Luxury, low price mix as some malls blend merchants

By Lorrie Grant
USA TODAY
Feb. 2, 2005

Mall developer Westfield Group will announce Wednesday that it plans to include "cheap chic" discounter Target alongside Neiman Marcus and Nordstrom as one of five anchors at a high-end mall it is redeveloping in Los Angeles' San Fernando Valley.
The $300 million redevelopment of the Westfield Shoppingtown Topanga mall is to be complete next year.

The move reflects a growing trend in retailing to experiment with bringing what have been mostly freestanding "big-box merchants" — from discounters such as Target to specialty retailers such as Best Buy or Bed Bath & Beyond — into malls as anchors.

The idea of mixing a luxury experience with low-price convenience under the same roof reflects widespread acceptance of discount shopping.

"The owners of department stores and luxury stores had an attitude many years ago about this, but today they are saying these are the same customers," says Richard Green, vice chairman of Westfield's U.S. operations.

The move also is a realistic response to consolidation within the department store sector that has pushed developers such as Westfield to try something different. This will be Westfield's eighth Target store as a mall anchor.

The Australia-based mall developer also has put discount giant Wal-Mart in its Westfield Shoppingtown Parkway mall outside of San Diego. It has seven Best Buy stores as anchors for some of its 67 U.S. malls across the country.

Meanwhile, the Irvine Co.'s Irvine Spectrum in Orange County, Calif., will have Nordstrom and Target as co-anchors when it's completed next year. Warehouse club Costco was a replacement tenant for Spotsylvania Mall in Fredericksburg, Va.

In general, malls depend on anchors to draw customers to their line-up of shops. Adding "big boxes," which are growing even as department stores are struggling, can do that, as well as add categories of merchandise not generally available now in malls. That helps them compete with one-stop megastores, such as Wal-Mart Supercenters.

"Years ago, malls were fashion driven. You couldn't get a bike," Green says. "But today, you can get a bike in Target, along with housewares, sporting goods, etc."

The big stores are adding to the pressure on malls with continuing rapid expansion and with more locations in close-in suburbs and city centers.

"Regional malls were once the principle option for a shopper wanting to purchase discretionary merchandise; now, they are one of many," according to a report by the International Council of Shopping Centers.

Most malls are in high-traffic suburban areas and draw customers up to 25 miles, the report shows.

Only four regional malls were built in the USA last year. Five are underway this year. To fill those, developers still are likely to seek complementary — or alternative — retailers to department stores.

Consumer surveys continue to register department store complaints about too much sameness in merchandise, cluttered stores and poor customer service. Sales at department stores open at least a year nudged up just 1.6% last year, and that was the first gain since 2001, according to Redbook Research.

Department stores are trying to help themselves by doing more to differentiate themselves — and by acquiring competitors.

Sears and Kmart expect to close their merger next month. May Department Stores bought Marshall Field's last summer. Federated Department Stores is in talks about a possible merger with May. Store closings because of overlap are seen as the inevitable result of such consolidation.

"There are fewer and fewer department stores to go after to anchor the malls," says John Melaniphy III, executive vice president at retail real estate consultant Melaniphy & Associates.