Rumours are swirling that upscale U.S. retailer Bloomingdale’s and Japanese cheap-chic fashion house Uniqlo are negotiating with the Hudson’s Bay Co. (HBC) to take space in the chain’s downtown Vancouver location.
The move would continue the trend among large retailers to shed square footage by either forging partnerships with other retailers to open in-store boutiques – or to simply sublease parts of the larger store.
HBC last year partnered with U.K.-based Topshop to open franchises within HBC stores for Topshop women’s fashions and Topman men’s clothing.
The rise of e-commerce is a major force behind this trend.
An eMarketer study released in February found business-to-consumer e-commerce sales jumped 21.1% to more than $1 trillion in 2012. It projected an 18.3% hike in e-commerce sales in 2013 to US$1.298 trillion worldwide, as the Asia-Pacific region passes North America to become the world’s largest e-commerce market.
North American e-commerce sales hit US$364.66 billion in 2012, and eMarketer expects that total to increase 12.2% to US$409.05 billion this year.
Best Buy Co. Inc. (NYSE:BBY) announced on April 14 that Samsung will operate kiosks in Best Buy stores. Large U.S. retailer J.C. Penny Co. Ltd. (NYSE:JCP) last year cited rapid e-commerce growth as one of the reasons it is carving its stores into mini-boutiques.
David Gray, retail consultant and DIG 360 owner, said HBC’s discussions with Bloomingdale’s and Uniqlo are likely for outright subleases of space. That would be similar to the agreement Canada’s oldest retailer negotiated last year with Kiehl’s that allowed Kiehl’s to open its first store-within-a-store, a 900-square-foot concession, at the downtown Vancouver HBC.
“The sublet store does not give up margin and it gains traffic,” Gray said. “The department store has predictable cash flow and a draw to its store.”
Holt Renfrew followed what Gray described as a “mall model” soon after it more than doubled its square footage in mid-2007. The high-end retailer left its longtime 67,000-square-foot location in Pacific Centre to move into a 137,000-square-foot retail space north of the Dunsmuir overpass – a building that previously housed a food court and 30 additional tenants.
Holt Renfrew then sought the reliable revenue stream of subleasing parts of its store.
Iconic French fashion house Chanel closed its decades-old street-front at 900 West Hastings Street in mid-2010 and opened a boutique within the Vancouver Holt Renfrew. The store now also includes tenants such as Louis Vuitton, Links of London, Agent Provocateur and Tiffany & Co., according to spokeswoman Carla Stef.
But Gray said that small retailers aspiring to capitalize on the subleasing trend will likely be out of luck because most large retailers considering in-store boutiques would want them to house iconic brands.
