Should More Retailers Open Up Shop On College Campuses?

The billion-dollar payout goes beyond move-in season.

As retailers continue to make adjustments amid a changing landscape, some have set their eye on a new target: college campuses.

College students are buying than ever before, per the National Retail Federation, with back-to-school spending last year reaching a record of $55.3 billion ($942.17 per student).

“College shoppers are prioritizing and increasing their spending budgets in essential categories including clothing, furnishings and shoes,” explained NRF vice president of research development and industry analysis Mark Mathews.

But the payout goes beyond move-in season, with students continuing to buy food, toiletries and seasonably appropriate clothing throughout the semester. All year round, retailers have an exciting opportunity to tap into a captive audience — and to potentially create lifelong customers.

“Campuses employ people [as well as] bring  in [shoppers] through the student population, so they basically create their own community. That’s a built-in customer base for many retailers,” said Steve Niggeman, executive vice president and principal for Metro Commercial, which manages real estate deals between schools and retailers like Target. “When you look at a college campus and [its potential] customer base, you’re talking about college students from 18-23 years old. Retailers have a very good chance of now creating [long-term] loyalty around their brands with that customer base.”

Over the last few years, Target has added around 100 small-format stores, which are about a third as big as its traditional locations. Around 25% of those are on college campuses with inventory that caters specifically to those populations. Walmart has also experimented with adding stores directly at schools, though not on as large a scale.

Meanwhile, Amazon has opened a number of fulfillment centers located on or near college campuses — allowing students to place orders online for convenient pick-up. The e-tail giant is also targeting college kids through its new Off-to-College e-store, which lets shoppers browse through moderately priced dorm decor, apparel, textbooks and more in one convenient location.

Still, Niggeman said he hasn’t seen many apparel and footwear companies opening up shop at schools.

“I think shoe brands are [a category] that would be successful on a college campus,” Niggeman noted. “And as it relates to branding, you also think how the shoe brand can incorporate the university. There’s a lot of ways I think those types of retailers can be real successful.”

But for now, big box retailers like Target and e-commerce giant Amazon may be most poised to tap into the college market, according to Nick Egelanian, founder and president of SiteWorks Retail; he also noted the rise of fast-casual restaurants on campuses.

“The last thing on [college students’] minds is shopping,” Egelanian said. “You’d probably find a higher internet sales concentration at college campuses, partly because there aren’t as many stores and partly because they’re using their parents’ credit cards. That said, if you put a Target on a campus that has 35,000 students, you’re going to make sales.”

While a 35,000-student strong campus can support a Target, not every school is the right fit. Two big factors to consider are size and location (urban vs. suburban, for example) explained Niggeman and Egelanian. Major public universities like Penn State, UT-Austin and Ohio State — all homes to small-format Targets — are thus best-positioned to handle retail.

“When you drill down on a campus setting and the students and even the faculty, understanding their needs and understanding what’s there is really what [retailers] need to do,” said Niggeman. “There are campuses that have 3,000-5,000 people; that’s not the right setting for a retail store.”

The rise of campus retail might not be a rise as much as an expansion, Egelanian noted. For years, urban campuses, like Georgetown University in Washington, D.C. and Northwestern University in Evanston, Ill. have been centered around shopping areas including apparel and footwear stores — but a rise in student affluence at private universities and selective public schools could more opportunity than before for some retailers. A 2019 Pew Research Center report showed an uptick in the percentage of high-income dependent students at selective schools — although the levels of students in poverty at public universities and other colleges are rising just as much — if not more.

“Do I think you’re going to see shopping centers built just to serve campuses in most cases? Probably not. But I think you’ll see more Targets — that makes sense,” Egelanian said. “You might even see some speciality stores like Adidas and so forth.”

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