PALM BEACH, Fla. — Change has come knocking in Palm Beach County. Even Palm Beach, which prides itself on time standing still, is being forced to address its 21st-century identity and the passing of the reins to a younger — or at least more youthful-minded — demographic.
This story first appeared in the December 30, 2010 issue of WWD. Subscribe Today.
This self-examination is being forced by the springing up of new gated communities for the affluent nearby, with the retailers along the city’s famed Worth Avenue having to step up their game in the face of increasing competition. A mere 15-minute drive up I-95 in Palm Beach Gardens is The Gardens Mall, owned by Southfield, Mich.-based developer The Forbes Company. The mall is capturing many of the luxury tenants that also populate Worth Avenue, leading some Palm Beach doomsayers to cry cannibalization — while the brands insist there’s plenty of market share to go around.
“This area has become unusual like New York or Los Angeles, where multiple pockets of wealth can sustain more than one store location,” said Vincent Ottomanelli, president of Salvatore Ferragamo USA, which opened a 3,800-square-foot boutique alongside Gucci, Chanel and Louis Vuitton at The Gardens last August. “There’s a significant difference in customer base. More than 65 percent of our Palm Beach store clientele is from the island, and the Gardens store reaches residents in northern developments like Frenchman’s Creek and Admiral’s Cove who don’t shop Palm Beach.”
Yet there is no denying Worth Avenue has been facing tough times, hit by everything from the Bernard Madoff scandal that decimated the wealth of many Palm Beach residents to luxury’s globalization and democratization. The once-exclusive brands that attracted shopping sprees by the likes of Jackie O are now ubiquitous throughout the region. Helen Weigel, a home decor retailer on Palm Beach for more than 40 years, recalls long ago when a Worth Avenue store manager of a major European fashion house admitted sales were secondary to slapping the Palm Beach name on shopping bags.
“That was when Palm Beach meant something,” she said.
Not that Worth Avenue isn’t fighting back, pinning its hopes for a return to glory on a $14 million makeover. Posing a surreal sight as Bentleys glided past bulldozers and construction workers mingled with coiffed doyennes, the project lurched forward early last April just as the final Easter visitors departed. Thanks to a storm-free summer, the project wrapped up ahead of schedule in early November.
“They did a lovely job, and people are coming out of the woodwork to see it, but I still think they should have held off at least until the end of April, which is a strong month for us,” said Susan Sutherland, owner of Style Paris, a women’s wear boutique that relocated to the avenue from nearby Via Mizner in 2009. “The construction manager said at least I was yelling at him rather than in tears, a worse sign of business.”
Sherry Frankel, president of the Worth Avenue Association, who made light of the situation with construction-themed decorative pillows at her Melangerie shop, said the makeover would have been even more detrimental in January. “Can you imagine all this dust and noise in high season? People don’t expect to have to deal with reality here, but even paradise needs sewers,” she said.
Updating the street’s infrastructure also buried power lines and widened sidewalks for the influx of baby strollers and wheelchairs. The tall coconut palms that traditionally lined the avenue were replanted; a new 30-foot vertical garden was installed as a living mural on the west side of Saks Fifth Avenue, and a shady piazza with water features and benches on perpendicular Hibiscus Avenue was built. Serving weary shoppers and bored husbands, more benches are dispersed along the street among freshly laid sod and trim begonias.
“The piazza is intended for fashion shows and other events, and nonresidents finally have a place to rest,” said Frankel.
Palm Beach has never been one to put out the welcome mat, so it’s caused a bit of disbelief that the overhaul included a 25-foot clock tower at Worth Avenue’s east end. In addition to this beacon announcing “We’re open for business,” the new west entrance’s 15-foot pilasters with gas lights cast an inviting glow.
“The residential portion has remained more exclusive than our commercial areas, but I hope that more independent boutiques with interesting treasures, like Bonnie Roseman’s BLT, will balance the big names that have taken over the avenue,” said Frankel.
Badgley Mischka, which opened a 1,200-square-foot pop-up shop on Worth in late 2009, aspires to capture the avenue’s heyday, when society women ran Parisian-inspired boutiques on the street, according to James Mischka. He said the brand’s formula of mixing $10,000 evening gowns, Mark & James dresses starting at $300 and exclusive costume jewelry in marine motifs has resulted in sales triple expectations.
“The recession didn’t deter us because we knew our product is appropriate for Palm Beach, and we’ve always done a good business with Saks Fifth Avenue and Neiman Marcus there,” said Mark Badgley, who knows the clientele well after residing with Mischka in the area for more than a dozen years.
Making the best of the construction, they timed the opening of their pop-up shop with the building of a permanent store that adds categories like shoes and the possibility of transforming storage space into a bridal salon. Saks at The Gardens carries the label as well.
“They’ve really upgraded that mall. South Florida has become an amazing market,” said Badgley.
Barbara Cirkva, division president of fashion, watches and fine jewelry at Chanel Inc., also reports Florida has been particularly strong throughout the year as customers buy complete ready-to-wear looks and accessories at both of the label’s stores, on Worth Avenue and in The Gardens.
“Comparing 2010 to 2009, sales increases in Palm Beach and Palm Beach Gardens continue in the high double digits,” she said.
Many believe, though, that Worth Avenue’s future lies in independent specialty stores rather than major luxury brands. Situated between Starbucks and valet parking at the 150 Worth shopping center, Caroline Freese’s 12-year-old Altona boutique did such a brisk business with European brands like Manuel Canovas and Dead Sexy that she opened Amina Rubinacci’s first U.S. store in September. The Capri-based women’s sportswear collection retails from $200 to $900. Focusing on swim- and resortwear, L’Escale followed two months later. Freese believes specialty shops like hers will revive the avenue more than aesthetics.
