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1998 MAXI Awards

Blueprint for Profitability

Glendale Galleria
Glendale, Calif.

Glendale Galleria's competition was intensifying, while its market's population base was not growing -- although it was becoming more diverse -- and customers were spending less time shopping. Sales were flat, yet the economy was flourishing. The center's management team recognized that those conditions represented a call to action.

The question was how to fine-tune the merchandise mix to optimize productivity and rental income. In 1990 Glendale Galleria management had launched an extensive remerchandising program that over the next six years affected 70% of the center's small shop gross leasing area. The challenge now was to find the best approach for the remaining GLA. But before deciding how to act, the team undertook a detailed study that would suggest the appropriate steps to take.

OBJECTIVES

1) To conduct demographic and lifestyle market research to determine the remerchandising program's direction. 2) To benchmark sales productivity and rental income. 3) To increase net operating income by 5%. 4) To increase net effective rent per square foot by 10% annually. 5) To increase sales of tenants with better price points and a classic fashion profile by 30% over mall average. 6) To increase sales productivity by 10% in those zones of the mall that had experienced the most remerchandising.

IMPLEMENTATION

Glendale Galleria conducted a host of market studies to benchmark and define consumers' wants and needs, including ethnic focus groups and more than 800 shopper intercept surveys. The management team also conducted roundtables with key retailers to assess their experiences nationally, regionally and within the center.

From the research results, the management team was able to formulate a blueprint for fine-tuning the center's merchandising and marketing strategies. The team also presented the results to targeted prospective tenants as evidence of the center's desirability.

The team developed sales and tenant databases to measure and analyze the effects of the remerchandising plan on sales and rental income. They also developed price point and fashion profile models, which they used to analyze sales ratio efficiencies and productivity levels. The data could be analyzed by geographic zones in the center, by tenant category and by fashion profile.

Among the findings was consumers' strong desire for fashion and branded merchandise, which led the management team to focus on expanding offerings of better price point classic fashions and building Glendale Galleria's fashion image. The center also upgraded its look through a $6 million cosmetic renovation, during which a merchandising campaign was launched to increase sales and promote the changes in store.

The research also identified Glendale Galleria's most productive consumers (ages 35 to 50); the team targeted those shoppers with a direct mail program that highlighted the tenants matching their consumer profile. Another finding was that adding food tenants to the center's less-trafficked areas would most effectively build overall sales and rental income; the team implemented an electronic restaurant card program to increase food tenants' sales and track food purchases.

RESULTS

The research, financial analysis, leasing and marketing efforts altogether boosted Glendale Galleria's net operating income by $1.6 million -- or 9.6% -- over the previous year. Net effective rent increased 20%, while total mall rental income increased 11%, compared with the national average of 8%. Sales productivity improved 2% over 1996, to a five-year high of $418 per square foot. Merchandising events during the mall's renovation increased sales 4.5% in June and 8.4% in July. The average customer expenditure increased 5% in 1997, to $99.

Stores featuring classic fashions at better price points averaged more than $615 per square foot, 47% over the mall average, and enjoyed the highest percent change in sales for the year. The four most remerchandised zones of the center produced sales 11.5% higher than the rest of the mall, at $437 per square foot. The remerchandising of two additional zones created sales increases of 8% to 10%.

CREDIT

Managed by: Donahue Schriber.

Professional recognition to: Deborah Blackford, CMD, marketing director; Judi Lapin, senior vice president, marketing; Cindy Chong, CSM, vice president, general manager; Karla Kirtland, president, Kirtland Consulting.

Expenses

Market research $19,500

Database development 7,200

Statistician fees 7,050

Merchandising events 37,168

Total $70,918