Shopper’s Paradise : Hawthorne Boulevard Is Retailers’ Road to Riches

Hawthorne Boulevard may not be an elegant shopping street like Rodeo Drive in Beverly Hills, but it is the center of one of the strongest retail areas in the United States.

It has attracted so much retail development, in fact, that some mall operators and store owners complain of a glut.

But as they start tallying up the past year’s receipts, most retailers and several market analysts say the South Bay’s economy is strong and there is enough business to go around.

“Few people realize that Hawthorne Boulevard has one of the highest retail volumes of any street, probably in the world,” said Steve Deming, senior consultant for Coldwell Banker Commercial Real Estate Services in Torrance.

Hawthorne Boulevard “is a spectacular area for retail,” said Steven Soboroff, whose UCLA Extension conference, titled the “Shopping Center Game,” was attended by about 1,400 retailers and developers a few weeks ago at the Los Angeles Airport Marriott hotel.

Five regional malls are located along a 10-mile stretch of Hawthorne Boulevard, and many major retailers have free-standing stores on the boulevard.

Malls clustered along the boulevard are Hawthorne Plaza, the Galleria at South Bay, Del Amo Fashion Center, the Courtyard Mall and Peninsula Center/Peacock Alley, plus the smaller Old Towne Mall. Scattered throughout the area are three other regional malls--Manhattan Village Shopping Center, the Carson Mall and the Fox Hills Mall, which also serves the Westside. A regional mall is usually defined as one with at least 200,000 square feet of retail area and at least one department store.

“I would hazard a guess that if you compared (the South Bay) with other areas you would find more major regional and sub-regional shopping centers here than anywhere else in the country,” said Richard G. Funke of Sierra Management Services, which operates the Peninsula Center in Rolling Hills Estates.

“In my opinion, there is a glut of shopping centers in the South Bay area,” he said. “For each one to be successful it has to have its own niche in the market, providing its customer with something the others don’t.”

For example, Peninsula Center/Peacock Alley has boutiques catering to wealthy residents of Palos Verdes Peninsula, while stores at Carson Mall and Hawthorne Plaza tend to appeal more to price-conscious families.

The South Bay is “incredibly over-retailed,” said Margo Heltzel, marketing director of Manhattan Village Shopping Center. “We are not only in competition with other shopping centers, but with every other retailer lining the boulevard between here and the ocean.”

Hawthorne Boulevard, which some call the Main Street of the South Bay, attracts retailers because it provides access to the area’s generally affluent population of more than 1 million, analysts said. An eight-lane commercial thoroughfare, it is one of two principal routes from Palos Verdes Peninsula to the San Diego Freeway. A huge volume of commuter and shopper traffic--estimated at 45,000 cars a day--makes the boulevard an ideal location for retail businesses, Deming said.

The boulevard has a schizophrenic ambiance that ranges from dowdy to trendy, with an array of fast-food restaurants, furniture stores, appliance centers, discount clothing outlets, bowling alleys, automobile dealerships, major shopping centers and high-end fashion retailers such as Nordstrom.

One might think malls like Del Amo, the Courtyard and Peninsula Center would suffer from lack of freeway access. But the isolation of much of the South Bay from freeways provides the malls with a “captive audience” of shoppers, according to James A. Jones, president of Torrance Co., which owns Del Amo.

According to information on selected cities prepared by Market Statistics, a New York-based demographics research company, the median disposable income for households in many South Bay communities is well above average for Southern California. The firm reported that the 1986 figures for Torrance ($37,804), Carson ($37,423), Redondo Beach ($34,737) and Hawthorne ($27,382) exceeded the $27,017 median for the Los Angeles-Long Beach area, while Inglewood’s median income was $23,216.

A 1986 survey conducted by Los Angeles Times Marketing Research found that the median income of households shopping at the Galleria at South Bay was $43,666; Del Amo Fashion Center, $40,746; Fox Hills Mall, $35,721, and Hawthorne Plaza, $28,500.

‘Staggering’ Volume

Sales volumes in the South Bay are “staggering,” according to Dean Stoecker of Market Statistics. Although the City of Torrance is ranked about 25th statewide in population, it ranks eighth in retail sales, he said.

