WEST COAST BRACING FOR BLOOMINGDALE’S BEVERLY HILLS INVASION
Byline: Michael Marlow
LOS ANGELES — Bloomingdale’s is shaking up Beverly Hills — even before breaking ground on its proposed West Coast flagship.
Throughout Southern California, retailers are preparing for the market share fight of their lives: another invasion by a prominent and competitive East Coast retailer. Last April, Barneys New York opened a chic California flagship here, but may be hard-pressed to reach ambitious sales goals, due to a tough economy and the highly competitive retail environment.
Bloomingdale’s chairman Michael Gould is confident that even if the Southern California economy is still in bad shape in August 1997, when the store opening is planned, his new unit can blossom.
“Yes, times have been tough, with all the natural disasters and cutbacks in the defense industry, but California is an incredibly vibrant place,” he said. “I feel by the time we get there the timing will be right.”
“If Bloomingdale’s increases the traffic, that will be great. But we can’t all keep feeding on the same pie,” cautioned Fred Hayman, the Rodeo Drive retailer. “That won’t work.”
“Times are tough, and bringing more stores to Beverly Hills is going to make it that much tougher,” said retail veteran Herb Fink, who opened Theodore on Rodeo 25 years ago. “We learned this lesson from Barneys. They didn’t bring in any new business. They just siphoned a little off everybody else.”
The news about Bloomingdale’s is sparking new strategy changes in a retail landscape that’s already in flux. Here, some developments:
I. Magnin will close its Beverly Hills unit as the chain liquidates, as reported.
Neiman Marcus and Saks Fifth Avenue scrambled to acquire at least part of the I. Magnin site, but, in a surprise move, Saks snagged it and plans a major investment in a men’s store.
Neiman’s, which has been clobbering the competition, has beefed up its schedule of events, adding appearances by designers who would have turned up at I. Magnin.
Barneys has begun building its events calendar, and even Maxfield, the Melrose Avenue boutique known for its celebrity clientele, has hired a publicist and begun holding special events, such as book signings.
As Bloomingdale’s plans to expand here have come to light, so have reports about disappointing sales.
Speculation that Barneys — despite all its publicity, provocative advertising and positive shopper reviews — is performing below expectations, was denied by Gene Pressman, co-president. He said the store has been “very well received” by locals because it has recreated the excitement of its busy Madison Avenue store, opened a year ago September.
“Our L.A. customer expects the same service, merchandise mix and environment as (in) our New York store,” Pressman said. “We do not disappoint them, and this is the key to our success in Beverly Hills. We built our second largest store in the country, and brought in the same array of designers and services we have in New York.”
Gould said his new store will add to the pie, not just draw from it. The store’s volume is projected to hit $90 million in its first year, and Gould predicted much of that would be new business.
“Any time a store comes into a market, it generates new business,” Gould said. “Hypothetically, if Neiman Marcus in Beverly Hills was to close tomorrow, some of that volume would disappear. It wouldn’t be distributed among the other stores.”
Bloomingdale’s strengths in Beverly Hills will include cosmetics and ready-to-wear, particularly bridge, two categories dominated by Neiman Marcus. However, Bloomingdale’s edge may be in housewares.
The store also is expected to be strong in men’s wear, but will face stiff competition from Barneys, the new Saks men’s store, and the Bullock’s Men’s Store in the Beverly Center.
Gould first met with city officials this spring and is making progress towards final approval to convert the new store’s site. He said Bloomingdale’s has been mulling over California for years and is looking for sites in the San Fernando Valley and Orange County’s South Coast Plaza. Gould said a multi-store approach will be the key to success in the West.
Plans for Beverly Hills call for a four-story, 250,000-square-foot unit on Beverly Drive, which is one block east of and parallel to Rodeo Drive. It will extend to Canon Drive, an additional block east, and be built on space now occupied by a city parking lot and several vacant storefronts.
A public plaza with a fountain, artwork and benches will accent the Beverly Drive entrance.
Gould described the structure as a California interpretation of the New York flagship.
“Certainly to California, and in particular Beverly Hills, we want to try to replicate elements of 59th Street,” Gould said. “I think that’s what people expect from Bloomingdale’s, and we don’t want to disappoint them. We want to recreate the excitement and the energy.”
