Six months after opening its flashy neon-lit doors to shoppers, the Galleria at South Bay is receiving rave reviews from city officials here and in neighboring Lawndale who say the mall is generating tax revenue, providing jobs and sparking new interest in adjacent commercial areas.
But some merchants who have small shops at the $70-million regional shopping mall say the glitzy, three-tiered center has been more of a white elephant than a road to riches.
Three stores are expected to close in the next few months because of poor sales, and several dozen unhappy merchants last month formed a merchants association because they claim business is poor and the mall management has not responded to their complaints.
"This is probably the most contemporary-looking mall in all of Los Angeles, and yet the merchants are hurting," said Larry Abrams, manager of the Backcare Place, whose store helped establish the merchants association. "Traffic flow is down; I've been here some Saturdays and you would be surprised how dead it is."
In a management shake-up precipitated by the complaints, Forest City Enterprises Inc., owner and developer of the mall, several weeks ago brought in William Recknor, a company vice president who had managed the former South Bay Center for 15 years, to replace Dan McNeer as general manager of the mall. McNeer became assistant general manager.
Recknor, who met with several disgruntled tenants last week, said his arrival at the Galleria is an indication that Forest City is recognizing the problems at the mall and is working to resolve them.
"The corporation has sent me back out to help the tenants," Recknor said. "My primary responsibility is to open up the lines of communication and to help them in any way I can." Recknor would not elaborate on specific problems at the mall, saying he would rather meet with the tenants than "air their dirty laundry" in the newspaper.
Forest City executives confirmed last week that at least 3 of the 123 stores now open at the mall plan to close in the coming weeks. In addition, one food concessionaire closed last month.
But while acknowledging that some tenants are unhappy, Forest City executives described the closings as part of a settling-in process that all new shopping centers experience. Randy Brant, vice president of leasing for the company, said some stores have simply misread the market.
Sales Projections Met
"There are a number of tenants that are struggling a little bit for a number of reasons," he said. "It is just part of opening shopping centers. Some retailers think they have just the right product the market is looking for, but they find out they have to modify."
The 950,000-square-foot shopping mall, built as a redevelopment project at the site of the former South Bay Center, has been meeting sales projections set last August, 85% of its retail space is leased and it is expected to bring more than $1 million in sales tax revenue to Redondo Beach this year, city and mall officials said.
"The location, the environment and the reception by area shoppers have turned out to be significantly better than anyone had envisioned," said Redondo Beach City Manager Timothy Casey.
The new mall, at the border of Redondo Beach and Lawndale, has also sparked intense interest in commercial property in Lawndale, City Manager Paul Philips said. The Galleria has already led to the construction of a one-acre neighborhood shopping center across the street, and has substantially increased the value of commercial property in the area, he said.
Jobs for Residents
Lawndale provided $8 million in federal redevelopment funds to help finance conversion of the old center in exchange for a 12.5% share of Forest City's profits from the mall and a pledge by the developers to provide jobs for Lawndale residents, Philips said. About 650 Lawndale residents have found employment at the mall, he said.
Mall officials projected in late August, when the Galleria opened, that sales would be $100 million in its first year. In an interview last week, Brian M. Jones, a Forest City vice president who oversaw construction of the mall, said that projection is on schedule.
Jones said the Galleria is one of the company's biggest earners in terms of sales dollar per square foot. Forest City owns more than 20 shopping malls nationwide, he said.
"We are very happy with the sales," he said. "The acceptability of the Galleria in the marketplace is fantastic."
But many small merchants say their sales are nowhere near their projections. They say that only the mall's large, anchor stores--Nordstrom, May Co. and Mervyn's--appear to be drawing steady business. Many customers, drawn by the established reputation and extensive advertising of the larger stores, are patronizing them and leaving without shopping around in the mall, some small merchants say.
Big Stores Doing Well
Spokesmen from all three department stores said last week that sales have either equaled or exceeded projections. "We are doing well as compared to plan," said Cody Kondo, regional manager for Nordstrom. "We are pleased with both the tenant and the customer mix, and I think Forest City has done an excellent job in running the mall."
