Playa Vista is the uber-hip urban master planned community near LAX. Its residential developments are fairly dense although the net dwelling units-per-acre is modest. Development has been scaled down and buildings concentrated into smaller areas to maximize green space, amenity areas, etc.
The product is mostly podium construction, block-style condominium. No swings in the back yard. No fenced back yard. NO BACK YARD!
There are no unfinished bonus rooms or developable basements.
Nevertheless, next to Playa Vista is the world’s busiest location of The Home Depot. Home Depot’s sales have shot through the roof once residents started moving into Playa Vista. The sales cannot be attributed to the other, limited residential developments nearby. Even owners of fully-finished, new condos buy lots of “home improvements.”
New homeowners, even if they have ultra-modern condos, are good for the retail giant. Even though their homes are covered by the various builders’ warranties, buyers find ways to spend money at a home improvement store despite the lack of “repair” work done in older communities.
New homes bring new commerce. But not every company understands this concept.
In Irvine CA, Westpark Dry Cleaners has an affinity program for owners at the nearby Villages of Columbus. VOC is a LENNAR master plan of 2000 homes with guest builders, KB Home and William Lyon Homes. The dry cleaners recognize that new residents at VOC will frequent local services. Offering a discount to new residents helps them establish new shopping patterns for those local services.
I doubt that even one of VOC’s hundreds of buyers chose that terrific community in order to have shirts laundered for a monthly saving of a few dollars. BUT…they have to get dry cleaning anyway…somewhere… and this one merchant helped convince them to bring that business to them. They realize that the extra revenue does not require more space, more staff, more machines, etc. They had the business capacity and moved to fill it!! I believe that the adjacent nail spa and other personal service businesses get more business simply by being there…next to someone who has self-generated more business.
In Tucson AZ, KB Home had a successful entry level community, Arizona Heights. The local pizza operator approached us and literally begged for the opportunity to deliver a free mega pizza to every single buyer on the day they moved in. We could not give the name, the price paid, etc. etc. But we could say that 123 Cactus Crescent would have people moving in on November 26. The pizzas would arrive just behind the moving truck. Hot pizzas. A nice note of welcome from the restaurateur. A fridge magnet with the restaurant’s name and phone number. Take a guess on how successful this was.
The merchant knew that the new resident was very likely to need a new pizza location. They knew that buying behaviors would change. They also did everything in their power to take advantage of the change. They did not need more ovens, more space, more staff, or more phone lines. They just used more intensely the resources they had. (I do believe they make more dough, but it’s mostly the dough that goes into bank accounts.)
Katsuya Restaurant, part of nightlife impresario Sam Nazarian’s SBE Restaurant Group, has co-sponsored events with John Laing Homes for their ultra-chic Hollywood condos at Madrone. Katsuya knows that new residents will look for new places to spend. Whether they are on a tight budget or are unaffected by external economic forces, they will go SOMEwhere for cocktails and meals. Maybe less frequently. But everyone new to Madrone is…new to Madrone!! They might still travel thirty miles for a dinner party. But are they more likely to rest and entertain closer to their new home? Of course. And Katsuya will have made an impression before other establishments. They have a realistic right to expect better patronage. Again, they don’t need to buy more chairs, lease more space or add more ovens. And the probably have excess staff capacity built in. They use their existing assets more intensely.
Whole Foods has a successful program of co-branding with homebuilders in Southern California. Not known as a discount supermarket, Whole Foods knows its niche is high quality, organic foods, green household cleaners, etc. and outstanding personal service. It is no wonder they want to participate even in pre-sales events…in order to build more awareness generally, but also remind home shoppers that they have a location near the new community being presented. Whole Foods stores are not as large, and hence not as visible as the super stores. They do not have the advertising budgets of Kroger or Safeway. Their customers will travel a little further for the Whole Foods experience, but first need to know the store locations. They may not easily find them if they are strangers to an area of new homes. Thus the co-branding is clever. The builder looks to Whole Foods to provide snacks etc. for buyer events. This allies / aligns the builder with another market leader, gives a power message to home shoppers and reduces the cost of events. Even those guests who do not buy a new home…or buy from another builder…have had a Whole Foods experience, and may build (or reinforce) a relationship with Whole Foods. Again, for Whole Foods, their success in co-branding does not require more shelves, longer hours or extra carts. They use all these resources more intensely and would only need to turn their inventory more often. Nice!
