels, and Steve Devine, SVP for Global Development of Johnny Rockets.

The second session of the new-to-international track, “What are International Licensee Candidates Looking for from Franchisors?” will be moderated by Larry Weinberg, Cassels Brock & Blackwell in Toronto.

International Summit, Track 2—Growing Your International Network—will tackle “Non-traditional International Expansion Strategies: The Current Business Environment is Opening up New Options,” led by Yoshino Nakajima,  COO, Global Operations, Home Instead Senior Care.

“Leveraging U.S. Government Resources to Fuel International Expansion” will be moderated by Peter Holt, COO, Tasti D-Lite, and feature speakers from the banking, legal and government sectors.

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