Peoria, Sit Down
What does the Gap’s latest venture reveal about Chicago as a retail incubator?
If chocolate is a drug, then Ethel's Chocolate Lounge on West Armitage Avenue in Lincoln Park is a terrible place for addicts. Opened in May, it invites customers to gorge on treats like chocolate fondue, hot cocoa, and gourmet truffles in a serene café milieu. But what customers won't see in the Lincoln Park lounge-and the five others like it, all in the Chicago area-is any sign of Ethel's corporate pedigree. Ethel's is owned and operated by the McLean, Virginia–based Mars, the maker of M&Ms and Snickers, which is using the Chicago metro area as a springboard to launch the concept before it elevates gourmet chocolate to a guilty pleasure that Americans everywhere enjoy daily.
Mars is not alone. In the past few years, Chicago has become a testing ground for established companies to develop new brands before rolling them out nationwide. Teen retailer Abercrombie & Fitch last year opened one of its five young-adult-oriented Ruehl No. 925 test stores in Schaumburg's Woodfield Shopping Center-the same mall used last year by the kids' clothier Gymboree to try out one of its new Janeville stores for women. This fall, the San Francisco–based Gap will place the biggest wager yet on the Windy City. Its Forth & Towne chain-taking a place alongside Banana Republic, Old Navy, and the original Gap brand-will sell fashionable "work to weekend" apparel and accessories to women over the age of 35, according to company execs. Four of the first five new stores will be in Algonquin, Aurora, Skokie, and Schaumburg. The brand's president, Gary Muto, says that the Gap picked Chicago because the city offered great "seasonality," which is retailing code for our devastating winters, sweltering summers, and temperate springs and falls. And he notes that the city is smack in the geographical and cultural heartland of the country: "It's a good reflection of what America is and a good gauge for what will work nationally."
Retailers haven't always seen it that way. Test marketers-who love to cite the old burlesque saw "If it plays in Peoria, it'll play anywhere"-typically avoid big cosmopolitan areas with unique immigrant populations when selling general consumer products. A Northwestern University marketing professor, Bob Schieffer, says that they also prefer to experiment far from the prying eyes of rivals, and in cities less heavily populated than Chicago where they can easily reach consumers with ads and get distribution in area stores. In its study of the150 top test markets in the U.S., the consulting firm Acxiom ranks Chicago far down the list at 136. (Albany, New York, is first and New York City is last. Peoria, alas, has fallen to 37th.)
But an established retailer trying visibly to launch a new chain of stores is another matter altogether-and it turns out that Chicago is an ideal incubator. Schieffer says that whereas West Coast consumers disproportionately gravitate toward anything new, and Southern consumers shy away from novelties, the buying habits of Chicagoans are closely representative of those of average Americans. The city's adjacent suburban business districts also offer a dynamic laboratory of diverse retail environments. Companies like Mars and Gap are bringing their new stores into the city's indoor malls, outdoor shopping centers, and downtown retail district to see what works best-then tweaking their concepts accordingly. "We want to get to know the market, react with it, and penetrate it before we start to spread ourselves out," says Gap's Muto.
And let's face it: Chicagoans don't exactly keep their wallets in their pockets. Last year, the city consumed 20 percent more premium chocolate than the national average, according to a study commissioned by Ethel's. And Gap says that sales in its stores-generally flat nationwide-were healthy in local outlets. Although they view Chicago as a reflection of the rest of the country, these companies also hope the city will put some wind in the sails (and sales) of their new ventures. Says John Haugh, president of gourmet chocolate and retail for Mars: "It's a town that really appreciates the finer things in life."