By  on November 16, 2010

SANTA MONICA, Calif. — Fred Segal is 77 years old, but he’s thinking like a young entrepreneur.

The retailer, a force in setting fashion trends for more than 50 years, is embracing change, and it has led him to push for one of the most ambitious transformations in the history of Fred Segal Santa Monica. The goal is to keep the influential 35,000-square-foot emporium of 25 stores relevant with differentiated merchandise and personalized customer service.

“There was a very successful store in L.A., a traditional Ivy League store 70 years ago, and it closed 30 years ago because their customer died,” Segal recalled, expounding on a favorite theme. “Why did their customer die? Because they died. They [the store] didn’t bring in new people.”

A half-dozen stores have recently opened or will soon open at Fred Segal. The newcomers, vetted by Segal, in a consulting role, and his son Michael Segal, who manages the complex, range from Babakul, a purveyor of hippie chic clothing, to Fred Segal Girl, an affordable, youth-oriented entrant. The overhaul is taking place against the backdrop of the recession, falling revenue and the evolution of consumer tastes, as well as stiffer competition from Internet retailers and the revamped Santa Monica Place, which has morphed into an open-air mix of department and luxury stores, food destinations and accessible retailers such as Charlotte Russe and Love Culture.

“Most storekeepers, their ego doesn’t allow them to use the customer for what they do,” said Segal, attired in his daily uniform of T-shirt — most with sayings like “I am you, you are me, we are they” — gray cotton shorts and white New Balance sneakers. “I’m going to tell you a real secret. Eighty percent of what I sold through the last 50 years I don’t like at all. What does that have to do with it? I’m just one person. We must have what everybody else wants.”

Segal, whose interests span philanthropy (supporting the green movement, peace causes and needy children), activism (he’s an opponent of the nuclear arms race and the a creator of Peace Park in Malibu, Calif.), spirituality (he counts the Dalai Lama as a friend), health (his diet is heavy on raw or almost raw meats and vegetables), and real estate (he figures he’s renovated 150 houses in the last 30 or so years), said the economic downturn hit his business hard, with an overall 30 percent drop in sales. But his spin is positive.

“What a healthy thing that happened,” he said. “It makes people really look at what they do have and appreciate it and have more gratitude, if they are smart.”

The “out with the old, in with the new” mentality means that Fred Segal staples, including contemporary apparel resource Fred Segal Fun and designer label fixture Fred Segal Flair, are being replaced after leaving the complex.

“The changes are taking place partly because some of the owners just got too old in their thinking or they got too spoiled by the money they earned,” Segal said. “Whatever the reason, we have fresh, young people coming in all the time. That’s our goal.”

At the heart of Fred Segal Santa Monica’s evolution is Fred Segal Originals, which reaffirms Segal’s commitment to customer service and the casual lifestyle wardrobe mainstays that helped establish his business. The 1,000-square-foot outpost, owned by Segal’s daughter, Annie Segal, is set to open Thursday. It is modeled on the red, white and blue and mirrored look of the Fred Segal Jeans Shop that launched some 50 years ago and revives key apparel pieces from its early heyday, such as Western-style shirts, satin jackets and so-called offon pants with elastic waistbands, mostly priced from $10 to $100.

“A lot of what we are doing is for comfort,” Annie Segal said. “It is about simplicity.”

Certainly, nostalgia factors into Fred Segal Originals — it will sell photographic memorabilia — but the founder said it also responds to an of-the-moment desire among shoppers for the personal touch.

“We are going to take care of them like they are family when they come here,” he said. “In today’s world, that doesn’t happen in retail. I’ve been in a hundred different stores watching the connection, and it is more like a corporate connection. We are more like a mom-and-pop connection….Even all of these stores, the 40 different owners, are all with that kind of attitude.”

