Guest: Wade Laufenberg
Topics: Bealls Outlet

Transcript:

Chris Ressa 0:02
This is retail retold the story of how that store ended up in your neighborhood. I’m your host, Chris ReSSA. And I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC management. First, I’d like to thank one of our sponsors credit Intel, knowing the financial health of retailers is crucial for the success of your retail related business. That’s what credit Intel is for credit, Intel analyzes the financial health of hundreds of publicly and privately held retailers in different sectors. With a subscription to credit Intel, you have access to comprehensive analysis of retailers, financial condition, and their Expert Analytics team. Visit credit intel.com for more information.

Happy New Year, everyone. This is Chris Ressa. It is Friday, January 3, pretty excited. You know this time of year a lot of people start their strategic planning and strategic planning is necessary. It’s important, you know, I did a lot of logistical planning. And I’ve taken my q1 and booked a bunch of my travel and set up a lot of meetings and going to regional offices here at DLC and doing property tours and meeting with some of our clients and retail partners and setting those up. And that feels good, right? Because you feel organized. And it’s like you have a direction to where you’re going. And given that corporate America really gets back in the swing of things after the call on Monday, January 6, because this week was a short week with New Year’s Eve and New Year’s Day. And there’s a lot of people on vacations. You know, having that all set in stone is good. And there’s a lot of people that have set their goals. And that’s all fantastic stuff. One of the things that I think is important is not to forget about just brainstorming ideas. And I think those hungry go getters out there spend a lot of time like, Alright, I need to go do X and here’s the goal. And here’s how I get there. Let me go try and attack that. And that was me. And I still do that a lot of the time. But it’s important to sit back and reflect and put down some ideas and brainstorm. And I started doing that about two weeks ago, right before Christmas, where I literally take out a notebook like a journal and start writing down things that were ideas I had, you know, solutions to problems, hopefully, or, you know, whether how crazy or how small or traditional those ideas might be. And the reason it’s good is one it gets your mind thinking it actually helps you strategically plan. But one of the things that I realized is, you know, as in this fast paced world, there’s a lot of ideas that get thrown out there by either teammates, clients, strategic vendors, friends, yourself, and nothing really happens. And so why doesn’t anyone any of those happen because they never get recorded anywhere like in a notebook and someone act on that man. So I’m excited because outside of like, my strategic plan and all the logistics that I set for 2020, I’ve been really focused on like just ideas, and some of them might not come into fruition to come to fruition. Some of them might not come to fruition for a long time. But if they don’t get on paper, and you don’t really spend the time to brainstorm, a lot of ideas just disappear and never get acted on it. So as everyone’s really focused on goal setting, and literally, I talked to someone today who told me they got to have a goal setting meeting, as people are focused on goal setting and strategic planning and doing what I did a little bit of this week and focused on logistics and setting up meetings and getting schedules ironed out. That’s all important. That’s all should be done, find some time to just kick your feet up, have a cup of coffee and journal down some ideas, brainstorm that aren’t full fledged plants. They’re just stream of conscious thoughts. And after you do that, you can’t just act on after you do that. The next step after you’ve got a bunch of ideas and a few pages of Journal notes, is you need a partner to talk those out loud with whether that’s a friend, a colleague, your boss, a mentor, or you know someone who works for you and start talking it out. Because once you put an idea out in space, then the brainstorming happens when two people or multiple people are going back and forth with that idea. And they start to give you new ideas and that process starts to lead into an actual plan at some point in time, because at some point, you will come up with an idea you feel really passionate about. And so you’re getting positive feedback. And you start to do something about that idea. And so for me, a guy who is just so goal hungry, ambitious, and really puts the pedal to the metal, there’s a lot of times where I don’t sit back and just brainstorm and think of ideas. And so I’ve been spending some time this last quarter really working through that. I’ve always been one that really like, plan out things goal set. And here’s a goal and how do I crush that goal. But that’s different than brainstorming and coming up with the ideas, alternative ideas that might be new goals, goals that you never thought of those come from ideas and brainstorming sessions. So my recommendation to everyone out there is take a journal, don’t put in notes app on your phone, take a journal, start writing down ideas you have, whether they’re about work about your personal life, it could be about saving money, they could be about how to get more clients for your business, how to do more deals in real estate, could be about working out, just start writing down some ideas. After you’ve got some weeks of ideas. Start reading through them and seeing which ones you’re really connecting with. And then start to talk out loud about them with someone and I think you’ll be fascinated what you see happens next. So that’s what I got for y’all today. And today I have for you on this podcast an interesting interview with Wade Lofton Berg. He’s the head of real estate for Belle’s outlet. Excited to have Wade on because he’s got a real interesting perspective. He’s been in this business for 30 years in the retail real estate business. And he’s got to work at companies like JCPenney, Macy’s, Lowe’s, Home Improvement, Dick’s Sporting Goods, I think that, you know, just really good breadth of knowledge. And it talks about something that I don’t think I’ll have the opportunity to talk to a lot of people about on this show because he works for a company that has multiple concepts under one company. And you know, there’s a lot of retailers that have one concept. It’s a retail chain of x. And Belle’s outlet has multiple concepts. And that was the key for him to getting a deal done that he talks about on the show. So thanks everyone. Hope everyone has a happy new year. It your strategic planning your logistics, your goal setting all that done, and spent some time brainstorming. Welcome to the show. Wait.

