SPECIAL ENTREPRENEURSHIP SECTION
Opening for
Business
Nurturing C onsumer spending is down and retailer bankrupt-
cies dominate the headlines, yet budding retail
entrepreneurs may find the business landscape more
hospitable than most may assume.
Entrepreneurship Retail has never been for the faint of heart. Just ask Tom
Stemberg, founder of the Staples franchise and a serial
retail entrepreneur. In an interview with PLACES, he
in an Economic cautioned aspiring retailers “Don’t quit your day job.”
He’s right, retail is not for everyone, but those unde-
Recession terred by such expert warnings are exactly the type of
people who are most likely to thrive. They are the ones
who walk into a store and cannot stop thinking of ways
to do it faster, cheaper, or better. They have a vision for a
different way of serving consumers and have the determi-
nation to see their ideas through.
By Jonathan Shartar For many entrepreneurs, being fired or laid off was
instrumental in getting their ideas off the ground. Take
Bernie Marcus and Arthur Blank, who did not even
know each other until they were both laid off on the
same day. They went on to start The Home Depot. Stem-
16
berg too was let go just before founding Staples. Often
when someone gets laid off, they place an increased pre-
mium on being able to control their own destiny. Retail
entrepreneurship is one way to satisfy that desire.
New retailers will find surprisingly hospitable condi-
tions right now. Established retailers are less agile than
ever. They are generally more diversified, with multiple
brands, numerous customer segments, multiple channels
of operation including online and offline. While this
diversification was intended to reduce the risk, today’s
far-reaching recession has left them distracted by cost-
cutting, debt management, and inventory overages.
Upstart retail concepts can be far more agile. They can
better react to evolving customer demands and seize
opportunities as they arise. Niches once dominated by
strong national competitors, such as linens or electronics,
suddenly have voids that may need to be filled. Contrac-
tors and suppliers are now willing to negotiate lower
prices and accept reduced margins. Landlords, most of
all, are eager to identify and incubate these new entrants
like never before.
MADISON MARQUETTE