“If more Palm Beach product can be found everywhere, it won’t matter how many pretty flowers we plant,” she said.
Arthur Weiner, principal of AWE Talisman, the Miami-based leasing, merchandising and marketing firm for 150 Worth, said the avenue remains iconic, though its retailers had to readjust expectations from former fantasy heights. He cites improvements like the town waking up from its antiquated bureaucracy and the addition of youthful brands like Starbucks — over which he battled older residents — and Tory Burch, which he said has exceeded sales projections since its 2009 debut at the center. The beautification project on the street is the icing on the cake, according to Weiner, who added that “2009 sales decreases didn’t go back to normal this last high season, but we predict they’ll pass pre-recession numbers postbeautification.”
He said the center, which is owned by West Palm Beach-based real estate and investment firm The Goodman Company, always intended to take the luxury brand direction. Anchors Saks and Neiman Marcus are bolstered by Louis Vuitton and Gucci, which relocated from its decades-old building on the avenue to 4,500 square feet at the center last April.
In a place where it’s perfectly acceptable for 40- and 50-year-olds to buy junior tickets for galas, Weiner insists there are actually even younger residents. Sasha Lickle, a Palm Beach native in her late 20s who managed Badgley Mischka when it opened, agreed, saying her contemporaries now have access to affordable real estate.
“West Palm Beach wasn’t gentrified until recently, so people who grew up on the island like me had no choice but to move away unless they lived with their parents,” she said.
Don Uselmann, senior vice president and regional director of stores, Southeast, for Saks Fifth Avenue, said the northern migration of a younger demographic has been on the company’s radar. Even as far back as 2007, when its store at The Gardens Mall expanded from 75,000 to 110,000 square feet, Saks prepared by shifting from a more mature environment toward a contemporary statement with modern decor and natural light.
“Our primary customer there is still in her 50s, but we’d like to see 35-year-olds. The big shift will happen in a couple years,” he said.
Though Uselmann predicted 150 Worth will blossom into a hot property, he views The Gardens as the real growth market, based on space. At half the size as its store in the mall, the Saks at 150 Worth focuses on best-selling categories like women’s designer wear, which leaves little room for contemporary and men’s.
Ferragamo’s Ottomanelli regards Worth as one of the best streets worldwide, but expects similar results at The Gardens. He said both have the same merchandise, with the latter being more fashion-forward.
“We’re looking for a fashion customer there,” said Ottomanelli, noting the mall’s other selling points like convenient parking, which has always been a complaint on Worth Avenue; year-round foot traffic, and an “un-mall” mall concept. “We appreciate how they understand a terrific shopping experience in a beautiful, relaxed setting versus trying to squeeze out every nickel with kiosks and carts,” he said.
The Forbes Company’s founding partner Sidney Forbes said the developer always had a vision of what the area would become, even though the interstate ended at the mall’s PGA Boulevard address when the firm broke ground on The Gardens in 1987. Nearly two decades later, it added a wing anchored by Nordstrom, where stores like Ann Taylor and Banana Republic relocated to clear a luxury section on the upper level surrounding Saks. Louis Vuitton paved the way for Michael Kors, Burberry and Tory Burch, among others.
“We’ve committed to luxury by offering valet parking and enforced security, and not junking up the mall with carts and things,” he said.
Modeled after Madison Avenue’s high-low mix, the center’s latest strategy is best in class. In November, H&M unveiled a 21,000-square-foot, two-story flagship store near Bloomingdale’s. Its impact was immediate, with 2,100 people visiting in three hours for opening day, according to Al Ferris, leasing manager for The Forbes Company.
“It’s pulling from all points in South Florida, and the number of calls for directions and Web site clicks is tremendous,” he said.
Forbes was adamant about getting a flagship for its designer capsule collections. Lanvin’s collection for H&M sold out in one day, with men’s flying out first. He reports Worth missed this trend.
“They haven’t contemporized for multigenerational needs. It lacks a cool factor,” he contended, citing brands such as Lilly Pulitzer and J. Crew that lure Palm Beachers to The Gardens because they don’t have units on Worth Avenue.
This year, J. Crew expanded from 5,500 to 7,300 square feet for a men’s and women’s collection store. Chairman and chief executive Millard “Mickey” Drexler recognized the opportunity through the abundance of baby strollers at the mall, according to Forbes. Other new tenants are Basler, Ilori and Vineyard Vines, and Hugo Boss plans to open a company-owned store after shuttering at 150 Worth last spring. Ferris said the mall is 99 percent leased and sales per square foot average more than $650.
“Luxury has rebounded here, and we expect overall sales to increase as our boundaries broaden and the market matures,” said Forbes of double-digit increases from last year.
Yet the tenants of Worth Avenue also are optimistic now that the beautification project is complete and, for better or worse, the island has lost some of its snobbishness. Frankel said consumers shouldn’t expect their grandmother’s same-old stomping ground this season.
It’s a shift into the modern era — one that other exclusive Florida islands like Gasparilla, near Sarasota, have yet to make. It, like Palm Beach, might be forced to, however: Forbes and his Gardens tenants have their eye on that underserved region with the possible development of the Mall at University Town Center. A new customer is ready and waiting there, too — perhaps to the dismay of Gasparilla’s old guard.