Chicago becomes 1st city in retail testing

Merchants try out everything from store formats to sales concepts to caskets

By Becky Yerak
Chicago Tribune
August 7, 2005

Gap Inc. is launching a new chain for women 35 and older.

Best Buy Co. is trying new ways of selling gadgets to soccer moms and young men.

And Costco Wholesale Corp. is betting that shoppers will buy a casket in anticipation of joining that big warehouse club in the sky.

But whether they're peddling cardigans, computers or coffins, the merchants have one thing in common: They're all using Chicago shoppers as guinea pigs in the retail industry's equivalent of a trial balloon.

In one of the most ambitious retailing tests, San Francisco-based Gap will roll out four of its first five Forth & Towne stores at Chicago-area malls on Aug. 31. Industry eyes will be watching because of Gap's batting average, going three-for-three with its ubiquitous namesake chain as well as its Banana Republic and Old Navy formats.

In using Windy City residents for early feedback on its fourth chain, Gap joins about half a dozen other retailers who have tested not-yet-ready-for-prime-time ideas here in recent years. "Chicago accurately reflects the pulse of what is currently going on in U.S. culture," said Cheryl Swanson, principal for New York brand strategy consultant Toniq LLC. "It's a sophisticated market, yet mainstream."

If a retailer can make it in Chicago, they can make it anywhere, another consultant said.

"Chicago is a microcosm of America," said Ed Keller, client director for the Chicago office of brand consultants Landor Associates. "It has a large ethnic population. You can find fashionista types and typical suburban soccer moms."

The latter in particular appealed to Forth & Towne.

"We chose Chicago for a few reasons," said Forth & Towne President Gary Muto. "Most importantly, there's a high concentration of our target customer that lives in Chicago."

And "it offers diversity. You have urban and suburban, and there's a good mix of environments and neighborhoods. That's all important when you want to test."

Forth & Towne will cater to women 35 and older. Retailers increasingly covet that demographic because it's growing rapidly and earns the highest average income of any age group of women, Gap has said. Moreover, their clothing purchases account for 39 percent of women's apparel expenditures. The typical customers at Gap's namesake chain are 18 to 34.

Forth & Towne prices will fall between Gap and Banana Republic, and products will range from career to casual.

The fitting rooms will be in the center of the store and feature lighting that can be adjusted depending on whether the woman wants to check out reality at its brightest or prefers a softer-focus version of herself.

"It's one of the areas that retailers spend the least amount of time thinking about," Muto said of dressing rooms.

The stores are spacious enough to navigate a stroller and will feature easily accessible bathrooms with changing areas. And they will have about 8,000 square feet of selling space, more than twice the size of other specialty retailers pursuing that demographic.

With four stores here, Forth & Towne will have enough of a presence to test its advertising message as well.

"Normally, when people test a concept, they test in multiple markets with one store per market," Muto said. It's hard to justify a big media campaign for one store.

Forth & Towne, which will open the first of its test stores Aug. 24 in a New York suburb, also liked Chicago real estate options. The four stores will be in Westfield Old Orchard, Woodfield Mall, Westfield Fox Valley and Algonquin Commons.

Different settings tested

"We wanted to test the concept in different settings," Muto explained. "Our customer still shops at department stores but she is changing. Convenience is important."

Enter Algonquin Commons, which Muto says epitomizes the retail industry's latest real estate trends.

It has "everything from true specialty stores to more convenient power players" in a strip center, he said. "In one fell swoop, you can do what you used to do at the mall with specialty stores and you can also do your grocery shopping. It's easy to park. You can shop for 15 minutes and get out, or you can linger."

As for Old Orchard, "it's a mall, but it's an outside mall" with a good tenant mix, Muto said. "It's an affluent area and it's close enough to the city that it draws city residents. We're trying a two-level store there."

Meanwhile, Fox Valley in Aurora is a more traditional mall with specialty and department stores. "It's really what you'd expect an American mall to look and feel and be like," said Muto, who was Gap U.S. president before his Forth & Towne appointment.

Finally, no Chicago test would be complete without Woodfield Mall, he said.

"It's a major draw, it's a very large center, very productive and it has diverse tenants," Muto said. "Anybody with a new concept has a store there."

Electronics for women

Meanwhile, electronics giant Best Buy chose Naperville last September to roll out its Studio D electronics store, a teaching-oriented format for middle- to upper-income women.

Best Buy liked Naperville's female demographics and the doubling of the city's population since 1993. It also considered Washington, D.C., Atlanta, Philadelphia, Dallas and California.

"Naperville represented town square America," said James Damian, senior vice president of Best Buy's experience development group. "It was in the Midwest, plus it wasn't far from the savvy marketplace of Chicago, where we have a network of Best Buy stores."

The Minneapolis-based company had a different target demographic when it opened a test store of another new concept in Chicago's Lincoln Park neighborhood. Called Escape, the urban-looking store is targeted at 20-something men, selling electronics and video gaming gear.

Although Seattle and Dallas better met the demographic criteria, Best Buy chose Chicago because "we could get in the heart and soul of America once again, with Northwestern (University) being there and Lincoln Park. There's so much diversity, and it's so eclectic in terms of retail, restaurants and clubs. Dallas was too spread out. And Seattle was more of a West Coast frame of mind," Damian said.

The fact that Studio D was already here and that Chicago is close to Minneapolis didn't hurt either.

"Chicago has always represented the blending of voices from all over the United States. It's the heartland, with sophistication, a big city, and the customer loves retail in Chicago," he said.

The Best Buy test stores are providing valuable insight into customers.

At Studio D, shoppers have embraced the ability to try out new products in a low-pressure setting. "What we're seeing is people staying longer in the environment, signing up for classes and selling more solutions," he said, explaining that Studio D sells "a digital camera with a class, with software and with all of the attachments that make the experience."

And one Studio D innovation--larger format digital prints--is now becoming more readily available to customers at Best Buy stores.

At Escape, customers are encouraged to test-drive the latest electronic products, spurring efforts at Best Buy to offer a more hands-on approach for customers prior to a purchase.

Some not sold on Chicago

Other retailers have also found Chicago a good market for experiments.

Purse retailer Misako opened its first U.S. store in Chicago.

President Javier Capella said he thought Chicago would be less competitive than New York and shoppers would be less brand conscious.

Misako now has six stores in Chicago and one each in Des Moines and Las Vegas.

"We're doing OK," Capella said.

What has he learned about Chicago?

"People are very brand conscious," he said, also noting that shoppers are older here than in Europe. "The biggest challenge is to get the brand recognized."

Costco chose Chicago for practical purposes to test the sale of caskets at three area stores--its supplier is in Michigan.

Others aren't sold on Chicago as a test market.

In a 2004 ranking of which U.S. cities made the best test market, Chicago ranked 136th out of 150, according to the study by Acxiom Corp. The Arkansas-based data cruncher, which based its rankings on such criteria as age, marital status, home ownership and income, said the city that best represents the U.S. population is the area around Albany, N.Y.