Leases are nothing more than documents outlining
mutually acceptable operating conditions. While the
assumption may be that landlords are more willing
to negotiate terms, that belief is not entirely correct.
Rents are clearly down, but recent boom times wit-
nessed lease negotiations becoming less about finding
agreeable partnership terms than about winning.
Now, circumstances have changed.
The greatest opportunity for new retailers is in vacant
spaces where national operators have abandoned fairly
new store build-outs. For nimble local and regional
operators, these spaces help overcome the lack of
standardized store designs. The ability to occupy space
at reduced costs for both themselves and the landlord
is what helps lower rents and increase profits. While
national tenants priced out their competition in the
past, that is no longer an option for landlords and the
values they placed on creditworthiness now appears
overstated.
When landlords
believe in a concept
they will make
unique trade-offs.
Landlords now place a premium on small retail opera-
tors with several successful stores that are looking to
expand. Their experience and track record make them
attractive tenants. For newer operators, landlords
must evaluate not just the concept’s ability to attract
consumers, but the entrepreneur’s ability to execute
successfully.
When landlords believe in a concept they will make
unique trade-offs. If investment capital is required,
landlords may be willing to take ownership stakes
in the business, equating to higher rents in the long
term. If less capital is required, a new business will be
met with the ability to gain significant bargains on
real estate. In some cases, landlords may be willing to
engineer leases to almost entirely remove the risk for a
new retailer in a way they never have before.
Since a landlord is, at the end of the day, nothing
more than a diversified investor in retail operations,
they too are interested in new retail concepts. They
want to support these retailers and help them grow
into tomorrow’s retail giants. Entrepreneurs with a
penchant for retail too should realize that times will
improve. Now is the perfect time to set up, get back
to the basics, not only to best capitalize on today’s
changing consumers, but to take full advantage of the
upswing when it comes.
New stores generally do not expect profits in the
first 9–12 months and it can take up to three years
for sales to stabilize. That means the downturn can
be an ideal time to set up shop and be uniquely well
positioned for the economic rebound.
Jonathan Shartar (jonathan.shartar@madi-
sonmarquette.com) is an Investment Associ-
ate in our Washington, D.C. office. P
PLACES MAGAZINE
SPECIAL ENTREPRENEURSHIP SECTION
Tom Stemberg
on Retail
Entrepreneurship
Tom Stemberg founded Staples in 1986 after being let
go by a supermarket chain. He saw how office supply
needs were being filled by mom-and-pop stores and
thought there had to be a better way. After building
Staples into a $19 billion company, he now serves as
Managing General Partner of the Highland Con-
sumer Fund which focuses on investing in retail and
consumer services companies. He currently serves on
the boards of CarMax, Inc., Guitar Center, lululemon
athletica, PetSmart, Inc., and Pharmaca.
Tom recently took time to answer questions about
entrepreneurship from PLACES.
Q: What personal attributes makes
someone a good retail entrepreneur?
TS: The biggest difference between entrepreneurs,
especially retail entrepreneurs, is that we view
every challenge as an opportunity, as well as a
barrier others will have difficulty surmounting.
And we can always see the light at the end of the
tunnel, even if it is a train coming the other way!
Staples, Bayfair Center, San Leandro, Ca.
Q: How is retail entrepreneurship
different from starting other types of
businesses?
TS: The challenge one has starting a retail business
is that it consumes a great deal more capital
than a software or medical device start-up. You
need inventory, fixtures, systems, not to speak
of a considerable amount of overhead to get a
store off the ground. You then need countless
more stores that have reached profitability to
TOM STEMBERG
Founder, Staples
cover your overhead. The other businesses often
require little more than an office and a few PCs.
Q: What advice would you give to
someone who does not have retail
experience but has an idea for a retail
business?
TS: Keep your day job: retail is way tougher than it
looks.
Q: What should landlords do to help
start-up retailers succeed?
TS: This magazine is not long enough for my an-
swer, tsk. Treat them with respect. It is the excit-
ing innovators who can make your development
special. Do the landlords who took credit risk to
sign up lululemon and Pinkberry in their early
days regret it today?
Q: What are the biggest challenges when
expanding from one store to multiple
stores?
TS: The toughest challenge — and there are many
— to building a retail business from one to
many stores is attracting and retaining great
people. When we look at investing in these com-
panies, which we do for a living at the Highland
Consumer Fund, this is a primary focus. One
can hire a new CEO but it is much tougher to
replace a dozen store managers and store teams!
Q: In your view, what types of retail
concepts have the greatest growth
potential right now?
TS: In the short term, economic challenges will
favor deep discount concepts like dollar stores
and grocery hard discounters; this will rapidly
change as the economy recovers. America and
the world are becoming more fragmented both
in terms of demographics and taste. The winners
will be concepts that serve the needs of par-
ticular segments very well. That is why we are
excited about investments like Pharmaca — an
integrative pharmacy that offers both traditional
and holistic remedies — and City Sports, which
offers the city-dwelling athlete everything he or
she needs in apparel and gear.
17
SPECIAL ENTREPRENEURSHIP SECTION

Helping Retail Entrepreneurs Succeed

In April 2009 Madison Marquette launched an online community for retail tenants in the company’s nationwide prop-
erty portfolio. The first-of-its-kind community brings tenants together with each other and with Madison Marquette’s
in-house experts and consultants in retail operations.

The success of any property relies on the success of its tenants. This online community is aimed at aggregating and archiving the best resources to help
tenants succeed.

The community leverages the LinkedIn platform which has over 35 million registered users and is considered the leading social network for profes-
sionals. The group, The Madison Marquette Retailer Network, features expert support in all areas of retailing, including store design, merchandising, H;J7?B;H
human resources, marketing, and accounting.
D;JMEHA
Included in this section are several examples of the resources available on the company’s retailer network.