One who knows the market, Joseph Cicio, former chairman and ceo of I. Magnin, said Bloomingdale’s is wise to open in Beverly Hills, but he warned “California is a very tough market.”
“The Bloomingdale’s 59th Street philosophy is definitely an opportunity for the market,” Cicio said. “But many of the problems in California are beyond retailing, and they might not go away by the time Bloomingdale’s opens up. The population is decreasing, and with today’s fax and computer world, people are finding alternative places to live even if they work in Los Angeles.”
Linda LoRe, president and ceo of Giorgio Beverly Hills, said Bloomingdale’s can generate new business if it exploits the shake-up in L.A.’s upscale retail market. I. Magnin is only the latest casualty. Bullock’s Wilshire, Bonwit Teller and Gump’s have all closed down, while traditional department stores such as Robinson’s and Bullock’s have traded down to more moderate merchandise.
“California became over department-stored, and then all the stores became the same,” LoRe said. “We’re looking for a new concept, something that’s exciting. This leaves an opportunity for stores such as Bloomingdale’s and Barneys.”
Gould’s confidence comes in part from his experience in California and in Beverly Hills, where he lived for several years. During the Eighties, he was chairman and ceo of Robinson’s, at the time an upscale Southern California department store. Later, he became president and ceo of Giorgio Beverly Hills.
Unlike some East Coast retailers, Gould knows Beverly Hills and is well connected. Reportedly, Gould has wanted to bring Bloomingdale’s to Beverly Hills since he moved East to head the chain in 1992. But he asserted that the Beverly Hills store is a business decision, not an emotional one.
“Roots are all well and good, but don’t count for much if you can’t make a good business proposal and show a good return on your investment for investors,” Gould said.
Others also think Rodeo Drive, once a symbol of Eighties excess, can bring in a good return.
Versace, Iceberg, Zegna, Georges Marciano, Lladro, Lalique and Franklin Mint all will bow with new Rodeo stores this year.
Calvin Klein, the on-again, off-again potential Rodeo tenant, is expected to finally take the plunge this year. He scrapped plans this year to open a store that would have been owned by Jousef Tar, who operates the Bernini men’s wear chain in southern California. Sources said Gabriella Forte, who joined Klein as president last year, wanted the store to be company-owned, not licensed.
Don Tronstein, a Rodeo Drive developer whose tenants include Giorgio Armani and Guess, predicted Rodeo would be 100 percent leased within a few weeks. While Tronstein had to struggle the past few years to fill some of his properties, now the tables are turned.
On one of his properties, a small space on the 400 block formerly occupied by the Custom Shop men’s store, Wolford hosiery will move in.
“There’s a little more electricity in the air,” Tronstein said. “Everyone feels things have finally bottomed out, and retailers are thinking they better get in before things go up again. They’re making deals.”
Bloomingdale’s could spur some other deals, serving as a magnet attracting retailers who have been intimidated by the city’s super-rich image. The Bloomingdale’s proposal has Rodeo Drive real estate players scurrying east to map out Beverly and Canon drives. Dan Blatteis, the broker who brought Barneys to Beverly Hills, said Bloomingdale’s would make Beverly and Canon drives “very hot big time.”
“It no doubt will double the rents on Beverly,” Blatteis said. “Where they were $3 or $3.50 per square foot, they’ll soon be $6 and $7 (per square foot). But that’s still cheaper than Rodeo at $10 to $11 per foot.”
Despite its reputation as a world-class shopping district, Beverly Hills is not an easy place to set up shop.
It took Barneys several years of handholding with city officials and powerful nearby residents to get its plans approved. Barneys even agreed to put black paper in its windows while it originally stocked the store so that no light would spill out to nearby areas.
Saks Fifth Avenue spent several years trying to get plans for its expansion through City Hall. Store officials were sent back to the drawing board several times before the city finally approved a smaller expansion. Saks’ decision last month to acquire the old I. Magnin building and convert it into a men’s store showed it was easier to acquire a vacant store.
However, Bloomingdale’s has found a city eager to deal, partly because there was another proposed location a few miles west in Los Angeles at Century City Shopping Center. Reportedly, Gould’s connections didn’t hurt either. Donna Ellman, a former mayor and consultant for Barneys during its approval process, said Bloomingdale’s benefits from the economic realities of the city. Tax revenues on the projected $90 million annual volume look very attractive.
“They have finally figured out who fills the coffers,” Ellman said.