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Chains Seek Life Beyond the Malls

Retailers led by Gap are following grown-ups, and their dollars, to other locations.

June 02, 2003|From Reuters

The shopping mall, ever popular with teens, has fallen out of favor with time-pressed adults, and retailers with resulting huge inventories are finally going where the grown-ups are.

"While everyone still does a portion of their shopping at the mall, it behooves a company to have a mixture of formats, so when [the consumer] isn't interested in going to the mall, they're not completely off her radar," said analyst Dawn Stoner of Pacific Growth Equities. "Retailers have recognized that."

The growth engine of San Francisco-based Gap Inc., the biggest U.S. clothing retailer, in recent quarters has been its lower-priced Old Navy division, about four-fifths of whose stores are located outside of malls.

Another clothing retailer, Ohio-based Too Inc., on Wednesday said it had decided to ditch a new mall-based chain it was rolling out and migrate instead into off-mall locations with a new chain of low-priced stores.

Too cited a "fundamental shift" in consumer shopping habits affecting all mall-based retailers as more customers bypass malls for discount stores based in strip centers or stand-alone "big-box" buildings.

Unlike chains catering to teens, who tend to buy whatever they consider cool, Too sells clothes for young girls and must appeal to parents, who control the purse strings, analysts said.

"While the mall will always remain relevant to teen customers, because they view it as an entertaining place and they like to hang out there, retailers targeting adults definitely need to use a mixture of real estate to capture that customer," Stoner said.

Adults see little reason to drive out of their way, fight for a parking space and trudge around the maze of a mall, analysts say, and real estate developers are responding.

The number of malls recently built or being planned has fallen dramatically, according to the International Council of Shopping Centers.

In 2001, 11 malls opened. In 2002, the figure fell to eight, one fewer than originally projected. Eight are projected to open this year and six in 2004.

In contrast, developers broke ground on 135 "lifestyle centers" of less than 100,000 square feet in the first quarter of 2003. That was up from 124 a year ago.

Department stores, traditionally the cornerstones of malls, used to be prime destinations for many categories of goods -- luggage, furniture, toiletries -- but consumers now have many alternatives, often at lower prices.

Wal-Mart Stores Inc., for example, has been drawing business from department stores by offering low-priced groceries, housewares and clothes in one place, thus allowing shoppers to bypass malls entirely.

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