Wade Laufenberg 7:45
Well, thank you, Chris. Thanks for that nice introduction. And thanks for having me on the show.

Ressa 7:50
I’m excited to have you so Wade, why don’t you tell everyone a little bit about Belle’s outlet? You guys are based in Bradenton, Florida what you guys are doing what we can expect from Belle’s outlet. Go forward.

Laufenberg 8:05
Absolutely. So Belle’s outlet is a off price retailer of fashion, beauty accessories and home. Today we operate 455 stores across 16 states. The company has actually been around now for 105 years. company operate as a department store for the first 70 and 30 years ago the bells outlet division was formed. The bells outlet has gone through a complete reinvention of itself over the last five years transforming itself into a truly off price retailer. We’ve done this to changing our buying mentality bringing on 1000s of new vendors changing our approach to real estate, the types of shopping centers that we’re in in the design and look of our stores going forward our growth is going to accelerate because we’re in a very strong position financially to do so and the businesses very good are running a nice two year stack of very healthy comp store sales increases. That’s fantastic.

Ressa 9:12
And so over the last you know few years you know over the last five years there’s been a lot of talk in headline news about off price and I think there’s a at least to people maybe not in retail or retail real estate there’s this link that off prices discount or and I still think that you know discount is a traditional retail price that’s sold that you know less than full retail price like a Walmart or Target and off prices. You know the how people are buying the products and the ability that to create value for the consumer in house. They’re buying those products that might give you the polo shirt from last year. But instead of buying it in the that, when it was released by Ralph Lauren, you might be buying it a year, year and a half later, but at a significantly less price than it was. But it’s different than discount. Is that still true today is, is there a difference between off price and discount? Am I on the right track of what I’m saying?

Laufenberg 10:29
Yeah, I think what you’re describing with the older merchandise is discounted, I think that I would define that as being discounted with with off price, we’re, what our buyers are doing is they’re opportunistically going to all the vendors, and getting buys on this year’s merchandise on stuff that’s in season this year, that perhaps there are other traditional retail formats like department stores or retailers are not going to make the orders on so we come in and we’re able to get a very optimistic price and sell this year’s name brand fashions that significant savings and amazing values.

Ressa 11:09
That makes a lot of sense. And so where are you guys go in with the trends what made you guys decide that you were going to transform into a true off price retailer from a department store?

Laufenberg 11:19
Well, the senior management made a decision about six years ago, to bring in a new president of Bell’s outlet and he came with a heritage and off price retailing, he spent a lot of his career with TJ Maxx, Canada and TJ, x in, in Europe as well. So he came in and he took the company and really refined our, our buying habits. And really just everything about the company to really make our price into the DNA of the company previous to that I wasn’t here but from what I understand it was mainly kind of a hybrid of trying to be off price, but a little bit of discount, a little bit of promotional mixed. And so now he’s weaned us off those other aspects and made us truly an off price retailer,

Ressa 12:10
and how many stores today. Today, we

Laufenberg 12:13
have 450 stores. And we’re currently in 16 states now that will that will soon change as we’re opening more new stores, we’re about to embark on the greatest growth in our company’s history plans to get up to doing 40 Even 50 new stores a year. And to do that we’ll enter new markets and winter new states starting out concentrically from our existing geographic footprint and essentially moving north of CSX going into the Midwest and a lot of new markets.

