Sparc Group, The Simon Property Group/ABG Creation, May Well Reimagine the Future ‘Brandscape’

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When I was first learning to drive, my father would tell me not to watch the car in front of us, but to watch the car in front of it. The implication being that to truly be a defensive driver, one needs to anticipate things before they happen. I have tried to apply similar thinking to other circumstances throughout my life. I even believe it has implications in retail. In fact, I am seeing it play out right now, in the guise of what is currently happening with the creative establishment of Sparc Group LLC, (Simon Properties Authentic Retail Concepts) and its primary partners Simon Property
SPG
Group and Authentic Brands Group. This does not completely surprise me.

I have had the good fortune during my 40-plus-year career as a retail planner and store designer to have more than a passing relationship with the Simon Property Group, in all its embodiment’s. This goes back to the 1980’s when my firm was contracted by Melvin Simon and Associates to established new storefront design criteria for their many centers. They became the first major developers to break from norms of rigid storefront continuity, to introduce design diversity, but within specific guidelines, for which we helped establish.

A decade later, with the epic development of Mall of America, for which Simon was a partner, we were retained again as consultants as well as designers for a litany of the specialty retail tenants. Throughout those engagements I saw the manifestations of “watching the car in front of the car ahead”. They were always looking beyond conventional norms and leaning into what was going to become new standards for retail design, marketing, and mall management. Now, I believe Sparc Group is the next manifestation of that same forward thinking.

Redefining the “Brandscape”  

With countless specialty retailers in a seemingly endless queue, through the bankruptcy court doors, many in the industry see the Sparc Group’s endeavors as a “necessary evil” of today’s retail meltdown. Many pundits believe that Simon Property Group’s, now four-year-old relationship with Authentic Brands Group as a desperation move, to buy these large (and previously thriving) chains just to keep their malls occupied.

Recently one of my Forbes colleagues, Greg Maloney wrote a terrific article devoted to some of the same Sparc Group news, noting “I don’t think that mall or shopping center landlords want to be in the retail business, but that under special circumstances the situation may dictate that they need to be.” And for the most part, I must agree. However, I also believe there is something much bigger and more holistic happening with Sparc, that screams unified commerce, and the next iteration of brand management. I see it as the manifestation of an evolving “brandscape.”

Getting Lucky

Last week the Sparc Group, LLC added Lucky brands to its fleet of bankrupt retailers, which now includes Aeropostale, Forever 21, and Brooks Brothers. Based on published numbers of both previous store closures as well as estimations of numbers of units expected to remain open, that would put the partnership in charge of 1,173 retail units, many of which do reside in Simon Property malls.

The thing that got many of these bankrupt brands in trouble in the first place was often driven by “what got measured, and what didn’t.” Retailers historically (often at their own peril) have fixated over the KPI’s that measure units sold, sales per square foot, comp sales, you know the drill. Too few have had a history of quantifying, prioritizing, or even measuring brand value. The classic exception is Apple
AAPL
, which today, August 19, 2020, reached a market valuation of $2 trillion dollars.  

And, as I have often written, one of retails own undoing’s stemmed from the notion of growth being a strategy, rather than a tactic for success. This left many retailers with too many locations, lack of focus on their customer, and a commoditization of their own brands. I believe Sparc Group won’t make those mistakes.

An Authentic Powerhouse

As a key partner in the resurrection of these four retail brands, Authentic Brands Group is employing its highly refined toolkit to overcome what has been overlooked and should introduce measures of brand sustainability. Their portfolio of over 50 consumer brands reads like a Who’s Who of popular culture and fashion. Additionally, they have built a stable of best-in-class manufactures, wholesalers, and retailers.

ABG has created over 100,000 sale touchpoints across specialty, luxury, mass, mid-level, department store and e-commerce channels, internationally. They generate an eye-popping $12+ billion in sales, annually. To quote David Simon CEO of Simon Property Group “They’re very, very good about understanding where there is value in the brand because they know how they can monetize that intellectual property.”

The Simon/ABG, Sparc Group has already born some sweet retail fruit. According to Dun & Bradstreet, the Lyndhurst, NJ based company claims 10,000 employees, generating $843.45 million in sales. Their capabilities encompass design, manufacturing, distribution, and marketing goods for both brick and mortar and e-commerce sales. They have wholesale accounts in North America, South America, Europe, and Asia Pacific.  

Conflicts Aplenty

Recently James Angel, professor of finance at Georgetown University’s McDonough School of Business, noted the dynamic introduced by Sparc is full of potential conflicts of interest. Among them, that tenants not owned by the mall may look askance at the ones that are. Angel notes “Now I’m starting to view my landlord as my competitor, so there’s definitely a channel conflict there,” he said.  

It further begs the question of how the Sparc-owned retailers will be viewed by non-Sparc malls as well. And when it comes to Sparc Group’s possibly culling the herd, will those retailers even exist in non-Sparc malls?

Exclusivity Versus Ubiquity

To answer the question, I would look to the famed Bauhaus architect, Ludwig Mies van der Rohe, who popularized the phrase “less is more.” By extension, less storefronts of an in-demand brand that is managed well, across all channels and touchpoints, will yield more value for all involved. Scarcity will enable a small number of strong malls to exist, even when most of them have closed.

I believe it will be up to Sparc Group to take a more holistic approach to monetization, where brand value will become the watchword for these, and possibly other brands to come. Managing the brands across the entire “brandscape” will help dictate the metrics that will ultimately manifest itself into the physical, and virtual embodiment of these reconstituted brands.

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