The 1-2 year spending spike, from new homes to furniture purchases, is well-known. But many many more retailers benefit from additional neighbors. This is quite different from the turnover of existing housing stock. New homes mean additional households. New homes mean more consumers.
How many businesses have the initiative and creativity shown by Arizona Hts. Pizza and Westpark Cleaners? Is this lack of initiative caused by a budget constraint? I doubt it since the pattern was evident when retail budgets were flush.
Is it complacency? Is it arrogance? Perhaps. Are some merchants so sure of their business that they don’t look for opportunities to widen their nets? Or avoid doing so until someone with initiative takes market share away from them?
Is it lack of interest in new business? I doubt it!!
Is it because they don’t know how to build a relationship with the provider(s) of new homes? I hope not! Homebuilders are visible. Their goods are very obvious! Theirs is no underground economy.
So why the reluctance? Why don’t more businesses see the value of being FIRST to engage additional customers? Who doesn’t want to turn their inventory more often? To use their people and facilities more intensely? Is it usually the little guy who sees opportunity first? This person has a vested interest in the retailer’s success? But, are we not ALL interested in our companies’ successes?
Hello, Staple Depot of Max Office Supplies. How many homes do NOT have plenty of business equipment and supplies these days? When would be a good time to look for new business? When should you help new neighbors establish new shopping venues and habits? After your competitor has already secured it? Strong outreach campaigns, leveraging with homebuilders, may also drive more business to the retailer’s online channels. Meaning more efficient use of resources. Better energy management. After-hours sales. It’s all good!
Wake up, Sleeping Company USA! Maybe there are co-branding opportunities, generally. Maybe there are specific opportunities for MORPH-y beds that change into a wall unit, use square-footage and volume more efficiently, and make those smaller new home spaces more attractive. And reduce the home cost. And increase the marketability and target audience. It’s all good!
I’m not sure about anyone else, but I REALLY do want to try VOIP. I just don’t have time or inclination to figure it out. What if…? How about…? Etc. But if a new home would include the equipment, the installation and a bit of a tutorial, I’d take that option. I would NOT buy a new home to get Spyke or Novage, but I would want it included in my new home.
And a builder who offered it would be sending me several messages:
1. They live in THIS century;
2. They are ahead of the curve;
3. They are giving me more opportunities to save costs;
4. They ally / align themselves with other known winners;
5. They know I am buying a lifestyle, not only sticks and bricks.
What if…a local bank gave every new owner of a new home at Acme Meadows…every single one…two years’ free safety deposit box? What’s the cost? Would they get everyone’s banking business? NOPE. But wouldn’t they get some? Safety deposit boxes can’t be accessed online. Users must come in…see the team, in the case of my California Bank & Trust, have a coffee and cookies, and be engaged. See customer service in action!! An opportunity for the bank to generate goodwill and new business.
What a nice thing for Acme Homebuilders to “include” for their new owners. Again, giving the message of giving a damn, respecting the buyer, being woven into the greater community and allying / aligning with another market leader.
As the housing market starts to come back, buyers will be in the looking process longer. They will qualify for smaller loans. Credit granters will look at income, something that FICO scores do not measure. There will be some, but not many low-down or no-down payment programs. Buyers will need real down payments. To save up these down payments will take longer as interest rates are lower and unemployment is higher. They will only be able to buy lower priced homes. But the dream of ownership continues. People’s life situations will still change and they will still look to move.
When they do, they will be forced into more compromises. They will either wait longer…or they will forego some of the features that would have been non-negotiable to a buyer in 2004. Builders should be looking for tactics to expedite the buying process. By improving the offering, upgrading the experience, if not the home.
Many times this can be done in collaboration with retailers.
In turn, these retailers, and even others, will benefit as new homeowners spend on things for their new home.
Many can benefit from the same creativity as Katsuya, as Westpark Cleaners, as Arizona Heights Pizza and as Whole Foods.
Once again, when is the best time for retailers and builders to co-brand and show initiative? Only after someone like Whole Foods and Westpark Cleaners, and Lennar and Laing and KB have done so…and taken market share from those who kept doing what they’ve always done? What's the worst to happen by doing more business??!!
HARD
January 10, 2009