Ressa 12:44
Wow. So how many states you’re in with those, you know, north of 400 stores?

Laufenberg 12:49
That’s 16 states today. And that includes the Oklahoma which we just opened. A month and a half ago. That was state number 16. For us.

Ressa 13:00
Wow. Congratulations. Thank you. That’s fantastic. growth story and exciting news. Going into the future and probably exciting to be a part of everyone wants to be a part of a company that’s constantly growing. So that’s great stuff. So today, you know, we’re going to talk about a story about one of your deals. So where are we talking about weight?

Laufenberg 13:24
We’re talking about the Tampa, Florida market suburb is called Brandon

Ressa 13:30
Brandon has an so I wrestled in high school college Brandon has an amazing wrestling team and nationally. I’m familiar with Brandon. So Brandon, Florida and we’re talking about a Belle’s outlet store.

Laufenberg 13:40
Belle’s outlet store. So we had a store in Brandon on Brandon Boulevard. And that particular store was a sublease of a Office Depot. And we knew that the Office Depot lease was coming to the lease was ending, and they would not be exercising an option. So we were have been really starting three years ago when I joined the company, we were looking for a new home for our Belle’s outlet store and the brand and Boulevard corridor retail corridor is very tight. We looked at a number of locations and we were not initially we did not meet with success and finding the location that we needed. The one piece of property that we kept our eyes on it was perfectly positioned was a Kmart anchored center. And we were of course, looking to the future when Kmart may eventually close that location. And then a couple years ago, that’s exactly what happened. Kmart closed location.

Ressa 14:44
So you were on a sublease. That’s interesting. So you were you guys were actually leasing space from Office Depot. And you knew a couple of years in advance that Office Depot wasn’t going to be exercising an option and renewing which means you wouldn’t have a lease anymore? Did you try to do a direct deal with the landlord?

Laufenberg 15:04
We did? Yes. The Economics of doing the fresh deal with the landlord were going to be prohibitive for us. So that’s a route that we chose not to go.

Ressa 15:14
Yeah. So you’re in the market, you’re looking for new sites. It’s a tight market. don’t really find anything but you’re being patient, because you kind of have your eye on this Kmart center. So did Kmart close? Were you working on an opportunity before they closed? Did you get when that they were you had a timeline when they weren’t going to close? What happened there?

Laufenberg 15:36
It was just an announcement that came up. I mean, it’s like, like most of the Kmart I mean, they’re, I would say today, anything that’s a Kmart or Sears is on a watch list. And this one was was on our watch list is something that we wanted to pursue. And when the announcement came out publicly, they were closing the stores. We, you know, advanced our discussions with the landlord, who was site centers is the landlord ID on that property.

Ressa 16:05
And so your prototype is what size,

Laufenberg 16:10
our prototype for Vielzahl is 20,000 square feet.

Ressa 16:15
And so K marks are usually and I’m assuming, I don’t know, but usually much bigger than 20,000 feet. So you didn’t lease the whole box. I’m assuming

Laufenberg 16:24
we didn’t lease the whole box. This one was actually almost 100,000 square feet. And as a matter of fact, site centers decided to demolish and build new on the site. So it’s really, really the real estate and not the box itself that this became the site. Wow. So

Ressa 16:44
and so they ended up demolishing it and it was Did they just build the 20,000 square foot bells album?

Laufenberg 16:53
No, they’re building an entire shopping center. In addition to us, we have crunch fitness. We have Lucky’s market. We have Kiki’s restaurant going in. So very exciting redevelopment of the of the project.

Ressa 17:06
And I think one of the things that’s interesting is like some other retailers, you guys just don’t have one concept. You have Dells outlet, but you also have home centric, which is an off price home retailer, correct?