In addition to Fred Segal Originals, Babakul and Fred Segal Girl, the other new shops are Japanese import Banner Barrett, which sells boho ponchos, slouchy sweaters and fashionable workwear; optical specialist The Spectacle at Fred Segal; beauty magazine-turned-retailer NewBeauty, and Robbi & Nikki, a diffusion label from L.A.-based brand Robert Rodriguez, which is owned by The Jones Group Inc. NewBeauty is taking the space of Studio Beautymix, which had been a launch pad for independent beauty brands. Another beauty spot, Fred Segal Beauty, closed in 2008 to make way for Fred Segal Salon, Fred Segal Yoga and Jet at Fred Segal, which sells sweaters, jeans and T-shirts from $60 to $180. The Parliament at Fred Segal, which carries high-end international designer labels, occupied the previous Fred Segal Flair space last year.

In addition, Umami Burger, which has become the standard-bearer for the hamburger craze in Los Angeles, replaced the Caffe Divine space at Fred Segal Santa Monica and is drawing crowds.

Stacy Lastrina, chief marketing officer of The Jones Group, said Fred Segal Santa Monica is where apparel executives go to check out the latest trends. It is “an iconic place in California that defines California cool, and they are great editors and curators of what it means to be that,” she said.

Explaining Banner Barrett’s choice to locate in Fred Segal Santa Monica, Satomi Hayasaka, manager of the unit, said, “Our boss wanted to open a store outside of Japan, especially in America. He asked where is the best place to open the store and I said, ‘Fred Segal,’ and that is what happened. Everybody knows Fred Segal, even in Japan.”

David Gonzales, who owns sunglass shop Fred Segal Eyes and is co-owner of The Spectacle at Fred Segal, sees the value of fresh energy. “A new eye and a new perspective for these new departments is good,” he said.

Babakul owner Kym Gold observed that some of the tenants that exited didn’t adjust to changed economic circumstances. The business “really needed a facelift because…Santa Monica on the whole is changing,” she said.

Newcomers will find that Fred Segal Santa Monica customers have grown up. And, though they may still be wealthy, their shopping habits have been affected by the prevailing financial winds, the rise of fast-fashion players and the introduction of Nordstrom and Bloomingdale’s at Santa Monica Place.

Gonzales said the music, film and media businesses that employ loyal Fred Segal Santa Monica customers have been challenged by the Internet and the recession, forcing customers to rethink splurges. “I definitely see people not with the frequency that I used to see them,” he said.

Customers tend to be older, discerning shoppers. At the Jet location, the creation of John Eshaya, the shopper isn’t primarily the 13- to 15-year-old girls that he expected upon opening about two years ago, but rather 35- to 50-year-old women. “It is more the mom with her mom,” said Eshaya, a former executive at the retailer Ron Herman. (Herman is Segal’s nephew.) “It is not the younger girl with her mom. Forever 21 and H&M have totally taken over that market.”

Not all Fred Segal Santa Monica shop owners, who typically pay anywhere from 8 percent to 11 percent of sales in rent, view Santa Monica Place as a business detriment. “It keeps people in Santa Monica to shop rather than them going to Century City or Beverly Hills,” Gonzales said.

As long as he’s been in retail, Fred Segal has managed to outdo his nearby competitors. In a scrapbook at the Fred Segal Originals store is a 1965 story that appeared in Daily News Record, the former brother publication to WWD, which reported that Fred Segal’s store did “twice the volume, per selling square foot, of the average specialty operation” and turned to trade sources to approximate his sales at $30 per square foot, or $195,000 annually.

Segal said the sources low-balled his operation. In the jeans store, Segal said he generated $700,000 in sales in its first year in about 250 square feet. “I owned the duplex behind it, and I had stocked jeans in there,” he recalled. “We’d bring them as we sold them, three or four times during the day. And the main price on jeans at that time was $6.95 to $9.95. We stocked over 50,000 pairs of jeans.”

Standing in the current Fred Segal Originals store, he said, “The average store that would open — the size of this store — on some street corner would be lucky if they did $250,000 in a year. Here, the first year dollarwise probably [could be] $600,000 or $800,000, in that range.”

Those kinds of results are why Gonzales said he’s been offered “stupid amounts” to sell Fred Segal Eyes to a larger company. But he hasn’t sold, and as he peers around Fred Segal Santa Monica from his perch in the 100-square-foot, postage stamp of a store near the entrance, he’s content with that decision. “If we focus on what we do, there is money there,” he said.

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