Creative retailing

Mall owner finds ways to compete with Internet

7/19/2012

SCOTTSDALE, Ariz. -- Glimcher Realty Trust, which owns and manages shopping malls, is experimenting with making them Internet-proof. The company concedes that if shoppers can buy something online, they will. So it is trying to fill one of its malls in Scottsdale, Ariz., with businesses that do more than sell stuff.

There are still clothing-only retailers at the mall, Scottsdale Quarter, but more than half of the stores offer dining or some other experience that cannot be easily replicated on the Web. That has Glimcher executives taking some unconventional approaches to finding suitable tenants -- like testing out laser salons, getting hairstyling lessons, and watching movies in a theater that serves food. Executives in suits descended last year on a prospective tenant in New York City, Make Meaning, where they mulled over making ceramics, candles, and jewelry as their town cars waited outside.

While a Scottsdale shopper can buy clothes on the Web, "she can't go out to lunch with her girlfriends and have a glass of wine and a salad online," said Michael P. Glimcher, chairman and chief executive. "She can't get her hair done online. She can't go and make pottery or soap or a cake online."

Just about every mall owner in America is looking for ways to compete with the Internet. R.J. Milligan, a real estate analyst for Raymond James, said that developers were slowly adding more service-oriented elements to malls -- for instance, dividing a closed Sears anchor store into multiple cafes.

But Glimcher is pushing the envelope even further than the standard model of restaurants and expanded food courts, he said, with tenants like Make Meaning (a membership store where people make crafts, cakes, and other things) and Drybar (a salon with no scissors, just stylists with blow-dryers).

"They've done a good job of getting the right tenants in there," Mr. Milligan said.

Scottsdale shoppers can have their hair blown into beachy waves at Drybar, create picture frames at Make Meaning, try a tree pose at Blissful Yoga, and grab a kale salad at True Food Kitchen before going to a movie, where they can have drinks and snacks delivered to their reserved seats.

They can also take advantage of in-person-only opportunities at standard retailers, like the so-called booty cam at Industrie Denim, a jeans store, that lets women study their rear view. A Restoration Hardware scheduled to open soon will offer fresh flowers and cups of tea for sale.

"We want to be a place that people go to frequently, more than one time a week," said Mr. Glimcher, so the emphasis is on classes and other hands-on experiences.

Scottsdale Quarter opened in 2009 without a bang. Consumers were pulling back on spending and real estate was troubled.

Glimcher soon realized that traditional retailing would not work by itself, and leasing agents began collecting intelligence on game-changing candidates. Jacqueline Fitch, a leasing agent, slipped incognito into a Make Meaning one evening and reported back that a group of older women were discussing a book as they made bracelets.

She also visited Los Angeles to evaluate how well Drybar dealt with her curly hair. This type of retailing "is also a form of hospitality," she said, so checking it out in person was important.

Daniel Nissanoff, Make Meaning's chief executive, said it "offers people a reason to come into a mall." Activities at Make Meaning often have wait lists -- so shoppers have to kill time at the mall -- and visitors must return to pick up fired pottery or glass jewelry, which means an extra mall visit.

Glimcher's revenue is rising again after a big dip during the recession. Its first-quarter sales rose 9 percent to $69.8 million, with the Scottsdale mall a major contributor to the increase. Scottsdale Quarter makes $1,000 per square foot, the highest figure of any Glimcher mall.

Glimcher is applying lessons learned in Scottsdale to its other malls. While Glimcher malls initially consisted of apparel stores and a food court, Mr. Glimcher said, now service-oriented or experience-oriented stores represent 20 percent of the company's portfolio, and that percentage is increasing. At Scottsdale, 30 of the 53 stores offer dining or some other experience in addition to pure retailing.

Because many retailers signed short-term leases in 2009 and 2010, when the economy was highly uncertain, many leases are up for renewal now, and Glimcher is ousting standard stores where it can.

At its Polaris Fashion Place in Columbus, for instance, it recently replaced a Gap with an Apple store.

"It's retail Darwinism," Mr. Glimcher said.