Laufenberg 17:20
That’s correct. And we we launched the home centric concept of two years ago. So that kind of came in the middle of the story. I think that’s what makes this interesting is that we had launched the home center con concept and we had plans to do more. And then we started doing combination stores where we partnered Belle’s outlet with a home centric and create a larger store. That was initially, our first one was in Daytona Beach. And we did a 30,000 square foot store. Turned turned out fantastic. And I really credit the launch of that combo store to us being able to make this deal with site centers here because it became something that was new and innovative and very exciting and was really going to be the anchor of the new project. And that’s that’s really what got their attention was to do a combo store, rather than just a 20,000 square foot store.

Ressa 18:20
And how big is the combo?

Laufenberg 18:22
This particular one is 28,000 Generally the range from 20,000 to 30,000.

Ressa 18:30
And it’s two separate storefronts so I can I can go into if I want to shop Belle’s outlet shop goes outlet, I can go into home centric shop that or I can shop both.

Laufenberg 18:39
You can shop both so they have separate entrances with separate branding. When you walk in the store, it’s you know, very updated store appearance, we have open ceilings, and we divide the two with partial partition wall that’s open in the front where they share the cash wrap. It’s open in the middle and then it’s open in the rear of the store. So it creates an open environment. So you can see into the from the fashion side into the home and vice versa creates a very good environment for for cross shopping between fashion and home.

Ressa 19:13
This new concept this year growing retailer, you got the landlord excited, but I think you know with the relocation and you guys were ahead of it. Timing is is always everything. And so you had three years to go on your sublease. Was there ever any concerns that the timing might not work out where you would be? This is new development now where that timing might not work out where you might not be open in time, and you’d have to close the store.

Laufenberg 19:42
Yeah, it was a very real concern and a very real concern that came to fruition as the project took time to to get together meant you know, major redevelopment and demolition. And in fact our sublease did run out and we close the store and we were we were out in the market for probably a good six months before we reopened. Wow. So I,

Ressa 20:07
that is always, you know, a real big concern of retailers is that that stop of revenue and you know in the brand and the connection with the consumer, while you guys are bringing in a new concept brand new store? How did you guys deal with that?

Laufenberg 20:25
Well, one of the things that helps us is the Tampa market is a market where we have a dozen stores. So we had, we had nearby stores. So it’s not like we’re out of the Tampa market, we were just out of that branded sub market for a few months. And we, you know, we would do more all our marketing is direct marketing. You know, we have a very robust loyalty program. And we communicate with our customers to that. So we let our customers know what was in store, this is great new combo store that would be that would be opening in the future. Yeah, so

Ressa 21:04
you were, even though you’re a closed, you guys were constantly, you know, before the new stores open all over your consumers from a marketing perspective, so that once it did open, there was some buzz around it. And it would be like You guys never left the market,

Laufenberg 21:19
right? Absolutely created that buzz. And were

Ressa 21:23
you able to get sales back to where they were, and hopefully higher.

Laufenberg 21:28
This store opened on December 5, and it had a great grand opening and exceeded our, our goal for grand the 40 Grand Opening by 30%. And then it’s gone on since then very strong, it’s, we really anticipate this to be one of the best stores in our company now. So we’ve we’ve more more than made up for the sales we had in the previous location. And we see the future being even stronger. And I’ll tell you, because we were so prompt on this project and getting in and getting open where the first retailer open and the new phase, so the rest of the center is not open. So it’s going to continue to get better with time as the as the restaurants and supermarket opened in the coming months.

Ressa 22:19
That’s interesting. And so were you the first open because you were the first deal, or were you the first open because you guys are trying to get open because you had this. You had that you were already in the market. And this was a new store. So you guys, you know, did you do the interior construction? Or did the

Laufenberg 22:35
landlord? Well, they built the they built the shell and they they will they deliver what I would call a white box to us or a vanilla box. There was a lot of different definitions for that. But then after that we we went in and built out the remainder of the store. Got it?

Ressa 22:53
So you open December 5 of 2019. This is recent.

Laufenberg 22:57
Yeah, this is just last month. Wow.

Ressa 23:01
Probably a lot of eyes on this one. This is in how many combo stores are there in the country now.

