Bloomingdale’s Will Take Its Hip SoHo Prototype to California

Originally posted in Shopping Centers Today on December 2008
Written by Kimberly Tchang

Export SoHo beyond New York City? Bloomingdale’s says it’s possible. Nearly five years after launching its scaled-down, super-chic SoHo boutique, in lower Manhattan, Bloomingdale’s is expanding the concept. The company plans to open two more SoHo stores, one at Santa Monica (Calif.) Place in 2010, and the other at Georgetown Park, in the Georgetown district of Washington, D.C., in 2011.

SoHo offers a tightly edited assortment of men’s and women’s apparel, accessories, denim and cosmetics, all with a contemporary, high-fashion edge. In its attitude and direction, the store targets the trendy 20-to-30-something set. And unlike the typical full-line Bloomingdale’s department store, which measures about 200,000 square feet, SoHo measures a mere 80,000 square feet. In retail, at least, it seems that sometimes smaller is better.

“Part of the allure of SoHo is not just what we carry, but what we don’t,” said Charles Anderson, Bloomingdale’s senior vice president and director of stores. “It creates a very pointed assortment for the customer, and in many ways it’s the best of Bloomingdale’s.”

If Bloomingdale’s uptown flagship store is more old-school, showcasing everything from apparel to housewares and linens, then SoHo, with its smaller footprint and edgier appeal, has emerged as something of a sassy, super-hip little upstart. Yes, the store features top brands like Free People, Seven For All Mankind and True Religion. But there is also more flexibility on the retail floors there to try out such up-and-coming lines as Abaeté, Elizabeth & James, Junya Watanabe and Kitsuné.

“SoHo has become a laboratory,” said Anderson. “We’ve been able to try smaller designers, new ideas, and very often they become the inspiration for ideas that can be translated to our mainline stores.”

Analysts seem to agree. “It’s a little hipper than the core [Bloomingdale’s] offering,” said Kelly Tackett, a senior consultant and the lead soft-goods analyst at TNS Retail Forward, a Columbus, Ohio–based management consulting and market research firm. “They’re focused on a couple of different categories, and they have more of a contemporary bent to it, in terms of the brands and styles offered.”

The idea of a department store trying out a smaller, boutique-style format is nothing new, of course. Both Barney’s Co-Op, with 18 stores, and Neiman Marcus’ Cusp, which has three stores, also use trendy brands to cater to a younger crowd.

There is a reason these stores have developed a following, analysts say. It is because consumers find them easier to shop, preferring a smaller, more nuanced assortment to the sometimes overwhelming options of larger retailers.

“There’s a pushback onto big stores that offer everything — it’s almost too much hoice,” said Candace Corlett, a partner at WSL Strategic Retail, a retail consulting firm in New York City. One of her firm’s surveys asked respondents how they felt about going to stores that offer one-stop shopping. “One-third likes it a lot,” Corlett said, “but two-thirds are on the fence about it.”

Macy’s Inc., which owns Bloomingdale’s, will not divulge any numbers, but Anderson says SoHo’s average unit retail is higher than that of traditional Bloomingdale’s stores. That, he says, is a function of the concept’s tightly focused offerings. “The [SoHo] assortment is more upscale,” he said. “We’ve really pushed the envelope there. Our mainline stores have a larger presence of better sportswear business.”

Though there is definitely a young fashion customer for SoHo outside of New York City, sources say this is not a concept that will play just anywhere. Both the Santa Monica and Georgetown locations were chosen in part because they are strong contemporary markets, Anderson says. “They’re both very dynamic, and vibrant with youth,” Anderson said. “They also tend to be in areas that have other interesting things happening: entertainment venues, other retailers, and things that will bring in foot traffic.”

The SoHo store set to open at Santa Monica Place will be part of that center’s transformation from an enclosed mall to a high-fashion, open-air lifestyle center. The 105,000-square-foot SoHo will take over what is currently a Macy’s store. “With SoHo, they’ve achieved a store concept that offers well-appointed venues for very special fashion lines,” said Randy Brant, executive vice president of real estate at Macerich, which owns Santa Monica Place. “It comes across as having designer shops within shops.”

The third SoHo store, an 82,000-square-foot, three-level space, will be an anchor at Georgetown Park, which is also being renovated into an upscale urban fashion destination. “Georgetown is ready for high fashion,” said Ben Miller, president of Western Development, which owns Georgetown Park. “We’re taking a giant leap forward and making Georgetown Park a fashion and boutique destination for Washington, with SoHo as the anchor.”

Macy’s is also rolling out several more traditional Bloomingdale’s stores. The company’s first Arizona store will open next fall in the new CityNorth development, in Phoenix. A 150,000-square-foot, three-level store is to open at Westfield Valley Fair, in the San Jose–Santa Clara area of California, in the fall of 2011.

Bloomingdale’s first overseas store will open in February 2010, at The Dubai (United Arab Emirates) Mall. The mall will contain two Bloomingdale’s stores: a three-level, 146,000-square-foot, apparel and accessories store, and a one-level, 54,000-square-foot home store.

Why the focus on Bloomingdale’s now? “They’re shifting some of the real estate emphasis to the stronger Bloomingdale’s concept,” said Tackett. “Bloomingdale’s certainly has been doing a bit better than Macy’s over the past two years. Bloomingdale’s has really tried to turn around their business, and they’ve largely been successful. They’ve increased their emphasis on hot categories, such as contemporary apparel, growing off of a relatively small store base, just 40 stores in 11 states.”

Macy’s, by contrast, like other traditional department store chains, has been hurting. In October Macy’s lowered its estimate for fall same-store sales, saying it expects them to drop about 3 percent to 6 percent, worse than the previously estimated 1 percent decline. The company’s same-store sales for August and September combined fell 5.8 percent.

This might not seem the most logical time to be expanding a luxury brand, with the U.S. in financial disarray, though it may represent the long view. Analysts are predicting slow going for the next year or two, with a possibility that retail sales will pick up again sometime around 2010.

“[SoHo] will open as we’re beginning to cycle out of the retail challenges we’re having now,” said Ken Nisch, chairman of JGA, a Southfield, Mich.–based retail brand and design consulting firm. “So actually, their timing will be slightly early to brilliant, if everything happens right.”

Still, SoHo’s expansion pace will not increase, even once the economy does turn around. “We’re not looking for any type of dramatic rollout,” said Anderson. “SoHo is a one- or two-at-a-time proposition, no more than that. Bloomingdale’s may be a big, iconic name, but we still have just 40 stores.