Why Penn, Drexel are recruiting retailers, not just students

Inside the Saxbys coffee shop at Drexel University, Alyssa Bennett, 21, makes deposits, sets schedules, and pitches in at the latte machine when the line gets long.

The third-year Drexel student is what the Philadelphia-based company calls a “Student CEO,” referring to cafe executive officer. In locations on or near college campuses in Pennsylvania, Washington, Georgia, and New Hampshire, the coffee company hands over operations to a local student for the semester, paying them above minimum wage to run the cafe full time while also receiving class credits.

Drexel president John Fry called this twist on the campus coffeehouse “exactly the kind of thing that we want.”

“Another coffee shop? Who cares. But a student-run Saxbys? Great,” he said.

As academia becomes increasingly competitive in attracting top students and staff, universities are turning to retail to create study, work, and play environments that set themselves apart. Even as brick-and-mortar stores struggle to compete with online retailers, the upcoming generation of college students is fiercely brand-loyal and often prefers a hands-on shopping experience, research shows.

“It’s been a slow burn to get colleges to realize how critical the retail and restaurants scene plays on the college campus experience,” said Doug Green, a managing principal at MSC Retail, whose MSC University unit focuses on retail real estate in higher education. “But it’s really starting to snowball, and you’re starting to see more and more schools recognize what they have, recognize what they need.”

Take the Saxbys on 34th Street. It is within walking distance of a Wawa, 7-Eleven, and Starbucks. A Chipotle, Insomnia Cookies, Blaze Pizza, and Drexel’s food court Urban Eatery are nearby.

“Just having a campus environment where you know there’s so much available to you, you can walk down the street … and pass three coffee shops I think that really pushes people to come to college campuses,” Bennett said. “I know when I was touring campuses, I was, like, ‘well, is there a coffee shop in the business building?’ Because I want to be able to access coffee whenever I can. Especially a café like this with such a great environment for people to come meet and study and hang out. It really drives home that Drexel, or whatever college it’s on, is a place where you want to be.”

Tracking the college generation’s shopping habits could also be a good indicator of their future tendencies, experts say.

For Saxbys CEO Nick Bayer, the university locations gave the company insight into the emerging demand for cold brew coffee over regular hot coffee. This happened “far sooner” at college campuses, he said, and the company responded by creating a cold brew collection with signature flavors. This has since spread to the company’s noncollege locations.

“Our more urban cafes in places like Drexel, we’re seeing a nice glimpse into what sort of trends and buying profiles future consumers are looking for because we’re serving that 18- to 24-year-old so closely,” Bayer said.

Penn has invested in commercial development for decades now, but it has adapted to provide amenities that meet the needs of its changing population. Although retail used to be mostly service-oriented, Ed Datz, Penn’s real estate executive director, said the university is now attracting more experiential retailers, expressed in some ways by the homegrown food hall, Franklin’s Table.

Penn courted Philadelphia-based companies and alumni to open locations at the food hall, resulting in a mix of cuisine, such as falafel from Goldie, breakfast sandwiches from High Street Provisions, burgers from KQ Burger, Kensington Quarters’ fast-casual model, and acai bowls from the Juice Merchant.

This gives local retailers exposure to a new market and insight into changing buying habits. Students also get access to diverse and unique Philadelphia foods.

"We have to make it an attractive place with needed amenities in order to be a magnet for talent,” said Tony Sorrentino, a Penn assistant vice president. “You can’t be in an ivory tower.”

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Even while online shopping carves out more of the market, a National Retail Federation survey showed that 67 percent of the younger generation, called Gen Z, said they prefer to shop in a store most of the time.

Big-name retailers have also taken notice of this trend. Target opened seven of its smaller-format stores on or near college campuses last year, and the company announced plans to open about 30 stores annually in the next few years. There are locations across the country, including the University of California-Berkeley, the University of Cincinnati, University of Texas-Austin, Florida State University, the University of Maryland, and Boston University.

Orange Theory Fitness, a boutique fitness studio chain, opened a location in University City this year, brokered by MSC. Carlisle, Pa.-based Giant Food Markets announced last month that it will be expanding its urban store concept, Giant Heirloom, to University City, among other neighborhoods.

“If you can hook them young, and you can get them engaged, you can be a presence in their lives during these formative years,” said Katherine Cullen, the NRF’s director of consumer and industry insights.

After the success last year at the Penn food hall, Michael Pasquarello, the owner of 13th Street Kitchens restaurant group, KQ Burger’s parent, said he hopes to open two more KQ Burger locations within a year.

“It’s turning people on to our 13th Street Kitchens brand as a whole, and we use that as a marketing strategy there for sure because these young students turn into young professionals and they’re Penn students, so they generally do pretty good out there,” Pasquarello said. “It’s a nice little circle of life.”

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It hasn’t always been a virtuous circle for universities and their environs. While relationships have probably improved over the years, there continue to be tensions.

It’s important to think about development in a way that benefits both the university and surrounding community, said Tayyib Smith, principal at Little Giant Creative agency, which helped develop an exhibit called “A Dream Deferred,” to examine the effects of redlining, aka denying loans in Philadelphia neighborhoods, including West Philly.

“The history of universities and the black communities that they border are extremely complicated,” Smith said, referring to the federal “urban renewal” policies of the 1950s and 1960s that Penn exploited to grab tracts of land in West Philadelphia and displace thousands of residents, mostly African Americans from the Black Bottom neighborhood.

Universities “ought to own up to the mistakes of the past and try to correct them moving forward,” said Omar Blaik, CEO of U3 Advisors, a real estate and economic development consulting firm that has worked with universities across the country.

Blaik, who was Penn’s senior vice president of facilities and real estate for nine years until March 2006, was instrumental in more than $2 billion in construction and real estate projects, including redevelopment of 40th Street and the Perelman Quad construction.

“Retail as a strategy is not a transaction. Retail needs to be curated,” Blaik said. Universities need to “create a market that is open to people from diverse backgrounds.”

University City hosts its annual Baltimore Avenue Dollar Stroll each summer, highlighting businesses between 43rd and 52nd Streets with $1 deals for the event. Though it’s about a mile and a half away from campus, Penn included a description of the event on its university-run news page and mentioned such businesses as VIX Emporium, Black Hound Clay Studio, and The Nesting House. The university also promotes shopping around campus with its website, dubbed “Shop Penn,” with a list of retailers, including the Last Word Bookshop, Piper Boutique, and United By Blue.

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David Adelman, the chief executive officer of Campus Apartments, a student housing company that has worked on many projects near colleges, said that, ultimately, he looks for retailers with a broad appeal.

Keswick Cycle, a bike shop 500 feet from Locust Walk between 40th and 41st Streets, pays Campus Apartments below-market rate rent to operate in that location, said Brian Hackford, the shop’s managing partner. The store, which has been open since fall 2011, saw 15 percent growth last year, Hackford said, not necessarily from the students, but from other residents of West Philadelphia.

“We try to curate and kind of cater with a focus more on the community than just the students,” Adelman said.