Laufenberg 23:07
So for these true ground up like side by sides, we have seven right now. You said the most

Ressa 23:15
interesting thing was about this was when you decided to turn this into a combo. I guess when you were first working with site centers, it was just a regular belts outlet. And I guess was there either less excitement on their end or less leverage on your end? And when you talk to them about hey, we’re prepared to do this combo things really got it really cooking? Is that is that kind of what happened? Yeah, the

Laufenberg 23:46
combo store definitely got everybody. It’s got both companies excited. And you know, we have a great relationship with with sight centers. And we, as a retailer, we really feel that we value the partnership with a landlord. And they did. They saw that as well. So having a, you know, a new fresh concept. You know, it’s kind of a feather in the cab of the landlord to have that brand new concept anchoring their redevelopment project. And I’ll tell you, for us it was a work in progress because we had just launched home centric about a year before we were negotiating this deal. And it was kind of a work in process. So we’ve developed and we’ve tweaked the prototype and the format of the store as we’ve gone along. So they they were they were good and working with us and doing some design revisions. Things that we’re learning from the very first combo stores we open like six months before this store. Wow.

Ressa 24:48
I think you know for me lesson one here is you were pretty early in the process. You guys had a sublease at three years to go and you started looking in the market because If you had known that Office Depot wasn’t gonna exercise in the existing landlord, and you weren’t gonna be able to come to terms, and you kind of had time on your side for a moment in time, and then I guess it got to a point where time might not have been on your side, you had a close but you guys were committed to the marketing the site and we’re able to make it work, I think, and then getting creative to decide to make this a combo store is, you know, I guess you know, really what got everyone really fired up about this. What was the driving force that decided that this was going to be one you were going to do a combo, you were in the market for so long with just a Belle’s outlet? Why make this a combo store?

Laufenberg 25:44
Yeah, great question. So I mentioned the loyalty card, we call it our one card. And it gives us great data, we know what our customers shopping patterns are. And we’re able to, you know, we know where our customers resides. So we’re able to know what the demographics so we studied before, prior to the launch of home centric, we studied the demographics of the fashion customer, the home customer. And we found that we’re different, we found that the geotech demo segments that that drove home were different from the from the primary ones that drill fashion. And so that that really drives a lot of locational decisions where we do a home centric standalone store where we do a bellows outlet stores where we have that geo demographic segmentation and high concentration is branded market, we saw we saw all of those segments in high proportions is nearly 50% of that market was either our fashion customer, or our home customer. So we knew it was just the perfect storm of demographics and a great location for us to launch a combo store.

Ressa 26:56
Interesting. Well, in a world where everyone’s creating data, here’s where a place where data really helps you guys make a awesome business decision. So you decided to do the home center, you know, playing devil’s advocate, what would have happened if if KMart never closed this location or never announced its closing? What happens to Belle’s outlet at branded Florida that

Laufenberg 27:21
we’re continuing to look for a for an alternative location. And I mean, your guess is as good as mine is to where we would have ended up at the end of the day. But

Ressa 27:31
when would this have ever been a place where you guys would have closed and left the market for a significant amount of time,

Laufenberg 27:39
we would have only done that if there were no viable alternatives for us to go in. I mean, we have, we would have found a viable location for just a Belle’s outlet, that would have been a possibility for us. But it really it really ended up being the best of both worlds where we had a great location and the ability to do a combo store

Ressa 27:59
well, and now you guys are open, you’ve been open almost a month, you guys are 30% above plan. Kudos to you guys, I hope wish you nothing but continued success. You haven’t even got your co tenants in there, which hopefully make this a real barnburner as more foot traffic continues to enter the project. Anything else interesting about this story and this deal are that we cover about at

Laufenberg 28:31
all. I think what’s interesting about this is how the circumstances played themselves out and how we, at the you know, this, this deal was more than three years in the making. And at the outset of it, we didn’t even wasn’t even in our mindset, the idea of a combo store. And having having that prototype in our in our arsenal now really, really was fortuitous for us to make this great location come together.

Ressa 29:05
Yeah, I think you know it, it’s a good lesson in constantly trying to be creative to solve a problem, right? The problem was you were in a market that you’d like to be in, but you were gonna lose a location. And so you know, just because you couldn’t come to terms with the existing landlord. And so how do you solve that and the way you solved it was in a world of retail disruption was making a bigger store adding more retail and bringing in a new concept which you’re right, you don’t hear that story too often. That’s pretty interesting. And that’s probably why everyone got excited for sure. So thanks for telling that. That’s pretty great. And when I am down in the Tampa area, I’m definitely gonna go check out this store brand new.