One store owner, who asked not to be named, said mall officials have given "a tremendous amount of lip service" to success stories like Nordstrom's. "I don't know whether the figures are fact or fiction," the store owner said, "but I do know we're not doing well and a lot of other smaller stores are not doing well."
Smaller, independent stores are faring worst at the Galleria, merchants say. Some store owners report their projected sales down as much as 30% to 60% from what they believed they would make when they opened their doors.
"It has been very disappointing," said the owner of another store, who also asked not to be identified. "Little entrepreneurs are always chasing a dream, but we have come to realize that our dream is unattainable here."
Sarah Callandar, director of publicity of Laura Ashley, an exclusive clothing store based in Great Britain with a store at the Galleria, said small stores with national name recognition and a strong following have not had the same problem.
"We've had very good results," she said. "We have a very loyal customer. It is different than dealing with other stores that rely on traffic or people walking by."
The merchants blame the slow sales, in large part, on what they described as ineffective advertising and promotional programs by mall management. The mall's promotional programs--such as weekend fashion shows and health clinics--are not scheduled frequently enough, they said, while the mall's choice of a monthly mailer to advertise stores is not effective for some small businesses and specialty stores.
Some merchants also complained that many South Bay customers never received the mailers.
Merchants' leases include provisions stating that they must participate in mall-sponsored advertising at least six times a year, said Mary Goodstein, director of marketing and advertising for the mall. Small merchants say this leaves them without money to do advertising of their own. "We know exactly who our clients and customers are, but we have to spend our money with the mall's advertising program," said one business manager, who declined to be named. "The mall's program is not suited to our store. We would do better if we spent our advertising money ourselves."
New Mailer Agency
Goodstein, who resigned Saturday to take a job with the Maxicare health maintenance organization, defended the mall's advertising program as best suited for a majority of mall tenants. She said the mall has found a new agency to distribute its mailers because of complaints about some mailers not arriving at homes.
"We have a diverse group of tenants here, and what we have to do in the initial marketing of the center is to make a statement about the center," she said. "Our primary goal is to bring people here and to let people know we are here. There are those who say the advertising is not upscale enough, and others say it is too highfalutin. You have to do what is best in an overall way."
Goodstein said many of the merchants who complain about the mall and its advertising and marketing campaigns may not have have mounted aggressive campaigns of their own.
"We've heard it and we've tried to tell them over and over again that the people who promote on their own are doing far and away better than those who are not," she said. "Some retailers thought by coming to a shopping mall that all of the advertising would be done for them. That is simply not true and anyone who feels that way is not going to succeed."
Goodstein also said that the mall has evolved into a "weekend mall," and that merchants should not be surprised when foot traffic is light during weekdays. "We are in a two-income family working area," she said. "If people are working, they are not out shopping during the week."
Too Many Malls
Some of the disgruntled merchants also said that the South Bay's glut of shopping malls hurts business. Already in the South Bay are Del Amo Fashion Center, Hawthorne Plaza, Carson Mall, Courtyard Mall, Peninsula Center, Old Towne Mall and Manhattan Village Mall.
"I think the South Bay area is really over-stored," said one store owner. "If you just drive down Hawthorne Boulevard, you see store after store--it's store heaven.
Spokesmen from the other area malls, including Del Amo, said their sales have not been affected by the Galleria.
"Comparing sales from year to year among the tenants, there has been no significant difference," said Kenneth Poole, Del Amo Fashion Center's general manager.
Torrance city officials projected in the city's 1985-86 budget that the Galleria would reduce sales tax revenues for the city by about $100,000. William Dundore, the city's finance director, however, said there is no way to know if Del Amo stores or stores outside the mall would lose the business.
"There is no way you can tell exactly whether people are buying less or whether we are losing business to the Galleria," he said. The $100,000, he also noted, is not a significant sum compared to the $21.3 million in sales tax revenues the city expects to collect this year.
About 50 Attend Meeting
Meanwhile, at the Galleria, store owners formed the merchants association about six weeks ago to fight the business slump there, said Abrams of the Backcare Place, a small business that hopes its store at the Galleria will be the first of many. The association discusses problems in the mall and various strategies for increasing business, he said.
A recent meeting drew about 40 to 50 people. "It's an effort to pull the thoughts of all of us together," Abrams said.