The 3 P’s of Merchandising

By Michael Walker

Recently, the 3 P’s were applied to Modern Times in
University Mall (Chapel Hill, N.C.). Over two days, the store
was completely remerchandised, repainted, and refreshed.
The response from shoppers has been great.
In tough economic times, getting the fundamentals
of merchandising correct is more important than
ever. The essential components of successful opera-
tions are people, presentation, and product. Each
of these elements is intertwined and each requires
dedicated focus and attention.
People
In-store staff must be educated about the products
they are selling. Customers expect to be told where
products are made, what they are made of, and why
they are a good value. But that’s not all. Sales staff
also need to know what products make the highest
margin and which products need to move quickly.
Too often owners are reluctant to involve their
frontline employees in this level of detail, but it is
absolutely essential to do so.
Empowering employees with knowledge gives them
a greater sense of confidence and helps avoid anger,
frustration and a sense of hopelessness that often
comes with uncertain economic times. If they under-
stand what they need to do to keep the store operat-
ing, they feel more in control of their own destiny
and more motivated to maximize their productivity.
Tough economic times also demand that owners and
sales staff be actively clienteling — maintaining a da-
tabase of loyal customers and keeping them engaged.
When new shipments arrive, let them know. When
items go on sale, make them aware. These commu-
nications are best done via telephone, but email can
also be effective.
Presentation
Creating a visually appealing store says a lot to cus-
tomers about how passionate the owner is about their
merchandise. When owners are tired and burned out,
it translates into a boring rack of clothes. When they
are engaged and passionate, it translates into vibrant
visual displays and current fresh designs.
Owners also need to understand how merchandise
displays benefit from their location within a store.
Research shows that customers instinctively look to
the right side of the entrance first. This area needs to
feature the fastest moving and most engaging mer-
chandise. At every turn thereafter, shoppers need to
be met with compelling displays. Owners also need to
understand how much income each turn is produc-
ing. If a display does not sell, remerchandise it.
Consumers are shopping with less money and are
increasingly concerned with where they spend their
dollars. In boom times, a few blown light bulbs and
stale store displays may not have mattered. But today,
if the store is not immaculate and products not dis-
played with care, it shows, and consumers will choose
to go elsewhere.
Product
Having the products that people want to buy is fun-
damental, but being successful requires proper inven-
tory management, good timing, and smart pricing.
Today’s environment is all about value. In many ways,
customers are pulling back from big ticket items and
yet are not ready to sacrifice luxury. This trend trans-
lates into higher demand for accessories and basics;
for instance, instead of buying six high priced leather
jackets, buy 40 designer t-shirts. The lower priced
items are far less risky in this economy.
Owners need to be smart about pricing complemen-
tary items. Consider selling one piece of an outfit at
steep discount — perhaps even at a loss. Shoppers
will be compelled to buy the entire outfit because
of the value they perceive they are getting with the
discount on the one component. In today’s climate,
shoppers also expect a sale rack. If none exist, they
may suspect that the products in the store are all
over-priced.

18 MADISON MARQUETTE
 SPECIAL ENTREPRENEURSHIP SECTION

NINE IDEAS TO KICK START SALES (FOR UNDER $100 EACH)

In today’s economy, people need a good “excuse” to shop. Sales people need a reason to pick up the phone, call them, and give them that
compelling reason that makes shopping feel good again.

Below are some great summer-themed special event ideas that cost less than $100 each but will get the cash registers ringing again. In order
to maximize success, keep the promotions and gift card redemption periods short to foster a sense of urgency. Make sure you capture as much
client information as they are willing to share so that you can include participants in upcoming events.

25 Weddings and Nothing to Wear Hot Summer Nights One Shoe, Two Shoe, Three Shoe — Score!

Throw a wine and cheese cocktail reception and
showcase great dresses to wear to all types of
weddings — formal, informal, day or evening.
Have a drawing that night for a $50 gift card
towards a dress that weekend.
Invite store patrons to register to win a $100
gift card for a great Fourth of July party outfit.
No purchase necessary, but limit the length of
time to enter. Make sure to keep and use the
contact information for all who registered.
Have your local cobbler set up shop in your
store. Invite your 15 best customers to bring in
three pairs for complimentary repair. Return
the shoes the following weekend so your best
customers have visited two consecutive weeks!

Queen for a Day Naughty or Nice? A Surprise for Dad

Invite the prom queen nominees from your local
high school to a special prom fashion show
party in the store. Use student models, iPod
music, and snacks to keep their attention. Give
the girls a $25 gift card towards a purchase.
Invite a local tattoo artist to offer temporary
tattoos, serve cocktails, play music, and create
a shopping frenzy. Have participants invite their
significant others for a fashion show and tattoo
reveal.
For Fathers Day, show Dad how much you love
him. Give away 20 $5 gift cards for the purchase
of lingerie. Invite brand representatives to do
proper fittings and offer refreshments.