Laufenberg 29:50
Oh, absolutely. this will this will be our showcase for all our landlords and vendors that come to visit us. Definitely, definitely take them for a tour on that store. Awesome.

Ressa 30:01
Well, thanks for that story. We’re going to pivot a bit. And now we’re going to go into we call retail wisdom. So I’ve got three questions for you. Wait, tell me when you’re ready,

Laufenberg 30:15
go ahead and was ready, I’ll be first question.

Ressa 30:20
Best piece of commercial real estate advice for the listeners out there.

Laufenberg 30:25
Develop your relationships, the real estate business is really relationship driven. The story that just related to you about this that was largely put together with the development of that relationship, the world of retail was very disruptive. And you’ll you’ll see people move around out of necessity with the disruption that’s going on in retail, but those relationships will be maintained when people move on to new places. And that’s changing in retail and changing in technology, the relationship is still the core of the business.

Ressa 30:59
I couldn’t agree more in this business. I think that’s how we’re all going to be successful how landlords retailers, if there’s not strong partnerships and relationships can’t win together. So good advice. Question to extinct retailer who wish would come back from the dead.

Laufenberg 31:19
You know, that’s, that’s interesting, that just speaks to to retail itself. In retail, you have to constantly reinvent yourself to be to be relevant to the consumer and give the consumer a compelling reason to shop your store. And a few years ago, I enjoyed shopping at borders, books, I enjoyed going to Blockbuster. I’m not sure that I would want those stores to come back today because I think the world has changed. You know, I think back to my years growing up as a kid going to wall worse, you know, thought that was a fun place to go as a kid but you know, the world changes. And, you know, I mentioned our company’s 105 years old, but we’re constantly looking to reinvent ourselves and become irrelevant to the consumer of today and in the future.

Ressa 32:17
Yeah, I don’t know if you’ve ever read any Jason Jennings books, but he has a book, Think Big act small. And he talks about a bunch of companies who are constantly reinventing themselves and it’s a must in today’s world, if you know you can’t, the consumers changing, buying habits at a rapid pace, you can’t keep up and trends are changing at a rapid pace. If you can’t keep up to deliver what the consumer wants, when they want how they want to shop for it. It’s going to be a challenge. You know, forget about all the other pieces right providing it at a price that they want to pay for it. And all that good stuff. I think. I think if you can reinvent yourself and be on trend and deliver a product in the manner in which they want to get it as fast as they want to get it it’s going to be a struggle. So last one, a little take on the prices right? I’m going to say a product then you’re going to tell me what the retail prices for that product. The zipper Pro on zippers website, zipper is a anti snoring solution now piece. What is the price of a SEPA Pro?

Laufenberg 33:46
Zipper Pro is this. Is this a electronic device? No. So it’s just a like a mask that you wear at night. It’s like a mouthpiece. Like a mouthpiece. I am gonna say 3999

Ressa 34:10
That I don’t know what the regular is but the the Pro is 9995. Okay, well, the pro military anti snoring solution clinically proven mouthpiece to reduce snoring the Zipa pro 9995 Sounds like your F snoring problems. That’s great.

Laufenberg 34:28
Yes. Don’t have sleeping problems. I don’t know about the snoring.

Ressa 34:38
Well, listen, wait. It’s been great. I really appreciate it. Thanks for the time. Sounds like business is going well hope the personal life is going well and look forward to getting out to you guys and kind of seeing how we can do more together and continue our relationship and see if we can. Yeah, it’s some deals going.

Laufenberg 34:58
Absolutely. Absolutely. And Thanks again for having me on today, Chris. I had I had a lot of fun today. This is this is this was a fun format you put together.

Ressa 35:06
Awesome. Well, thanks. Wait, have a great weekend and I’ll talk to you soon. Okay, bye. Thank

Ressa 35:11
you for listening to retail retold. If you want to share a story about a retail real estate deal you were a part of on our show, please reach out to us. This podcast highlights the stories behind deals from all perspectives. So it doesn’t matter if you’re a retailer, broker attorney or an architect. Contact Diane Lee at D L E at DLC mgmt.com Also, don’t forget to subscribe to retail retold so you don’t miss out on next Thursday’s episode