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CROSSING THE BORDER

MELROSE SERVES A LUCRATIVE APPAREL NICHE: HISPANIC FAMILIES

By Steve McLinden

Melrose, it seems, has found its place. Buoyed by momentous growth in the U.S. Hispanic population, San Antonio-based United Fashions of Texas has crafted a new model for this women’s discount clothing concept, which the company is expanding throughout the Southwest. Husband and wife Natan and Tzipora Bar-Yadin, immigrants from Cuba, opened their first Melrose store in 1976 in McAllen, Texas.

United Fashions plans to open at least a dozen stores a year for the foreseeable future, says Reuben Bar-Yadin, a son of the founders and the company’s vice president of real estate. (Reuben Bar-Yadin is a part owner of the business with his mother. Natan Bar-Yadin is retired.) “There is tremendous growth in the Hispanic head count, and many of them are young families,” said Reuben Bar-Yadin. “What we are giving them are affordable and trendy nonbranded fashions that match a growing need.” The Melrose core customers are juniors, teens and young adult women in predominantly working-class Hispanic neighborhoods.

United Fashions’ growth plans seem to be well timed. Hispanic buying power in this country is projected to reach $863 billion this year, up 8 percent from last year, according to the University of Georgia’s Selig Center for Economic Growth. By 2011, that could reach nearly $1.2 trillion, which would top off a two-decade spending growth rate of 450 percent in the segment, according to the center.

By contrast, spending growth among non-Hispanics is projected to amount to about 176 percent over that same span, according to the Selig Center, which also says this Hispanic spending bump will continue to concentrate mostly in the border states, where Melrose is active.

In Texas alone, Hispanics tallied a whopping $140 billion in spending last year, the research center says. Thus it is no surprise that the chain, which operates about 70 stores in Texas, has pegged that state for continued expansion. But new sites in New Mexico and Arizona will be a top priority too, Bar-Yadin says. Additional stores are in the plans for California, too, where Melrose happens to operate just one unit, in Calexico. The company also has Nevada under consideration.

Though United Fashions uses several formats, from large, freestanding units down to the condensed, 4,000-square-foot Melrose Express mall stores, nearly all the expansion is to occur within the broader Melrose Family Fashion concept, which includes men’s and children’s departments and larger maternity wear sections. “Of course, we don’t see ourselves with a full-fledged men’s store at any point, but we do have a lot of women who come into the shops with men or who are out shopping for men,” he said. “What we are doing is becoming more of a specialty department store with a larger sales floor and a bigger assortment for the whole family.”

The family-oriented stores measure between 8,000 square feet and 12,000 square feet, though a few stores are as big as 16,000 square feet. The company plans to open most of its new stores in second-generation centers in urban areas, Bar-Yadin says. United Fashions will also expand and remodel some existing Melrose stores in conformity to the new format. Store traffic is particularly brisk just before the New Year and around other holidays and festivals, says Mary Bueno, a merchandiser for several Dallas-area Melrose units and an assistant manager at the store in the Oak Cliff section of town.

The stores feature an inexpensive assortment of vibrantly colored tops and pants. Many splashy ensembles can be put together for as little as $20. Lingerie, dresses, sequined tops and shoes are also abundant and inexpensive. Costume jewelry starts as low as $1.50, while purses, watches and wallets can be had for as little as $3 to $5. Young-miss and plus-size fashions are the fastest-growing clothing categories for the chain and those lines are being expanded, says Bar-Yadin.

Most of Melrose’s staff members are bilingual, as is the signage. The stores nearest the Mexican border recognize national holidays of both countries in their promotions. There are two Mother’s Day sales, for instance — one for the May 10 observance in Mexico, and another for the second Sunday in May in the U.S. “It is part of our understanding of the culture and the customs of our customers,” said Bar-Yadin. But he also emphasizes that Melrose stores have cross-market appeal. In fact, nearly 50 percent of Melrose shoppers are non-Hispanic, he says. A typical new-generation Melrose store costs about $30 per square foot in store design, merchandising and other costs.

The retail real estate community is taking greater notice of Melrose’s growing appeal. “We have definitely seen the level of broker inquiries and [site] invitations rise in the last year or so,” Bar-Yadin said. “Commercial property owners in Hispanic areas have come to see us as a very viable tenant.”

The company is eager to expand, but not anxiously so, says Bar-Yardin. “We are not afraid to wait until just the right opportunity comes along,” he said. The supersize, 16,000-square-foot Melrose Family Fashions store, which opened in January at the Century South shopping center, at the bustling intersection of Interstate 35 and William Cannon Drive in Austin, Texas, is a prime example. The company chose the site after an exhaustive search that lasted about a year in that fast-growing city. At press time the company had at least three deals in the works around the city, which currently has just two stores, including one at Highland Mall.

Generally, the company seeks street-facing spaces at in-line centers with capacity for prominent signage. San Antonio has the highest concentration of Melrose stores, with 12, Dallas and Houston have nine each, and El Paso has seven.

The Bar-Yadin family invests in neighborhood retail centers in Hispanic communities, even where it has no plans to open a store. “We buy and redevelop and reposition those centers,” Bar-Yadin said. “We just think that is good business, especially in communities where we operate.”

Consultants say U.S. retailers do well to cultivate this population. Though U.S. Hispanic households tend to earn less ($34,300 annually) than the average ($46,400), they also spend at a higher rate, says Ryan Nichols, a managing consultant at Excend Consulting Group, a Salt Lake City-based marketing and business strategy firm specializing in the North American Hispanic market. These people salt away savings at a rate that is one-third the national average, he says. “Which means they’re circulating a higher percentage of income on purchases on the retail side,” he said, “and they are excellent consumers.”

U.S.-born Hispanics also tend to accept new products more than other groups, the firm says. And the shares of companies that market to Hispanics aggressively trade at up to 55 percent more than those that do not, Nichols says. “That strategy of catering to Hispanics, I think, creates a positive [investor] perspective,” he said, “that such companies are progressive and assertive in their planning.”