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THE ‘UNRUSH’ HOUR

If opening doors later in the day saves money for retailers and landlords, why aren’t more properties doing it?

By Curt Hazlett

It’s 10:30 on a cold but sunny weekday morning, and not much is happening inside General Growth Properties’ otherwise hugely popular Maine Mall. In Macy’s a janitor slowly vacuums the carpet near the menswear department while a handful of customers eyes the big midwinter sales. Sales associates in the Gap store fiddle with some displays as a lone shopper strolls up and down the aisles. And at Abercrombie & Fitch, the dance-beat Muzak echoes across an empty floor — this is a school day, after all, and the Abercrombie crowd has other things to do.

The Maine Mall is not always this quiet. At 1.2 million square feet, it is the largest shopping center in the state and so popular on late afternoons and weekends that parking is available only on the outer reaches of the sprawling lot.

But little moves in the morning, save for the power-walking seniors who seldom buy anything beyond a cup of coffee at Au Bon Pain.

Opening early in the day is not just an American phenomenon. Many new centers around the world — The Mills Corp.’s Xanadú Madrid, for instance, or the massive MetroCentre mall in northeast England — are open at 10. And yet mall shopping is not much of a morning activity anywhere, at least not on weekdays. Before noon, shoppers are more likely to frequent grocery stores and off-mall retailers, observers say.

All of which raises a question: Why go to the trouble and expense of opening so early in the day, when most people have better things to do, like work?

“It’s an issue all mall owners think about, but no one wants to be the first to implement such a change,” said David J. Contis, CLS, CSM, chief operating officer of The Macerich Co., at ICSC’s Research Conference in San Francisco in November.

The owners may be thinking about it, but most are not talking about it, at least not in public. Privately, though, some executives say their hands are tied, both by the need to compete with other shopping centers and by the desires of big tenants, especially department stores, to squeeze the most revenue out of every workday. The fact that off-mall discounters such as Target and Wal-Mart are generally open by 8 a.m. is especially worrisome to them.

“What major retailer is going to say, ‘We’re not going to open until 11 or 12,’ when every one of their competitors is opening at 9 or 10? It’s not going to happen,” said George Whalin, a San Marcos, Calif.-based retail management consultant. “Retailers are in a business today that is so fiercely competitive that they just can’t give up on anything.”

But there is plenty to gain by opening later, others contend, and they believe that retailers are increasingly open to the idea. For one thing, staff time could be redirected to where it is needed most, and operational expenses, particularly utilities, could be reined in. Such savings might be small for mall owners, but for tenants, especially the big chains, they could justify a shorter selling day.

“This is an issue I remember talking about 25 years ago,” said John C. Melaniphy, president of Melaniphy & Associates, a Chicago-based consulting firm that has advised most of the country’s major shopping center developers. “Retailers were saying even then that there were no customers in there, and when you look at when consumers are buying today, it’s at night and on the weekends. If you walk into a mall in the morning, the only people you see are the walkers. It’s dead city.”

Melaniphy says most of the reluctance to change lies with the owners, who feel bound by their hours-of-operation agreements with tenants.

“The mall people just have this feeling that they have to be open,” Melaniphy said. “I’m sure that when General Growth or Simon look at their business, they know they don’t need to be open in the morning. But what they would save would be relatively small. The retailer would really benefit. A lot of them are independents, and it’s their time. But other stores have labor costs of the early morning hours, and, certainly, anything you can save today makes a difference.

“If you were to get all the retailers in the community room and ask them the question, and their leases didn’t say that they had to be open certain hours, I think you’d find that they would acquiesce immediately. There are very few of them that do that much business in the early morning hours.”

Indeed, hours are spelled out in leases, but negotiation is possible, says Sheldon A. Halpern, a partner at Pircher, Nichols & Meeks, a Los Angeles-based law firm that specializes in commercial real estate.

Usually, it is the landlord who wants longer hours as a way to ensure higher traffic for all of the center’s occupants, says Halpern. “It’s a contractual matter, particularly with smaller tenants,” he said. “Tenants with leverage — the anchors or those with a national presence — can negotiate a complete carve-out for hours. The department stores, for instance, will say that the hours they operate will be at their discretion. The tenants with some leverage will adhere to an hours program but might negotiate some language that gives them comfort that the customers will be there.”

The question is whether anyone, landlords or tenants, will decide that fewer hours is better. Melaniphy says he thinks they will.

“There is increasingly more pressure to do it,” he said. “The concept of opening at 1 p.m. makes all the sense in the world, though opening at 12 might be a little more realistic, because it benefits the food court.”

Melaniphy’s reasoning is that retailers may soon need to exercise even more control over costs. “The consumer is going to be squeezed in 2006, and I think we’ll see retail sales under considerable pressure,” he said. “Retailers will find themselves with sales that are flat or declining, and they’re going to start to put pressure on the mall people. As a result we’ll see some hours being reduced, because they have to save some money.”

But Tom Moseman, senior vice president of Envirosell, a New York City-based market research firm headed by mall guru Paco Underhill, does not that believe it is going to happen. The reason is that the mall walkers, those very people who walk right past most stores, are too important to the future of malls, he says.

“The most important thing about a mall today is creating a place,” Moseman said. “Why do malls have ice-skating rinks and basketball courts? Not because of shopping per se, but as part of an effort to create a place for people to go that gets them to think about the mall in a different way.

“Malls need to be open long hours,” said Moseman. “Sure, the commerce may not be going on during all those hours, but making the mall a vital place in the community is extraordinarily important to the long-term health of the mall.”

As for cutting costs, marketing efforts contribute directly to the bottom line, he insists. “There are other ways the mall owners can scale back costs,” he said. “Maybe a little less marble.”