Star Tribune

Business

Department stores past their prime as retail anchors

Bloomingdale's and other high-profile closures are causing malls to rethink their basic concept.

Article by: JANET MOORE , Star Tribune

Updated: January 9, 2012 - 3:31 PM

In the old days, mall economics were so simple: Plunk down two big department stores as anchors and sandwich smaller shops in between. Open doors.

But the past 20 years, the draw of the major department store has begun to erode, with many sold or shuttered as aging malls struggled to modernize. Remember Dayton's? Donaldson's? Powers?

The news last week that Bloomingdale's is leaving the Mall of America comes just after Sears' recent announcement that it was closing 25 of its "full-line" stores nationwide -- most of which are in anchor malls, although none in the Twin Cities.

"Department stores are not exactly dead, but they're obviously troubled," said retail historian Jack Thomas, of the website www.deadmalls.com. "Everyone wants one-stop shopping. The problem with department stores and malls is nobody wants to go to multiple stores to get what they need."

After word that Bloomingdale's will be shutting its doors in March, retail followers wondered whether the Bloomington megamall -- the nation's largest -- would be left with a gaping hole in its grin of retail offering.

Yet at the same time the news was confirmed, Mall of America officials excitedly announced a new cluster of "junior anchors" for the south end of the shopping center where Bloomingdale's now stands. No tenants were revealed for the $30 million to $50 million project, but spokesman Daniel Jasper promised they would be "major international fashion-forward" retailers.

"A center of that magnitude won't have any problem leasing out that space," said Jessie Tron, spokesman for the International Council of Shopping Centers. Splitting up the space "will be a lot easier than trying to find one tenant to fill the whole space," he added.

Tron noted that the megamall's strategy of rethinking the traditional anchor space and replacing it with smaller stores has been tried in other regional malls, too. The success depends on the individual center and the retailers.

When Borders book stores went out of business, Rosedale could have been left with a highly visible vacancy on its east end. But two months after Borders left, Becker Furniture World opened in the 30,000-square-foot space at the Roseville mall.

"I'm not sure you'd call Becker or even our movie theaters traditional anchor stores, because they utilize a lot less space," said Rollin Hunsicker, Rosedale's general manager.

Some retail experts agree that reconfiguring Bloomingdale's 210,000-square-foot space and expanding the adjacent south court by renovating basement space could prove successful.

"It could be very positive," said Jim McComb, a veteran retail analyst with Minneapolis-based McComb Group Ltd.

"They have a lot of flexibility on how they deal with that space."

Edina's upscale Galleria is an example of a popular shopping mall that does not have a traditional department store anchor. And malls, in general, have evolved over the years. Some have adopted more of an outdoor concept while others have focused on outlet stores.

The struggles of Bloomingdale's in the Twin Cities market doesn't necessarily mean all department stores are withering in the Twin Cities -- Herberger's just opened a sparkling new store in Southdale Center.

"Bloomingdale's has never done well at the Mall of America," McComb said, noting that merchandising at that store has been quixotic. "Several years ago, I was walking through the store and saw a very large display of INC [International Concepts] merchandise, the Macy's house brand. I'd never seen that in any Bloomingdale's store anywhere else in the nation." (Macy's is Bloomingdale's' parent company.)

In announcing the closing last week, Bloomingdale's spokeswoman Marissa Vitagliano said the megamall store "wasn't meeting expectations." Another store in the Chicago area is to close, as well.

While it would be easy to say the iconic New York department store mistook Midwestern taste, experts say the Mall of America is not like the average 'Dale mall because it is also a tourist destination. Mall statistics indicate that a third of the 40 million annual visitors come from outside a 150-mile radius. That could be Iowa -- or Dubai.

"I would attribute this more [to] the normal churn of retail stores" in a difficult economy, said George John, a professor of marketing from the University of Minnesota's Carlson School of Management. "The Bloomingdale's brand is not going away and it isn't tarnished in any way. It's just the usual cycle of retail."

Janet Moore • 612-673-7752

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