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Clustering makes further inroads

By Edmund Mander

Crate & Barrel is situated right above competitor Williams-Sonoma at Park Meadows, Littleton, Colo.

The clustering of similar stores in regional malls was first done in the name of customer convenience, but these days developers are finding plenty of other reasons to do it, too.

Bridgewater Commons in New Jersey, opened in 1988 by what was then The Hahn Co., was one of the first malls to break with the custom of putting like stores at opposite ends of the mall, a practice that was designed to encourage shoppers to shop impulsively at other stores along the way.

“It used to be shop till you drop; now it’s precision shopping,” said Alberta Davidson, SCMD, TrizecHahn’s senior vice president of corporate marketing in San Diego, describing why the company grouped stores in “leasing districts” at Bridgewater and other malls.

But while the industry is still concerned about accommodating customers with little time and patience for shopping excursions and exertions, it also is grouping stores to address issues that include age, shopping habits and even class sensitivities.

A February story in The Wall Street Journal credited the Internet with the clustering trend, arguing that in an age when shoppers can shop without moving from their chairs, let alone their homes, developers cannot risk making them schlep all over their malls. But the Internet has only a bit part in this story, developers and retailers say.

“The Web gets some credit for it, but in all reality it really came from focus groups and consumers that we were working with,” said Robert A. Michaels, president and COO at General Growth Properties, Chicago. “It really came from the consumers saying, ‘This will be more convenient for us.’”

The company has grouped similar stores at RiverTown Crossings, the mall it opened in Grandville, Mich., last year, and plans to do the same thing with all its future projects.

At Park Place, a 25-year-old mall that General Growth is extensively renovating in Tucson, Ariz., there are no less than five jewelry stores facing each other around the center court, with a sixth just down the hallway.

Park Place’s half-dozen jewelry stores will make its center court known around town as a good destination for jewelry, observed Richard Miller, executive vice president and chief financial officer for Stirling Jewelers, of Akron, Ohio. Stirling owns Kay Jewelers and Weisfield Jewelers, which are neighbors at Park Place. “If the customer heads to that part of the mall, we’d like to be represented there,” Miller said.

Most tenants say they are as enthusiastic as landlords and shoppers about clustering, at least when it comes to selling proprietary merchandise. But sometimes a retailer will resist being located near the competition, even when all the signs indicate it will benefit, according to Candace K. Rice, SCMD/CLS, Newport Beach, Calif.-based Donahue Schriber’s senior vice president of leasing said. But it usually won’t do them any good.

“Typically we will stand firm if it’s our real estate and we have a merchandising scheme in place,” she said. “We’re the ones who have invested hundreds of millions in a shopping center.”

A conglomeration of similar stores can act as an anchor, drawing people to a mall in the same way department stores do, said TrizecHahn’s Davidson. The developer banded together home furnishings stores at Park Meadows, the “retail resort” that it opened in Littleton, Colo., in August 1998. Collectively, these stores offer as wide a range of merchandise as category killers, and in a far more attractive setting, she said.

Similarly, specialty women’s apparel stores also have good reason to stick together, because women go to different stores for various parts of their wardrobe, said Valerie Richardson, Ann Taylor’s senior vice president for real estate development. Consequently, she has no qualms about setting up shop next to other fashion stores.

“We would rather meet the needs of our customer by being where she wants to shop,” Richardson noted. Ann Taylor likes to be near direct competitors such as Banana Republic, Talbots and J. Crew, and other lifestyle tenants like Williams-Sonoma and Restoration Hardware.

But tenants who do not sell proprietary products, such as bookstores, will want to continue keeping their distance from one another, she observed.

While it is obviously less disruptive to introduce clustering when opening a new mall, or after a complete renovation, some developers will move tenants around even before their leases are up. In such cases, Donahue Schriber will try to make a move coincide with a tenant’s decision to remodel, but developers generally will not offer any incentives or compensation for the disruption of changing location, said Rice. After all, she noted, the move itself is incentive enough, given that the point is to increase sales.

By the same token, landlords do not charge higher rents in clustered store areas. Again, the higher sales will increase percentage rent.

In a sense, there is nothing new about clustering, and clues about the virtues of putting similar stores near to one another have been staring the industry in the face for years.

“We started clustering all the fast food in the food courts 30 years ago,” noted Robert D. Riedy, CLS, vice president at The Rouse Co., Columbia, Md. The company started doing the same thing for children’s stores about 10 to 15 years ago, realizing that mothers towing shrieking children are of little mind to walk from one end of the mall to the other, let alone stop for impulse buys along the way.

Other shoppers still had to hike, though. The industry’s rule of thumb was, “Let’s force the customer to go from the lower level at one end of the mall to the upper level on the other end,” Riedy said. “We’re really much more customer friendly today.”

Donahue Schriber also is making its malls more user-friendly, giving much thought to which stores are likely to appeal to the same customers. It is clumping together such tenants as The Disney Store, Store of Knowledge, Sanrio Surprises, GapKids, babyGap, Stride Rite, Pretzels, Kay Bee Toys, Right Start and McDonald’s, all of which are geared to young people, explained Rice.

At its 1.3 million-square-foot Glendale Galleria in Glendale, Calif., Donahue Schriber has just converted a section of its mall into “The Zone,” an area designed to attract the lucrative teen market. Here youths, some no doubt with studded tongues, pierced eyebrows and tattoos, will be wandering in and out of cacophonous music stores and clothing shops, playing with interactive Internet kiosks, gazing at large video screens broadcasting the Zone’s “Channel Z,” or just hanging out.

“We’re clustering a dozen Generation Y retailers together,” said Rice, explaining that a group of teens had a hand in designing the area. All of which is great for teens — and great for the adults who would not be caught dead in such a place.

But the industry is taking segmentation even further, separating not just the young and the old, but also the rich from the poor. At the widely celebrated Bluewater mall, which opened last year outside London, the developer’s particular challenge was to attract people from places like Sevenoaks, a suburban “stockbroker belt” outside London populated by people with an aversion to malls and shopping with the hoi polloi, according to Keith Stone, its director of leasing. So the triangular shaped, two-level center has devoted an entire side exclusively to high fashion and luxury goods, putting its middle-market stores in another wing, and reserving the third “sporting” side for the younger crowd.

“In a sense you’ve got six malls,” Stone said, noting that each side has two levels. While shoppers can, and do, pass from one area to another, they don’t have to, he explained.

The strategy has worked, and the mall has proved popular with the people of Sevenoaks, particularly now that many of its less-affluent customers have returned to shopping at the older shopping centers closer to their homes, observed Adrian J. Wright, Bluewater’s managing director.

New England Development is grouping upscale retailers at the $485 million Galleria mall it is opening in New Haven, Conn., next year, putting them on the first floor, while placing teen-oriented tenants on the third level.

Rouse also intends to cluster luxury tenants at its future projects, Riedy said.

“It is something we and other developers are beginning to look more closely at than we have in the past,” he said. “I think it’s just the changing nature of the customer base in the malls; we had more of a homogeneous customer in those days.”

Those in the retail industry cite so many advantages to grouping tenants of a similar type or clientele, some might wonder why they ever did it any other way.

“I’m not sure the retailer ever liked that [separating similar stores], but the mall liked it,” said Miller of Stirling Jewelers.

John Phelan, CLS, executive vice president for leasing, at Newton, Mass.-based New England Development, is quite blunt about the old way of spreading similar stores around.

“It didn’t work,” he said. But clustering does. “It results in a lot more shops being shopped.”