Free Manicures with Purchase Get Ready for Swimsuit Season Private Sale Night

What girl doesn’t love a free manicure? Invite Create an event around beach season. Offer Invite your 10 best customers to a special
your local manicurists to meet with your clients, personalized fittings and give away inexpensive private sales night. Give them each $10
set up in front of your store and offer free beach items such as totes, sunglasses, novels, gift cards and offer them first crack at new
manicures with any $50 purchase. and towels and arrange them in a great display. markdowns or just arrived merchandise.

Contributed by Angela Sweeney (angela.sweeney@madisonmarquette.com).

PLACES MAGAZINE 19
SPECIAL ENTREPRENEURSHIP SECTION
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20
Ten Traits to Look for When
Hiring Retail Workers
By Reynolds Atkins
1. Demonstrated commitment to the retail
sector
Even if retail sales remains something of a classic “sec-
ond job” for the financially over-extended, your true
floor-leaders should be there because they want to be
there. They should understand the merchandise they
are selling and look to the sector as an appropriate place
for a career, whether on the floor, in management, in
merchandising, or as a buyer.
2. Flexibility
Anyone looking for a traditional “9-to-5” opportunity
in retail will likely not find it. On the other hand,
anyone who craves an alternative to the increasingly
outdated work routines of the typical corporate office
will be able to find a retail schedule to suit just about
any lifestyle choice or personal situation.
3. Attitude
A successful retail experience for any consumer depends
on encountering sales associates who actually want to
be in the store. Trying to convince a bored, disinterest-
ed, or even actively hostile sales associate to help locate
an item, return, or exchange merchandise is as close to
a universal experience as most Americans have. A good
attitude is key to ensuring a good customer experience.
4. Know the products or service being sold
This is just as obvious in a shoe store as it is in an
electronic store. It is great if a company is able to hire
from a ready pool of sales associates with experience in
the products or services being sold. If that is not the
case, select associates eager to learn where the products
come from, who typically buys them, the features and
options, how to upsell, and so forth.
5. Pay attention to communication skills
America is wonderfully diverse and our retail establish-
ments should reflect that diversity, but the buying expe-
rience will be better for everyone if the sales associate
and the buyer can engage in a meaningful conversation
on the potential purchase. Even our most upscale retail
establishments hire from a variety of backgrounds and
nationalities and while this has the potential to make
for a positive buying experience, it more frequently
does not. If it requires special language training or sem-
inars in managing cultural differences to improve the
experience, the investment will no doubt pay off in in-
creased sales in the future. In fact, retail establishments
can actually exploit this diversity as an advantage.
Marriott headquarters, located outside Washington,
D.C., brings trainees from all over the world to work in
its local hotels and identifies their home location on a
special badge. Celebrating rather than hiding diversity
cannot help but broaden the appeal of the store.
6. Understand and hire for the target
customer
A sales staff distinguished mostly by their body pierc-
ings will be out of place at a Saks or Nordstrom just
as a 30-year veteran of couture sales will likely feel
uncomfortable talking compression shorts at an Under
Armour store. This seems blindingly obvious, but until
this economic downturn the desirability of positions in
the retail sector was seldom high and purchasers often
found a disconcerting mix of skills, capabilities, and
experience levels at many of the stores they frequented.
7. Look for candidates who respond
positively to recognition and rewards,
and don’t be afraid to single out the top
performers
There is an almost infinite variety of sales base pay
and incentive plans that retailers can draw upon and
experiment with. Pay matters; when done right allows
a retailer to build a committed, engaged, and long term
relationship with the sales associate and more impor-
tantly, consumers.
8. Find creative ways to keep your best sales
associates out of sales management
Success as a sales associate has very little to do with
success as a manager and retailers should be prepared to
be creative in keeping the right people on the floor in
front of customers.
9. Select for initiative and judgment
A competent, well-trained sales associate should be able
to handle most challenges on his or her own. The most
irritating and pointless response a purchaser can hear
during any transaction is: “Let me talk to my supervi-
sor.” Trusting sales associates with some level of discre-
tion can over time make him or her feel like an owner
rather than merely an employee.
10. Select for self-confidence
The sales floor is no place for the timid, diffident, or
insecure (though it is also appropriate to avoid the
opposite unless one is selling labor-saving devices on
late-night cable television or timeshares in Aruba).
Reynolds Atkins (reynolds.atkins@madison-
marquette.com) is VP, Human Resources in
our Washington, D.C. office. P
MADISON MARQUETTE