Shopping Centers Court Boutiques to Stand Out; Some Click, Some Miss Orange County Business Journal By Sherri

Cruz Monday, November 21, 2005 Lola Rouge boutique does brisk business selling designer denim, jewelry, handbags and other items at its Costa Mesa store. The shop, on Costa Mesa's funky-chic 17th Street, isn't far from Fashion Island. But it might as well be a world away from the upmarket Newport Beach mall. Earlier this year, Lola Rouge opened a second store at Fashion Island after leasing agents came knocking. In the past five to 10 years, malls have been recruiting more boutiques such as Lola Rouge to spice up their centers. In a way, they've become like venture capitalists, searching out startups that can add some bang to their mall's portfolio. Other boutiques that have jumped to Orange County malls include: The Closet and Toy Boat at Fashion Island; Mac & Madi at South Coast Plaza; Kaitlyn at Irvine Spectrum Center; Planet Funk at Brea Mall; and Mercer at The Shops at Mission Viejo. Boutiques have a knack of knowing the latest trends. They carry one-of-a-kind items that can't be found in chain stores. They change products quicker because they don't have a corporate headquarters to consult with. And boutiques are small enough to pay closer attention to shoppers. Moreover, trendy specialty shops draw shoppers and help make up for declining sales at drabber department stores. National Trend "Boutique-ing" of malls is a national trend. It's more pronounced in OC because of the county's luxury bent. "We go across the country looking for the next big hit," said Jeff Dodd, vice president of leasing for The Irvine Company, owner of Fashion Island, Irvine Spectrum Center and other neighborhood malls. The company's leasing agents travel eight to 10 times a year, he said. "We try not to leave any stone unturned," Dodd said. Dodd and others go to hot spots, New York, Chicago, Dallas, he said. They visit stores they've heard of or read about in fashion magazines.

"We develop relationships with the store owners," Dodd said. The Irvine Co. has about 35 to 50 stores on its hit list. "If we get five of that list, that would be a great result," he said. Boutiques at Fashion Island make up 5% to 10% of tenants, according to Dodd. The Irvine Co. looks for stores that have good brands, high sales and strong customer service, Dodd said. Other stores are found locally. San Clemente children's shop Mac & Madi came to South Coast Plaza earlier this year after one of the Segerstroms,owners of the shopping center,went to Mac & Madi to buy a birthday present. A leasing agent followed days later. The courting by malls is in part a necessity, said Mary Gilly, a professor who specializes in retailing at the Paul Merage School of Business at the University of California, Irvine. "In general, people have just become bored," Gilly said. Malls are homogeneous, she said. You see a lot of the same retailers no matter where you travel. "So what's the fun?" Gilly asked. Internet shopping has made buyers more accepting of smaller retailers, she said. Shoppers, particularly younger ones, flood the Internet looking for hidden gems and one-of-a-kind items, sometimes sold by some guy in his garage, Gilly said. "We've become more comfortable with a little more risk," she said. To keep shoppers intrigued, retailers are mimicking boutiques, signing up exclusive designers and manufacturers as a way of standing out, Gilly said. Take Isaac Mizrahi's line for Target and Martha Stewart's line at Kmart. Big Retailers Some boutiques are big retailers in disguise, said Les Morris, spokesman for Indianapolis-based Simon Property Group, which owns Brea Mall, The Shops at Mission Viejo, Laguna Hills Mall and Westminster Mall. Big retailers are launching boutiques to compete with upstarts, he said. Gap Inc. has started Forth & Towne, a store for women 35 and older. Abercrombie & Fitch Co. has Ruehl, which sells clothes for recent college grads.

In Costa Mesa, The Lab shopping center has nurtured boutiques for the past 14 years. Virtually every store there is a boutique. "Tenants are hand selected for the Lab," said Linda Sadeghi, who owns The Lab with her husband, Shaheen Sadeghi. "There are no corporate brokers bringing us national chains." It seems any shop owner would jump at the chance to move to a big mall, if only for holiday shopping season. But recruiting isn't so easy, Dodd said. A boutique owner or designer may not be savvy about mall retailing, he said. They may need wooing,follow-up calls, hand-holding. "It's harder than just calling up Starbucks and doing another deal," Dodd said. Anti-Mall Malls have another turnoff for boutiques,they are malls. Many boutiques have an anti-commercial bent to them, Dodd said. "They have a general aversion to the idea of being in a mall," he said. Boutiques cluster together so sometimes it's a matter of getting to know whom they hang with, he said. They'll tell you whom they want at the mall in order to attract them, Dodd said. They might say if Marc Jacobs signs on, they'll go in, he said. Opening in a mall is risky for a boutique. Rents typically are higher. The mall rolls the dice, too, according to Dodd. Small retailers lack real estate or design experience, he said. When a store is done, it might not live up to the "pretty pictures they show you," Dodd said. The Irvine Co. tries to minimize the risk by looking for boutiques with higher than average sales per square foot. "We're not looking to give up sales productivity for the benefit of having a better looking store," he said. "This is a business." The trick is figuring out which designer or boutique is going to be a hit. "Sometimes we get lucky," he said. "Sometimes it's good judgment." Sometimes it doesn't work out at all. Peterman Flop

Take catalog retailer J. Peterman Company Store, made famous on "Seinfeld." Officials from J. Peterman travel around the world and pick out the finest goods. They then write about them in the catalog. The idea seemed great for a store, Dodd said. So the Irvine Co. recruited J. Peterman to Fashion Island. "They built a nice store," Dodd said. The owners also had a great plan and good management, he said. "It was a major flop," Dodd said. "At the end of the day, it didn't resonate with the customers." The Irvine Co. points to Gary's Island, a men's store, and Traditional Jewelers as successful recruits, according to Dodd. It has high hopes for newcomer Lola Rouge, he said. "The expected sales performance is very high," Dodd said. Once a boutique opens at the mall, it's pretty much on its own. The goal isn't to nurture the boutiques to become big chains, Dodd said, though "it's always gratifying if they end up being a 100-store chain." The idea is to differentiate the mall from others, to have something no one else has. "At the end of the day it doesn't take a huge square footage to make it look like it makes a difference," he said.