Edgy BoutiquesTest New Territory: Local Malls

Retailer Ron Herman, who knows a thing or two about selling hip clothing as the owner of Ron Herman/Fred Segal on Melrose Avenue in Los Angeles, plans to open a 4,000-square-foot eponymous boutique featuring everything from “Chloe to Juicy” in nearby Orange County. But, it won’t be on a trendy shopping street. Instead, it will be at Costa Mesa’s South Coast Plaza—a shopping mall.

Not that South Coast Plaza—which boasts an array of high-end department stores and European designer boutiques including Chanel, Gucci and Versace—fits the stereotype of a shopping center. However, edgy, street-front retail it’s not.

“I like the stores that currently exist there—the Louis Vuitton and Hermeacute;s customer and I like the Gap customer—and it’s hard to find all of that in walking distance in the streets of Orange County,” said Herman, who also owns Los Angeles-area Ron Herman stores in Brentwood and Beverly Hills. (Herman will double the size of his Beverly Hills store to 4,000 square feet in July by taking over the adjacent space held by Bare Escentuals.)

Herman is not alone in his mall ventures. Other boutiques are embracing mall real estate, capitalizing on existing pedestrian traffic and cooperative marketing strategies. Miss Sixty, a subsidiary of Sixty SpA, based in Chieti, Italy, is branching into U.S. retail with the opening of seven to 10 stores by 2004, including a 3,000-square-foot location carrying the line’s complete collection at South Coast Plaza in September. South Korea-based Obzee Ltd. will open a diffusion-line store geared to women in their 20s called Obzee at Los Angeles’ Beverly Center in July.

The addition of these stores helps balance out the cookie-cutter image of malls dominated by chains and department stores, according to industry experts.

“These stores personalize the shopping environment, giving it a human, local scale,” said retail consultant Sanford Goodkin.

For newer concept boutiques, the advantage of locating at a mall is a built-in customer base and cachet.

“We’re not doing any public relations and plan to take advantage of the existing traffic,” said Kris Kim, director of operations for Obzee Ltd.’s New York-based holding company. “But, if you’re in a stand-alone location, especially in Los Angeles, you need to do PR to build brand awareness.”

At a mall, tenants also have a sense of the type of neighbor they may have someday.

“Certain connotations come to mind when you think of malls, but when you’re at a luxury mall like South Coast Plaza, you sit with designer brands that have synergy with yours and you don’t have to worry about sitting next to a fabric store,” said Andrew Pollard, director of sales and marketing for Miss Sixty.

Too, mall officials often work more closely with these less-established stores than with chains, promoting them in public relations efforts and local charity fashion shows.

“They don’t have the name in the market so a lot of education has to be done to get their name out in the local community,” said Debra Gunn Downing, executive marketing director at South Coast Plaza.

Downing said that the mall has designated the renovated West Wing to home and lifestyle stores, including boutiques Air de Paris, SoHo, Hugo Hugo Boss and Traffic.

Though stores bet on built-in traffic at a mall, a remodeled section may take longer to catch on with shoppers. That’s a lesson learned by John Lee, president of Santa Ana, Calif.-based SoHo, a contemporary clothing boutique that also has locations in the Fashion Show Mall in Las Vegas and Water Tower Place on Chicago’s Michigan Avenue.

“Compared to our Las Vegas store, the traffic [at the South Coast Plaza location] isn’t even a quarter of it, so we plan on bringing in higher price points to make up for volume,” Lee said.

Lease negotiations can be tougher at malls, nor are boutiques spared the red tape endured by chains, especially if it’s their first venture. Bachmai Luu, an MBA graduate from Pepperdine University, had to write a 30-page business plan to convince the developers of Paseo Colorado in Pasadena, Calif., that she was serious about retail. Her store, B. Luu, opened last September and has been meeting expectations, Luu said. However, mall advertising hasn’t been as extensive as she had expected, nor does it always help niche players. So, Luu recently held her own party and fashion show for customers.

“My price points preclude a lot of the mall shoppers from buying at my store,” Luu said. “So, we’re pushing for more targeted parties and in-store promotions to give our customers that exclusivity.”