Galleria Opening Puts Pressure on the Competition
Two years ago, when Redondo Beach officials approved plans to convert the decaying South Bay Center into a $70-million regional shopping mall, officials two miles down the road at the Del Amo Fashion Center predicted disaster for other malls on or near Hawthorne Boulevard, the South Bay’s major commercial strip.
The Torrance Co., owner of the Del Amo Fashion Center, the largest mall in Los Angeles County, filed suit to block the renovation, arguing that the expansion would create insurmountable traffic problems and would compel shoppers to avoid Hawthorne Boulevard.
The suit was eventually thrown out of court when a Los Angeles Superior Court judge ruled that the Torrance Co. was more interested in stifling competition than in keeping local roads free of traffic. Said Redondo Beach City Manager Tim Casey at the time: “I don’t think anyone believes (the Torrance Co.’s) concerns are limited to traffic flow.”
Economic Repercussions
This weekend, as the renovated South Bay Center readies for its official rebirth on Monday as the decidedly highbrow Galleria at South Bay, concerns remain on Hawthorne Boulevard and beyond about the economic repercussions from another major shopping mall.
The new mall features a Nordstrom department store, part of a Seattle-based chain that prides itself on good service and stylish, contemporary fashions at upscale prices. With it have come exclusive retailers such as Laura Ashley, Abercrombie & Fitch and Old River, a French clothing store for men. The mall will offer valet parking, a three-level waterfall--even a boutique with computerized shopping services for women.
“It is a quality project,” acknowledged James Jones, president of the Torrance Co. “It will divert sales from other projects in the South Bay area.”
Anchor Stores Doing Well
Dan Reed, general manager of the Carson Mall, estimates that his mall has already lost about 5% of its business since the Nordstrom store opened in March. Although the Galleria will celebrate its grand opening this week, its anchor department stores--May Co., Nordstrom and Mervyn’s--are already open and doing very well, according to the developers.
Representatives from other South Bay malls said they are preparing for a drop in sales--most expect it will be only temporary--during the next few weeks. “A lot of people will be curious about the mall and will go down there and take a look at it,” said Charles Davis, general manager of the Hawthorne Plaza, located several miles north of the Galleria on Hawthorne Boulevard.
Based on brisk sales at the three anchor department stores, Redondo Beach city officials are already raising projections about how much tax revenue the city can expect from the Galleria during its first year. Sales tax information from individual stores is proprietary, but Casey said last week that the city’s share of sales taxes from the Galleria--including the May Co., which has remained open throughout the center’s transformation--will exceed $1 million.
“The market studies suggest there is a growing market share in the South Bay area of increasing affluence,” Casey said. “We believe it is going to do even better than we originally projected.”
Sarah Callandar, director of international publicity for Laura Ashley, an exclusive clothing store based in Great Britain with area outlets in Beverly Hills, Century City and Costa Mesa, said the company conducted exhaustive marketing studies before choosing to locate at the Galleria.
“The mall itself is being filled with like-minded retailers, meaning those who cater to somewhat upscale customers,” Callandar said. “We look at income and the number of people supporting the area. We appeal to the customer who likes quality and good design at a very reasonable cost.”
Good Demographics
Similarly, Tom Blakeley, regional manager for Abercrombie & Fitch, which caters to the affluent leisure sportsman, said the company selected the Galleria because of the demographics and the merchant mix.
“We can definitely serve the needs of the upscale customer in that area,” Blakeley said. “Nordstrom’s success in the mall was somewhat attractive to us, too.” Abercrombie & Fitch has area stores at Beverly Center and South Coast Plaza.
The Galleria, including Nordstrom and Mervyn’s, added about 600,000 square feet of retail space to an existing 350,000-square-foot May Co., the only building from the former South Bay Center to be incorporated into the Galleria design. The other major regional shopping malls in the South Bay--Del Amo Fashion Center, Hawthorne Plaza, Manhattan Village, Carson Mall, Peninsula Center and the Courtyard Mall--have a combined retail space of more than 4 million square feet.
A regional shopping mall is defined by marketing and retail experts as a center with one or more full-line department stores. Specialty malls, such as the Old Towne Mall in Torrance, do not qualify as regional malls, according to the definition.
‘Saturation Point’
Brian M. Jones, vice president of Forest City Enterprises Inc., developers of the Galleria, said marketing studies done for his company several years ago showed that the South Bay could absorb a million additional square feet in retail space before it reached a so-called “saturation point.” The Galleria is designed to accommodate a fourth major department store in the future, which would push the mall well over the million-square-feet mark.
Robert Bearson, a Long Beach management consultant for specialty store retailing, said that Southern Californians have shown that they will accept new malls even when they are constructed in heavy commercial areas.
“The idea that there might be a certain size pie and it is cut into smaller pieces is not valid with the type of merchandise in regional shopping centers,” Bearson said. “The business might come out of the smaller community shopping centers but normal growth will take care of the drop that might take place at larger malls.”
Some South Bay retail managers, however, including officials from most area malls, said the Galleria will probably be the last major center that the South Bay can absorb.
“They said we had reached the saturation point when we built Del Amo,” said James Jones of the Torrance Co. “It is hard to visualize another shopping center being built, but then I don’t have a crystal ball.”
‘Over-Retailed’
“The whole area is over-retailed right now,” said Edward Milatz, manager of Old Towne, a community-oriented discount center. “They call it spreading the wealth, but what you are doing is watering down the market.”
Before construction began on the Galleria in 1983, the South Bay Center ranked 38th in sales among 61 regional shopping centers in Los Angeles and Orange counties. By comparison, Del Amo, with $331 million in sales--more than seven times the sales at the South Bay Center--ranked second behind South Coast Plaza in Costa Mesa.
