REGIONAL UPDATE

Byline: Georgia Lee / Holly Haber / Kristi Ellis / Diane Dorrans Saeks

The big regional apparel marts have felt all the trauma of the fashion industry. Retail consolidations and diminishing numbers of independent merchants have put the squeeze on the marts’ buyer attendance, and the shifts in consumer interest and spending have cut into their tenants’ incomes.
In some cases, financial woes hit the owners of the facilities as well, and foreclosures have occurred or been threatened, and lenders have taken over the deeds.
Still, most mart managements are working with increased intensity to keep the retailer rolls respectable and reshape the businesses to make sense in the challenging environment of the mid-Nineties.
From here to page 23 are updated reports from key regional marts.

Diversity Keeps Chicago Solid
CHICAGO — Through niche marketing, new leasing programs and cross-marketing-related categories such as gifts, the Chicago Apparel Center is trying to give buyers and reps more bang for the buck.
The Chicago mart has faced the same challenges as other regional trade centers — retail softness, consolidation of department stores, proliferation of discounters and the attrition of specialty stores. But while other centers have gone through foreclosure, threat of foreclosure or been forced into financial restructuring, the Chicago center has remained financially solvent.
“We’ve always been diversified with office and hotel space, and any diversification limits risk,” said Christopher Kennedy, executive vice president for Merchandise Mart Properties, which manages the apparel mart. Diversification has been a strategy since the apparel center opened in 1977.
“Fifty percent of the building is unrelated to apparel, which is unheard of in other apparel marts,” said Kennedy. “This has been critical to its success, as the other businesses have kept the apparel mart afloat during times of cyclical risks.
Kennedy also noted that the Merchandise Mart, now a 6.2 million-square-foot trade center that encompasses the apparel mart as well as other buildings, had weathered four or five recessions since Joseph P. Kennedy purchased the building from retailer Marshall Field in 1945.
Of course, it doesn’t hurt that the facility is backed by the money of one of America’s first families, acknowledged Kennedy, who is a son of Ethel and Robert Kennedy.
Kennedy said that the family ownership has lent confidence to the operation. “People have faith that the company will be here through anything,” he said. “There’s a level of quality that a Kennedy operation brings, which includes a focus on personnel.”
The majority of the mart’s management comes from retail and wholesale backgrounds, rather than commercial real estate, said Kennedy. “The focus is on what we can do to improve the industry, rather than just talk about cheaper rates,” he said.
Stressing the importance of diversification, Kennedy further noted, “Other marts in the Seventies and Eighties went for the quick hit when times were good, but anybody carrying 100 percent apparel now is in trouble.”
Six businesses, unrelated to apparel, operate in the 2 million-square-foot Chicago Apparel Center. In addition to office space occupied by the Chicago Training Authority and a training facility for Illinois Bell telephone, the apparel center includes a Holiday Inn, two restaurants, a drugstore and an office supply store. The mart’s trade show area, the Expo Center, hosts 30 shows a year in addition to apparel markets.
Four years ago, however, the recession forced the apparel mart to change its way of doing business in dealing with the industry.
“We had to stop looking at apparel as a monolithic whole,” said Kennedy. “We had to focus and take advantage of areas of growth.”
Niche marketing programs have intensified each year since, said Kennedy. One major change has been a focus on better price points, as moderate and budget business has shifted from department stores to discounters. In addition, single categories, such as traditional, contemporary, accessories and bridal have emerged as the biggest growth areas.
With two bridal markets per year, the category has been particularly successful for the mart. The 40,000-square-foot bridal area was fully leased 18 months ago and was recently expanded to another 20,000 square feet. In addition, temporary bridal exhibitors have increased 25 percent over the past year, said Kennedy.
The traditional clothing floor, with lines such as Barry Bricken, Eagle’s Eye and Cambridge, is 98 percent leased.
Contemporary clothing, including denim, has been a strong area, particularly in the past year. Over 4,000 square feet of new leases have been signed in recent months for lines such as Pepe, Girbaud and CK Calvin Klein.
Although overall attendance over the past few years has been flat, Kennedy said that traffic in these specific areas had picked up.
“We’ve been killed by the huge loss of lower-end specialty stores,” he said. “But we’ve seen big increases in other areas, so it really represents a shift that reflects growth in niches.”
With the building 78 percent leased, the mart has also revamped its leasing packages, offering one-year packages on a per-market basis, in addition to its traditional five-year leases.
