I recently had the pleasure of chatting with Zae Perrin, general manager of The Market on Market, a food hall featuring locally sourced healthy food and other retail on the ground floor of the Twitter building, 1355 Market St., in San Francisco.
Zae began his career with Enterprise Rent-A-Car, where he worked his way up to become area manager for Germany, opening 26 new offices over four years—and acquiring over $7 million in new business for Enterprise. He’s also worked as an executive with Target and with Corinthian Colleges.
ANJEE: What was the genesis of The Market?
ZAE: Initially this was a furniture store, and when Shorenstein (a privately-owned, San Francisco-based real estate firm) took it over, they started talking about how to make it a multi-use space. The thought was to bring in grocery, produce—everything local—and then have different food venues within the space. They also had an accumulation of complementary subtenants: EO, Farmgirl Flowers, The Market Sushi, The Market Butchery, and Seafood. And then the other subtenants were Azalina’s, Project Juice, and Nuubia.
The Twitter building, 1355 Market St., in San Francisco. Image courtesy of San Francisco Business Times.
ANJEE: When this was being created, was there a certain square footage that everyone was targeting, or did it occur organically?
ZAE: It was really organic. The total space is 22,000 square feet, and the concept was to have all the food in the back of the house, and have everything else in the front of the house. From that it’s morphed into how do we do it the best for our clientele based on what we have? So the grocery, when it first began, had a good 10,000 SKUs (stock keeping units, a way of tracking inventory), which is a lot of product and a lot of offerings, because they wanted to provide everything to the community. Through that experience, they recognized, well, you can’t do that. It’s too much.
Also: Click & collect: brick-and-mortar stays current | Experiential shopping: more than just a store
ANJEE: What audience were you targeting at that time to develop this 10,000 SKUs?
ZAE: At the very beginning, it was kind of a shotgun effect, and then it really morphed into seeing who we have—recognizing who we were getting from the direct community, who we were getting from the neighboring businesses—and really catering everything to them.
ANJEE: When you say community are you talking about a one-mile are, point-five-mile area?
ZAE: It’s one mile because we have folks who live on this side and people who work on that side (of Market Street), so they travel past us, or they travel to yoga past us, or they go to Fitness SF, or whatever it may be. So right now, with the way that we’ve been able to add great subtenants like Azalina’s, like Project Juice, we’ve really been able to hone in on some changes for our grocery section that opens up the opportunity for more subtenants.
Our grocery had a footprint that took up about 8,000 square feet, which was pretty much the entire middle portion of The Market. I’ve changed those 10,000 SKUs to about 3,500, and then I took out the back section of grocery and made more seating, so that we can bring in more subtenants strictly for food venues. I’m condensing the full footprint of grocery to really be the heart of The Market, and then our fresh, beautiful, locally sourced produce in that section as well. So when you first come in you either go directly into The Market, into the vibrant colors and smells, or you go off to the veins of The Market, as you will, because this is the heart.
The Market on Market’s extensive cheese selection. Image courtesy of San Francisco Eater.
ANJEE: Now you’ve realigned your offering, which is the driver? Is it the food portion of The Market, or the subtenants, or is it a combination?
ZAE: It’s a combination.
Plus: Budget matters when Millennials become parents | Interview with Julie Taylor, Renowned Bay-Area Broker
ANJEE: So you’re saying a customer will shop both?
ZAE: That’s really what we want to drive. So I had 10,000 SKUs and that was 35 percent of the business. Now I have 3,500 SKUs and it’s 35 percent of the business. So by curating that offering, I could shrink the overall footprint and still give all of my customers what they need and what they want and then still expand that offer at the same time.
ANJEE: Ultimately, can you replicate this?
ZAE: Yeah, because we’re looking to open on Polk and Clay by the end of the year. So we already have the location, the old Green Apple Books.
It will be about half this size. It’s 13,000 square feet as opposed to 22,000. But the other benefit of Polk is that we’ll have a rooftop bar. So that’ll have a different draw.
ANJEE: You could do this with just about any mixed use developer, co-brand and become the ground-floor anchor tenant.
ZAE: We see it the same way. It’s really about the concept for myself and Chris and Mario to duplicate wherever we can and really curate the same type of experience. We run 10 food venues or mini-businesses within the business, not to mention our retail grocery and our produce, so really we’re running 12 businesses in one. So it would be more along the lines of curating, finding all of those subtenants, running some of the tenant businesses, or just managing the entire process.
One of the things that I recognized was that residents of NEMA (apartments) were going down to the Embarcadero to the Farmer’s Market and they had the exact same produce there as we do here, so it kind of shocked me that people just didn’t even know that they could walk across the street and get the same locally sourced produce.
The Market on Market’s Floorplan. Image courtesy of The Market on Market.
ANJEE: The area is changing and growing.
ZAE: Mid-Market is still going through gentrification and changing over, and a lot of people are still scared to come here. They don’t know the changes that have happened. And as many of the high-rises that are going up and opening up, the people that are moving in aren’t necessarily from San Francisco, so they don’t know the changes that have happened. We’re going to do a marketing push with other businesses in the community as one single association and try to change the name of mid-Market. Because the other part is we don’t want to be “The Market that’s in the Twitter building.”
ANJEE: That’s a very interesting point. It’s always referenced as The Market, so that’s a great point to re-brand-reposition. Can I ask about your target market again, in terms of the demographics and psychographics? What is the range? Is it income?
ZAE: Really, it’s a lot of millennials, but we do get families on the weekend. I’d say from those weekend folks, maybe 15, 20 percent have younger children. Everyone else either don’t have children or are partnered but not married. We do a larger percentage in wine and beer, so we automatically conclude that they’re somewhere between the ages of 22 and 35.
The influx of residents is way up there, so we already know that this is going to be a success well down the line. We’re trying to drive it now as a destination. So that’s really what we’re trying to strive for right now.
The deli counter. Image courtesy of San Francisco Eater.
ANJEE: What do you see as some of the challenges outside of the perception issues?
ZAE: I think that we’ve tackled the majority of them head-on already, especially in the curation of what we have and what we do. Part of the issue with having 10,000 SKUs is that we had high, high premium, and when you go shopping you only see the most expensive as opposed to the most economical. In actuality, if they looked at our most economical brands, we’re less than Whole Foods, we’re less than Trader Joe’s, in some instances we’re less than Safeway.
ANJEE: Is the merchandise “ The Market” branded? Or third-party branded?
ZAE: We do have Market-branded items as well. The majority of them we produce ourselves. So we have our own bone broth. We sell our salsas that we have at our taco bar, our own guacamole. We also do some candies and bulk nuts—things like that.
ANJEE: Are you meeting your sales projections for this location?
ZAE: Once we finish the overall changes and get produce completely moved over, then I see us plateauing just above the goal. Then when we add in the additional subtenants, we’ll be just fine.
ANJEE: Do you think this concept has good sustainability?
ZAE: Oh, yeah. Very much so, in certain markets. I think it has to be more—it can’t be in a suburban market because you don’t have that core need. You need a city/urban environment with kind of salt-of-the-earth produce as well as local, growing businesses as tenants, kind of everything bringing it together. You do need to have a base of recurring guests to get you through the hills and valleys.
Main image courtesy of SF Gate.
Anjee continues to be an insatiable collector of all things retail. She’s a student of culture living next door to future shoppers, whose fleeting trends constantly change the retail landscape … driving retailers, landlords and developers crazy!