Redondo Beach and Forest City officials project sales of more than $100 million at the Galleria during its first year--a projection that could push the Galleria into the top 15 malls in the two counties.
Redondo officials are particularly interested in the success of the project because of the financial support the city has given to the developers. The city declared the 30-acre South Bay Center site at the corner of Artesia and Hawthorne boulevards a redevelopment zone, which enabled the city’s redevelopment agency to float $5.7 million in bonds to help pay for a 2,000-space parking garage.
Three-Decade Payback
The city will be paid back over the next three decades from the property tax it will receive from the increased value of the site. Casey said the South Bay Center was assessed at $35 million. The Galleria is already worth an estimated $120 million, he said.
Redondo Beach has also agreed to build a $2.1-million bus terminal near the parking garage which will serve as a layover point for buses from the RTD, Torrance Transit, Gardena Municipal Bus Lines, and the Redondo and Lawndale trackless trolleys.
City officials from Lawndale, which borders the mall, have also taken a keen interest in the project. Lawndale has provided $8 million in federal redevelopment funds to help finance conversion of the old center in exchange for a pledge by the developers to provide jobs for Lawndale residents. The developers will pay back the city over 30 years with 6% interest. When the Galleria is 100% leased, officials estimate it will provide almost 1,200 new jobs, half of which Lawndale residents hope to hold.
While representatives from several South Bay malls expect the Galleria to draw from their customer bases at first, they predict that their shopping centers will not suffer significantly in the long run.
Kept Up With Inflation
James Jones, of Del Amo, said the Galleria will steal from Del Amo’s growth potential, if anything, rather than from its existing customer base. Since Nordstrom opened in March, Del Amo’s sales growth has kept up with inflation but has not exceeded it, he said. Typically, the mall records an annual sales growth of about 3% or 4% above inflation, he said.
“The traffic has been our greatest concern, not the competition,” Jones said. “Since the Nordstrom and Mervyn’s have opened, we have seen the impact of traffic congestion . . . particularly on weekends.”
Jones said that Del Amo’s size and diversity--the mall includes eight major department stores and 350 other stores--will continue to attract customers from throughout the South Bay.
“We simply feel we have more to offer at Del Amo,” he said.
Other malls located farther from the Galleria say loyal customers and proximity to residential areas will keep their sales up. Craig Pettitt, for example, general manager of the Courtyard Mall in Rolling Hills Estates, said the mall draws from an “isolated” market on the Peninsula. He said sales this year are 16% higher than last year.
Biggest Draw
Both Pettitt and Reed, of the Carson Mall, said the biggest draw for the Galleria is Nordstrom. But, they said, their malls do not compete for Nordstrom customers.
“People just won’t go to the South Coast Plaza as much,” said Pettitt. The Costa Mesa mall also includes a Nordstrom. “We are going to concentrate on keeping our customers on the hill.”
“The Galleria is reaching for a higher image,” Reed said. “We are a middle-of-the-road image. They are trying for a high-fashion mall.”
Alexander Haagen, owner of the Manhattan Village, said the Galleria will have “very little impact” on that center, which officials there say has developed a loyal following since opening in 1982.
Davis, of the Hawthorne Plaza, said marketing surveys in Hawthorne show that residents in that area are unlikely to brave traffic on Hawthorne Boulevard to shop at malls south of the San Diego Freeway. He also said his mall, like the Carson Mall, appeals to middle-class customers and does not attempt to compete for the more affluent shoppers.
Mainstream Customers
But Galleria officials, while eager to portray the mall as elegant and sophisticated, are also hoping to attract more mainstream customers. The Galleria’s May Co., consistently ranked near the top of the chain’s stores, and Mervyn’s, a high-volume, popular-price department store, will be joined by other chain stores known for their wide appeal. Among them are Kinney Shoes, Casual Corner, Foot Locker and General Nutrition Center.
“We are not focusing entirely on the upscale customer,” said Brian Jones of Forest City. “The whole emphasis is to have a good mix of tenants and have stores that are not represented elsewhere in the market. The difference is going to be that people will realize how attractive the architecture is and how the shopping environment is so much more comfortable.”
He said the three-story mall, which is accentuated by a mall-long vaulted skylight, was designed for convenience. The distance between the anchor stores is about 500 feet, about half the length of many suburban malls, he said. Some escalators will move shoppers directly between the first and third floors.
“The Galleria will coexist beautifully in this market area,” said Randy Brant, who oversees leasing for Forest City. Brant said about 80 of the 160 stores will open on Monday. Grand opening ceremonies will begin at 9:30 a.m. on Monday and will continue until closing at 9 p.m. About 30 other stores will open by mid-September, Brant said.
MAJOR REGIONAL SHOPPING MALLS Gross Taxable Sales, fiscal 1983 Median household income within a five-mile radius, 1980 census Median home value within a five-mile radius, 1980 census
Del Amo Fashion Center, Torrance $331,825,000 $23,204 $116,842 Hawthorne Plaza, Hawthorne 74,306,000 16,395 86,678 Manhattan Village, Manhattan Beach 66,999,000 20,866 102,902 Carson Mall, Carson 66,143,000 18,603 76,416 South Bay Center, Redondo Beach 44,823,000 20,903 98,558 Peninsula Center, Rolling Hills Estates 33,401,000 26,646 152,455 Courtyard Mall, Rolling Hills Estates 26,269,000 26,780 152,758
A precedessor to Galleria of South Bay Sources: State Board of Equalization and the Los Angeles Times Marketing Research Department.