At the November market, the mart also officially dedicated its “pavilion suites” program. The program, started on a limited scale at the August market, offers temporary exhibitors small collective spaces on permanent floors for about the same price as space at the booths in the building’s Expo Center, which is located away from the permanent floors and had housed temporary exhibitors.
“We realized our traditional product, a 1,000-square-foot showroom open every day, with a three- to five-year lease program, can be a big financial commitment for reps,” said Kennedy. “The other alternative, a 10×10 pipe and drape facility in the Expo Center is not as attractive, and it can be confusing to the buyer.”
Sales reps have applauded the new area. Lee Brenner, principal with Lee Brenner Associates, a fashion jewelry and accessories sales firm, moved to the pavilion suites after 10 years on the temporary floor.
“It’s good to feel like a part of the building,” she said. “Before, buyers often didn’t have time to get down to see us. We expect traffic and sales to increase after people get used to the idea.”
With specialty stores diminishing, the mart’s retail development division has begun to target department stores, such as Dayton Hudson and J.C. Penney. “We often do the preliminary legwork and sourcing to match up product with their needs,” said Susan McCullogh, vice president, leasing.
At the specialty retail level, McCullogh noted more crossover in gift and apparel items. To accommodate this trend, an apparel minimart will run during the July gift show, and in January, gift and apparel shows will run concurrently.
To back up its crossover and niche marketing focus, the mart has instituted more educational programs, product display, specific fashion shows and splashy direct mail pieces.
However, marketing is secondary to good product, said Kennedy. “No marketing program is as important to the retailer as good lines,” he said. “Lines are what bring people in, and that’s still what we’re going after.”

Atlanta Sets Plans To Extend Its Reach
ATLANTA — After years of financial turmoil and attrition of its customer base, the newly restructured Atlanta Apparel Mart is extending its reach, targeting specialty stores nationwide with an arsenal of new marketing and educational programs.
Portman Cos., parent company of the Atlanta Apparel Mart, recently completed a financial restructuring that turned over majority ownership to creditors, as reported. The move strengthens the mart with financial solvency, said Peg Canter, general manager, although its effect on day-to-day operations is minimal.
“Regional marts have had problems based on real estate and finance, and the decline in specialty stores and manufacturers has been industrywide. But through it all, buyers are mainly concerned with finding lines in a comfortable environment where they can rub elbows with other buyers,” she said.
Canter put a positive spin on flat attendance figures this year. “Specialty stores have gone out of business at a rate of 7 percent a year for the past three years, according to economic reports. We look at flat attendance as staying ahead.”
AMC Inc., the newly formed company that owns and operates the Atlanta Market Center, covers the Atlanta Apparel Mart, the Atlanta Gift Mart and the Atlanta Merchandise Mart. Although Jack Ryan, president, has emphasized minimal changes and a “business as usual” approach, the new company will focus on cross-marketing between its components.
In January, gift and home furnishings will combine markets for the first time. Cross-merchandising between apparel and gifts reflects a growing retail trend, said Canter.
“Gift stores carry apparel, and apparel stores carry gift and home accessories,” said Canter, who added that educational programs would integrate both areas when possible this year. Currently, three floors of the apparel mart are open during twice-yearly gift markets, while most of the gift mart is open weekdays all year. Starting July 1996, the first two floors of the apparel mart, each 100,000-square-foot halls, will be used as temporary gift floors during gift markets as well.
Last year’s consolidation of the apparel mart, which downsized apparel from 14 to 10 floors, was the most positive move in recent years, said Canter. “The consolidation brought new energy and focus to the building,” she said. “Buyers want to see activity in the building.”
The consolidated space is currently 70 percent leased, up from 65 percent last year. Canter projected a 7 to 10 percent increase for each of the next five years.
Billing itself as “the specialty store market,” in 1996 the mart will extend direct mail and field marketing efforts beyond the Southeast territory, to lure more nationwide attendance. Educational seminars will stress information vital to small business owners — such as how to start a business, establish credit, build advertising and promotion and how to figure an open-to-buy.
Seminars, which drew an average of 100 buyers each at the October market, have been so well received that the mart will introduce a full-day pre-market seminar package to buyers in April, which includes travel and hotel incentives. The most successful educational programs have been conducted by retailers.
“Buyers want networking opportunities,” said Canter. “The best way they can learn is from another retailer.”
The mart will capitalize on the hype surrounding the Olympic Games being held July 19-Aug. 4 in Atlanta. During June and August markets, the mart will offer venue tours of Olympic sites, ticket giveaways and promotional items, such as a collector’s pin.
