By  on May 15, 2007

Federated Department Stores has become a partner in a futuristic new format that's big enough to replace dormant anchors in malls, WWD has learned.

The new concept, called The Epicenter Collection, is conceived as a 180,000- to 200,000-square-foot "showcase" in the mall for online and catalogue companies, as well as branded manufacturers that generally don't have stores. The collection is a possible solution for mall owners starving for new retailers to entice jaded shoppers and who have space to fill in the aftermath of retail industry consolidations.

"This is the evolution of retail. It isn't a store," said Sheldon M. Gordon, the shopping center developer and chairman of Gordon Group Holdings LLC, who conceived Epicenter. "We call them showcases instead of stores. They're like glorified trade shows."

Gordon disclosed that the first Epicenter will open in August or September 2008 in the Christiana Mall in Newark, Del., in a former two-level, 181,000-square-foot Lord & Taylor. The store will cost over $10 million to build, but future ones would vary in cost depending on the condition of the location.

"We have a number of other locations in mind that we've been in discussions on," Gordon said. "The developers we talked to are high on it, but we are not going to pursue them until after we open the first one in 2008. As we learn about our business, we will develop it and make it more exciting. We will know very quickly whether this thing works — in a couple of months. We are sure this will work, but it is a matter of degree. We have budgeted a very large amount for promotion and advertising."

Federated is an equity partner in a new company called Convergent Retail LLC formed to launch Epicenter. Federated contributed the Lord & Taylor space in exchange for stock in Convergent and a seat on its board. The deal, giving Federated a minority interest in Convergent, was inked about three weeks ago. "This is a very interesting concept worth learning about and taking a close look at," said Jim Sluzewski, a spokesman for the retailer.

Federated closed the Lord & Taylor site after it acquired the chain through its purchase of May Department Stores two years ago. In 2006, Federated sold Lord & Taylor to NRDC Equity Partners, but held onto the L&T site in the Newark mall.Sluzewski said Federated has fewer than 10 department stores sitting dormant, but acknowledged it's possible some could be converted to Epicenters if the initial site succeeds. Federated does not have an operating role, he added. As a partner, the department store group would have a say in where Epicenters are located.

Gordon said talks with prospective tenants that would lease space inside Epicenter have begun. He expects to lease space to between 60 and 80 cataloguers, e-tailers and branded manufacturers that typically don't have stores. Each could have anywhere from 400 square feet to 5,000 square feet, he said.

"We are giving them a vehicle to open stores inexpensively and very productively. It will all be tied together with our electronic technology," the centerpiece being a handheld shopping device called a Spree-go. It enables shoppers to select and buy products without waiting at the checkout line or finding a sales associate, and to cross-shop all the brands and companies within Epicenter. The process is similar to shopping online. The technology, which Gordon calls "fast track," is also being rigged to enable shoppers to walk the mall and shop stores other than the Epicenter. Earlier, the device was called a Buy-Pod, but Convergent encountered some trouble with Apple, which sells the iPod, over that name and decided to drop it.

Epicenter will also have touch-screen kiosks, conventional checkout counters and shopper assistants.

The Christiana Mall, owned by General Growth Properties, is anchored by Macy's and J.C. Penney. Nordstrom is moving in around the time Epicenter opens, and the mall is being renovated and expanded with another 175,000 square feet for lifestyle retailing, which will be between Nordstrom and Epicenter.

Epicenter executives characterized the format as an inexpensive vehicle for companies to have a mall presence, costing roughly 40 percent of the total expense to open and operate a regular store in a mall. They see companies spending $50 to $60 per square foot to build a space in Epicenter, versus the $300 or more it could cost to create a conventional retail space.

Epicenter tenants will sign three-year leases, instead of 10-year leases that are often signed in malls, and won't build their stores, but must provide flooring, lighting, furniture, fixtures and signs. Some may decide to have inventory on site; others may decide to just ship from fulfillment centers.Gordon is best known for developing off-beat and flamboyant retail/entertainment complexes, notably the productive Forum Shops at Caesars in Las Vegas, and the Pier at Caesars, which opened last year in Atlantic City. He also developed the Beverly Center in Los Angeles, the San Francisco Center, and Bridgemarket in New York City.

In the year ahead, Convergent will get the handheld devices manufactured, create software, sign up tenants, get the property ready for them to move in and develop marketing strategies.

"This has been seven years in the making," Gordon said. "I came up with the idea during the dot-com boom in the late Nineties when everybody said the dot-com was going to kill malls. I said there is another way." He originally sought a location in Ohio to launch Epicenter, but the mall there opted for another tenant, Gordon said.

He envisions Epicenter as luring people to the mall who otherwise shop electronically and has described the Epicenter experience as "walking through the Web, or being in a living catalogue....You will see people there answering questions intelligently, instead of stocking shelves, sweeping floors or swiping cards through registers." With Epicenter, "We are not in the retail business. We don't own one [stockkeeping unit] of merchandise. We take a large piece of real estate and sublease to special types of tenants. We are purely in the real estate business."

After the Christiana unit opens, "Future locations are not going to be a problem for us," said Antony H. Lee, chief executive officer of Convergent. "Mall developers, retailers and department store operators are all talking to us about future locations." Lee previously ran an e-commerce fulfillment business.

Lee said the Christiana Mall generates $750 in sales per square foot. "We fully expect our tenants to mirror the mall's productivity. This is a highly productive mall."

Ann Gambardella, a technology expert for more than 20 years, has been named chief technology officer. Before joining Convergent, Gambardella was the vice president of systems development at Columbia House Company.

Architect Jay Valgora of Studio V designed the Epicenter prototype. Lee said Epicenter will have a racetrack design but will be a "radical design departure from a department store." Kaleidescope, a technology design firm, is helping produce the handheld Spree-go devices so they're ergonomic. American Catalog Partnerships is helping Convergent with introductions to the catalogue community, and Tallon is the main technology firm on the project.While no leases have been signed yet for Epicenter, Lee did say there have been discussions with Under Armour, Tommy Hilfiger, Esprit, Seven For All Mankind, Frontgate, The Territory Ahead, Amazon, Google and Bluefly, among other companies. "We've met with ceo's of maybe 50 companies."

Federated's chairman, president and ceo Terry Lundgren is keen on new technologies and electronics. Last year, he introduced a robotics-driven vending machine to sell iPods and BlackBerrys at a few Macy's locations.

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