LOS ANGELES — On a trip to the Grove shopping mall in Los Angeles’ Fairfax District to buy Christmas gifts for her two daughters, Glenda Paredes arrived armed with a list that included Seven For All Mankind Jeans, Juicy Couture and Paul Frank.
“Our 19-year-old daughter is asking for Michael Kors,” said Paredes, of Chatsworth, Calif., who estimated that she would spend a total of $4,000 to $5,000 on her children this holiday season at higher-end specialty stores such as M. Frederic and Theodore, as well as department stores.
While that type of spending surely suggests the highest ends of affluence — or parental gratitude for the world’s best-behaved offspring — the brand-savvy young adult customer is becoming an increasingly valuable demographic for mall developers nationwide.
As teen retailers such as Wet Seal and Hot Topic struggle with strategies to retain their fickle young customers, malls are focusing more attention on the rising number of consumers roughly in the 20- to 34-year-old age range. The malls, facing increased competition, are courting more boutiques that carry the items du jour at contemporary price points. And they are finding that they are meeting little price resistance.
“It’s a customer base that’s going to continue to grow and it’s important not to miss them,” said Patrice Duker, spokeswoman for the International Council of Shopping Centers. “If you look at how these customers are spending, they are spending pretty freely and they are not the ones being affected by higher energy and gas prices, so it’s a great customer to court.”
The ICSC estimates that the higher gas prices cost consumers about $5 to $7 extra on a weekly basis. “And for the budget-conscious consumer, that $5 is going to affect them pretty significantly,” she said. “But this is not that consumer.”
Orv Madden, the founder of popular counterculture teen retailer Hot Topic, and the recently launched Metropark stores agrees. A fusion of fashion, music and art — the stores feature DJ booths in front, plasma televisions and an art gallery in the rear — the Metropark units deliver the most-wanted brands of specialty boutiques to young-adult customers. The brands include Kitson, Lisa Kline, Fred Segal and Ron Herman to the mall with the tag line, “In the mall, but not of it.”
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“This customer is out at their first job or just getting out of college or maybe in the dating scene,” Madden said. “And people want to dress great and are looking at fashion publications and keeping an eye on what the cool people are wearing.”
And that potential hasn’t escaped the attention of Abercrombie & Fitch.
Abercrombie has launched its Ruehl brand, aimed at customers as they leave college for the business world, which has opened at International Plaza in Tampa, Fla., the Woodfield Mall in Chicago and Garden State Plaza in Paramus, N.J.
It’s that brand awareness and willingness to pay for the hot items that has so far enticed customers into the mall-based store, despite prices that range from $65 to $200 for lines such as True Religion, Chip & Pepper, Trunk and True Meaning. There are four Metropark locations in California with four more slated for 2005, as well as plans to eventually open 200 to 250 across the U.S.
“I thought, ‘Where do all the old teenagers who used to shop at Hot Topic, Wet Seal and PacSun go now that they’ve graduated?’” Madden said. “So we looked at the demographics and it’s going to be one of the fastest-growing age groups in the next 10 years.”
The ICSC reported that the 25- to 34-year-old segment of the population will experience a major growth after 2006 with an average annual increase of 1.4 percent from 2007 to 2011, based on the Census projections — and retailers like Madden want to be among the first to cater to this market.
People ages 25 to 34 spend an average of $87.20 each time they visit a mall, according to ICSC 2004 figures. That compares with $45 per visit for 14- to 17-year-olds.
While Madden is busy bringing specialty boutique items to the mall for mass consumption, malls are also getting savvy to the benefits of courting more independent retailers to woo specialty boutique customers.
“The 20- to 35-year-old segment is very critical to us,” said Janet LeFevre, marketing director for the Glendale Galleria mall in Glendale, Calif., which is home to a Metropark store. “Our leasing teams are regularly out and looking at potential new independent retailers to incubate and bring to the mall.”
The downside to bringing in independent retailers is that “you have to be much more patient and willing to work with them,” LeFevre said, because they often don’t have the resources of major stores.
This isn’t a problem when the store is bringing in sales per square foot that are upwards of $750 at places like Fashion Island in Newport Beach, Calif.
“It’s always been a part of our strategy to have stores that you wouldn’t typically find in a mall,” said Jeff Dodd, senior vice president of leasing for Irvine Retail Properties, which operates Fashion Island. “The trick for us is to find the unique and different yet highly productive. So if you’re a boutique and you have a track record of doing $1,000 per square foot, then we’re really interested.”
The company recently signed on two boutiques to its Fashion Island location with just such track records: Las Vegas-based Talulah G opened its first California location and third store in Fashion Island; and Costa Mesa, Calif.-based Lola Rouge debuted its second location.
“The Irvine company wanted us there because they said there were no specialty stores in the mall,” said Talulah G owner Meital Grantz, whose 3,000-square-foot store is projected to bring in at least $2 million in sales in its first year.
Dodd said that Irvine had so much confidence in the boutique that it “put her front and center in front of Bloomingdale’s and Neiman [Marcus]. We noticed [Grantz] showed up a lot in the likes of [publications such as] WWD and Elle and she was someone who was known as being in-the-know and trend-savvy, and our team was watching that.”
Dodd said he wouldn’t be surprised if Talulah G becomes “what Fred Segal was in the beginning, and turns into an institution.”
While the boutiques may add a hip quotient to the malls, is it possible that they lose some of that appeal for customers by being in a mall?
“Not at all,” said Lola Rouge co-owner Sandy Johnson, who operates the store with her sister. “Our [original] location in Costa Mesa was known as an emerging boutique, and the customer base goes back and forth between both stores.”
The company’s sales at the Newport location more than make up for any lost hip factor. The 2,250-square-foot store is projected to bring in about $2.5 million in its first year. By contrast, the 1,600-square-foot Costa Mesa store, which is expanding to 2,600 square feet, does about $1.6 million in sales, Johnson said.
“It was a no-brainer for us because we thought we needed to spice up [the mall],” said Johnson, 38. “We grew up here in Newport and we shopped Fashion Island, and see that people are getting more savvy. They don’t want what everyone else has, and we bring that to mall environment.”