“Buyers can feel a part of the Olympics being here before and after the crowds come,” said Canter, stressing that plenty of downtown hotel rooms had been reserved for June and August markets.
Also new this year, the mart will institute annual fashion awards, voted on by retailers. To be held during August or October in 1996, the black-tie awards ceremony will benefit DIFFA (Design Industries Foundation Fighting Aids). The mart is negotiating with a fabric company to cosponsor the event, said Canter.
Upgrading its image and providing fashion direction continues to be a primary marketing goal. With an advertising and marketing budget expanded 1 to 15 percent last year, the mart hired New York advertising firm Balet & Albert to launch a slick black-and-white ad campaign, with photography by Walter Chin. During markets, live models revolve on turntables in lobby areas, while a huge black-and-white fashion mobile attracts attention in the atrium.
But despite razzle-dazzle promotions, good resources ultimately draw buyers to market, said Canter. “We want lines that cater to specialty stores with low minimums and exclusives whenever possible,” she said.
Contemporary, traditional, denim and bridge areas have performed well, particularly in showcase collectives, called “Premier” areas. “Premier allows manufacturers to test the waters with one-year leases,” she said, adding that tenants often lease permanent showrooms or sign with reps after testing lines in Premier.

Seminars, Data Key Dallas Programs
DALLAS — The Dallas Market Center is going into the education business next year as a way to entice more buyers to shop at the wholesale complex.
The outreach includes an 11-city tour of retail seminars; the debut of a twice-yearly magazine for women’s specialty stores, and the creation of a National Specialty Store Association that will stage seminars and offer health benefits and a credit card.
“No one is really out there watching out for the specialty stores, making sure they stay alive,” said Robbin Wells, senior vice president of marketing for the DMC. “No one treats the specialty store owners as professional career people. They need continuing education.”
The DMC is calling the program its National Retail Trade Center and Dallas Market Center University. The idea came about when DMC executives observed that the number of buyers going to seminars during women’s market weeks was tripling even as overall buyer registration slipped.
The drop in market attendance finally leveled off in October to match last year’s figures, Wells said, noting the Mart had requalified buyers by more stringent criteria in 1994. This factor was seen as at least partly responsible for the drop in traffic.
“In apparel, our business has stabilized in terms of retail attendance, but now we have a better understanding of who our customer is than in the past 10 years,” she added.
The seminars will offer practical retail advice, such as how to sharpen marketing skills. The first program is slated for Feb. 21-22 in Dallas, followed by one-day seminars in Los Angeles, San Francisco, Seattle, Phoenix, Denver, Charlotte, Minneapolis, Chicago, Columbus, Ohio, and Kansas City.
By staging them across the country, the Mart hopes to reach new buyers outside the traditional Southwest territory and tempt them to shop here.
“We have a geographic advantage by being at the center of the country,” Wells said. “And our reps’ territories seem to be more flexible so they can get commissions from outside the territory. That’s where most of our growth will be in the next five years.”
The first issue of Storefront, a business magazine for women’s specialty retailers, will make its debut in April with a second issue planned for September. It will land in the mailboxes of about 30,000 stores from the Mart’s mailing list, with half of them based in Texas, Oklahoma, Louisiana and Arkansas.
“It’s a piece of literature to bind together the organization,” Wells explained. “There isn’t a business magazine out there for all women’s specialty store types.”
The DMC turned to Texas Monthly, a successful regional magazine based in Austin, to organize Storefront’s editorial content and advertising sales. Some planned features: private label opportunities for specialty stores; an update on fashion trends, and how to entertain kids during a buying trip to Dallas.
The DMC also intends by midyear to begin recruiting retailers to join a National Specialty Store Association. It’s currently evaluating three proposals from companies to manage the association.
The NSSA would provide another avenue to feed information to buyers through a newsletter. Modeled on the International Home Furnishings Association based in the World Trade Center, it also is expected to offer health coverage, a credit card and various discounts. A planned annual convention here would provide more opportunities for seminars and networking.
The DMC also hopes to catapult itself into the information age by expanding its site on the Internet this month to include a listing of every line exhibited at the market center, including apparel, accessories and hard goods.
Since the World Wide Web site went on line in May with general information and market dates, it’s been visited about 2,000 times a week by manufacturers, retailers and the curious. About 10 percent of the inquiries have been from stores that have left their electronic mail addresses.
“As a marketing tool, it’s been extremely worthwhile just to gather electronic addresses for retailers,” Wells said. “And we’ve gotten inquiries from small manufacturers looking for temporary space.”
Only one sales representative in the Apparel Mart — Showroom G75 — has participated thus far in the DMC net site with a “virtual showroom” that lists the 10 accessories lines it represents.
“I’ve gotten about a dozen inquiries from retailers and manufacturers looking for reps, and I’ve gotten bunches of inquiries from people like you wanting to know if I’ve gotten inquiries,” said Eli Escobar, a principal in Showroom G75. However, he added, he feels it has potential in getting leads and will be good for the market center in general.
The retailers who contacted Escobar through the Internet mainly asked for catalogs, he explained. “I don’t see it as a vehicle in its current format to get orders,” Escobar said.
The complex is also laying plans to install interactive video kiosks throughout the market center by the end of next year. The kiosks would display information about the Market Center and would allow sales reps who don’t have their own computers to send and receive mail through the DMC’s site on the Internet.
But the several hundred-thousand dollar cost of the kiosks won’t go into the DMC’s budget until there is a final resolution to the threat to foreclose on the Market Center, which has loomed since October 1994.
The way it stands now, Crow Family Holdings, which owns the DMC, has reached an agreement with its two lenders to pay off its $450 million loan at a discount. The Crow family has until March 27 to raise the funds to pay off the loan. If they don’t, the lenders have said they will foreclose.
“The owner situation has impeded big, long-term plans,” Wells noted. “We still invest $3 million to $5 million in capital each year, but it has affected out-of-the-ordinary investments that are not a necessity.”
Still, DMC continues to lay strategic plans to strengthen its business, like the education outreach.
Also new next year will be a mini show of contemporary lines and New York fashion designers coinciding with the April and October markets. Called Hot Lines Dallas, it will be produced by Non-Stop Productions, New York.
“The concept is to bring our show and ideas to Dallas because we think it would work wonderfully for the Dallas Market Center and also for our companies, who can benefit from being in the market center,” said Patricia Tubiana, director of Non-Stop and of Very Important Productions, which coordinates the Showroom and Hot Lines shows in New York.
“We’ve got to look ahead to three or four years down the road,” Wells explained. “We’ve spent a lot of time in the past 18 months looking at ways to develop new business by developing points of difference and what we can do to add value here.”

California Mart Gets $14 Million Redo
LOS ANGELES — With a $14 million face-lift under way, the California Mart is beginning to reap the rewards of its aggressive campaign to redefine itself and remain viable on the edge of the 21st century.
Mart executives are banking on both the prominent structural changes and new programs to recapture business and polish the building’s image.
For the past six months, there has been a focus on implementing new programs to attract buyers and new tenants, such as apparel and accessories vendors and visual merchandisers, advertising firms, fixtures companies and fashion publicists.
“The ball is rolling,” declared Maurice (Corky) Newman, California Mart president and chief executive officer, who claimed that buyer attendance is up an overall 34 percent this year compared to last year. Newman took over the helm of the mart last year as the ownership changed. In August 1994, the Equitable Life Assurance Society of the U.S. foreclosed on the mart. The Morse family, which owned the trade center since its startup in the early Sixties, failed to make mortgage payments on $265 million in loans.
Defining the mart’s place in the West Coast fashion business, Newman said: “California is the hotbed for entrepreneurs; it is easier to open here than in New York. They will always need showrooms for their exciting designs, but we have to stay on the cutting edge.”
Among the various programs aiming to revitalize the facility, one of the most successful in attracting first-time or dormant buyers has been the retail development program. Led by Gwen McKenzie, a four-member team, soon be expanded to six, reaches out to buyers in 17 Western states, conducting seminars on industry issues and offering attendees incentives to shop the mart.
“Most stores just don’t know what is going on at the Mart,” Newman said, and the mission of the retail development department is to get the word out.
“We found that the best results are going out into the field and doing the breakfasts or one-on-ones and finding out why buyers weren’t coming,” he said.
Newman pointed to one breakfast the department sponsored in Seattle, which attracted 90 stores. Of the 90 retailers, 60 signed up to attend an upcoming market and of those 51 actually came, Newman said.
For the first time, the mart has also closed off the building to unregistered buyers.
Another significant change has been from a perceptual standpoint, according to Newman. Fewer buyers, he said, express concern about crime and dirt, which may be a result of the improved surroundings, as the area gets cleaned up with the supplemental maintenance services of its new business improvement district.
Created by the mart and the Downtown Property Owners Association, the BID will raise $6 million in self-imposed taxes in the next three years, which will be used for services including street maintenance, graffiti abasement, trash removal and bike patrols. Development of focused trade shows is another mart strategy, and they may not always be held within the facility itself. In conjunction with the city of Los Angeles, mart management has created the Look show, which will run March 8-10 at the Los Angeles Convention Center. It will focus on key men’s, women’s and young contemporary sportswear resources. Newman expects the show to sell out in the next 60 days and anticipates a total of 300 to 350 exhibitors.
But the mart isn’t stopping there. It plans to take its show on the road to New York. In conjunction with 50 West Coast contemporary resources, mart management will host West Coast Collective Jan. 6-9 at the Waldorf-Astoria Hotel.
Meanwhile, work progresses on the building’s $14 million renovation project. A video conferencing center, which is up and running, allows tenants to show lines and hold production meetings point-to-point without having to leave the center.
The mart is also on the Internet with its own web site, and Newman said he expects a minimum of seven manufacturers to be on the site by the beginning of next year. Subscribers can now access information on its amenities and activities. They will also be able to electronically preview and order merchandise from participating manufacturers and showrooms.
A satellite television station will be built by the end of 1996 and will enable tenants to broadcast to multiple outlets.
Prominent features of the face-lift, slated for completion by the end of 1996, will include a new $6 million two-story lobby. It will have a four-story high atrium ceiling, a balcony, a full-service business center, a buyers club and a new food court. A $1.2 million, 1,200-capacity fashion theater on the ground floor will replace the current 450-person theater. Excluding the lobby, which has 35 different construction projects in the works alone, there are about 80 to 85 ongoing projects throughout the building.
Newman said that the occupancy rate is currently 81 percent but will probably jump to 85 percent by March 31, 1996. There are currently 37 pending leases.
“This is the first year since 1988 that we have had plus leased-out square footage,” he said.

SF Center Tenants In Waiting Game
SAN FRANCISCO — About 30 women’s apparel showrooms remain in the 750,000-square-foot Fashion Center here, as it awaits a buyer.
The five-year-old building was placed into receivership in August, and manufacturer representatives and others affiliated with the fashion industry have been vacating their showrooms and offices in the property since then. The interior atrium, encircled by darkened empty showrooms, presented a rather gloomy picture on a recent visit. Still, it continues to operate.
“The building is still in foreclosure, and as of right now it is business as usual at the center,” said receiver Kyle Everett of the San Francisco accounting firm Sugarman & Co. “As long as I am receiver, it will continue to operate as the Fashion Center.”
However, remaining tenants have formed the San Francisco Apparel and Accessory Group to address concerns such as planning alternative market sites and pursue grievances about building management and maintenance.
Some remaining tenants met recently to discuss a possible permanent move to the Gift Center, a block away.
“There’s a thriving manufacturing and retail community in Northern California, and we see no reason why there should be no apparel and accessories reps to service them,” said Sharon Salzman, who has a contemporary sportswear showroom in the center.
As for the building, Everett said that there had been a great deal of interest from potential buyers, and he had had discussions with several. He declined to specify the exact number.
“I’m not sure if there is anyone ready to make a serious offer,” he said.
Business insiders say that Pittsburgh-based Mellon Bank, the lender who foreclosed on developer John Portman’s $91 million project in August, would be lucky to receive an offer of $30 million.
Everett declined to comment on speculation that after a sale, the building would no longer serve as a fashion mart.
Meanwhile, with a summer market scheduled to start Jan. 6, showroom reps and manufacturers are scrambling to bring in buyers.
“If we do our homework we can get buyers in here,” said Lori Alpert, a rep who has had a prime position in the center since it opened. She said she planned to stay as long as the center operated as a fashion mart.
Max Watkins, president of the Golden Gate Apparel Association, whose 300-plus members make up the center’s major tenants, emphasized that the January market would take place. The sales rep group, with 300-plus members, account for most of the reps who show on a temporary basis during market weeks.
“We’re on the edge of our seats waiting to see what will happen with the center,” Watkins said. “We have backup plans to use other sites for future markets, but right now, it’s wait and see.”
“The building did not fail because the fashion industry is not strong in Northern California,” said Lori Gamble, owner of the Urban Style showroom, which reps contemporary sportswear. “The building failed because it was overbudgeted, overbuilt and undermanaged.”
“Even with all the changes in the center, local and Northern California buyers have been very loyal,” said Ann Fehrenbacher, owner of the Me Myself and Eye contemporary sportswear showroom. “But we have lost many buyers from other states.”
“The building may be in limbo, but all the reps continue with their business,” said Gamble.
“We want buyers to know that they will find the usual number of resources at the January market.”

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