Developers look closely at market potential before investing millions in a shopping mall, said Bill Recknor, general manager of the Galleria. They build or expand a mall “because their research shows there are dollars to reach in a community,” he said.

Recknor said the Galleria’s specialty stores expect to show an astonishing 41% sales increase in 1987 over 1986, which was its first full year of business. He attributed the expected increase to a new mix of retail tenants at the mall. The shopping center is forecasting a sales volume of more than $200 million for 1987, he said.

According to Times marketing research, 1986 retail sales at the eight South Bay regional malls totaled more than $978 million, roughly one-seventh of the $6.6 billion for 61 shopping centers in Los Angeles and Orange counties. Del Amo topped all Los Angeles County shopping centers with $378.5 million in sales in 1986. It was second in Southern California only to Orange County’s South Coast Plaza, which had $488.9 million in sales, according to Times research.

Department stores and chain stores on Hawthorne Boulevard often are among the top revenue-producers in their companies, retail analysts said.

According to Women’s Wear Daily, the May Co. at the South Bay Galleria placed second in the 35-store chain in 1986 with $43 million in sales, topped only by the store located at the South Coast Plaza, which generated $44.4 million in sales.

Broadway at Del Amo ranked second among the chain’s 44 Southern California stores in 1986, with a total of $43.4 million, second to the Glendale Galleria store’s $48 million, Women’s Wear Daily reported.

Sears at Del Amo has a higher sales volume than any store in the entire chain except the one at Ala Moana Shopping Center in Hawaii, according to Deming of Coldwell Banker.

The Circuit City store on Hawthorne Boulevard is among the chain’s top three in sales nationwide, with an unheard of $1,000-a-square-foot ratio of annual sales to store space, Soboroff said. “Hawthorne Boulevard is for retailers the best street in the state of California” in sales volume, he said.

Some companies have even located more than one store on the strip. Mervyn’s, for example, has one store in the South Bay Galleria and another a few miles south near Sepulveda Boulevard. “It is extremely unusual for a department store to locate two stores within such a short distance,” Soboroff said.

Several retailers have multiple locations in the mammoth Del Amo Fashion Center, which has 2.6 million square feet of leasable space and is the largest enclosed mall in the United States.

(The world’s largest is the West Edmonton Mall in Canada, which has 5-million square feet of space, 11 department stores, 836 shops, 110 restaurants, 20 movie theaters, an ice hockey rink, an 18-hole miniature golf course, a roller coaster, a 600-foot water slide and a 2.5-acre artificial lake.)

Because Del Amo attracts so many shoppers, Hickory Farms operates two stores there year-round and a third during the holiday season, according to franchise owner Harry Grayson.

Hickory Farms at Del Amo ranks sixth in sales among the chain’s 500 stores, and the 1,000-square-foot holiday store at Del Amo is No. 1 in the satellite-store category, he said.

While Grayson sings the praises of Del Amo and its ability to attract shoppers, owners of small businesses who must compete against the giant retailers say it’s a struggle to survive.

According to Times market research, department stores grab the lion’s share of revenues generated by malls. In 1985, for example, department stores represented only 3.3% of retail units in 15 Southern California shopping centers, but generated 60.3% of the total taxable retail sales.

Asked what he thought about the profusion of malls and stores in the South Bay, the manager of a men’s clothing store in Del Amo shrugged and said: “Too many.”

“The competition is very tough,” added Gus Garcia, manager of the Domani menswear store. It is not easy for a small store to carve out an identity for itself in a huge mall like Del Amo, with seven department stores and 340 specialty stores, he said.

Exacerbating the competition is the location of similar businesses close to each other, store owners said. For example, Footlocker, Payless and Thom McAn shoe stores are located side-by-side in Del Amo, with Kinney’s directly across the way.

“The mall owners and managers are kind of like madams in a brothel,” said Douglas J. Miguel, manager of Hatfield Jewelers at Del Amo. “They don’t care how many stores they have working for them or how many shops of a similar type, as long as they do business,” he said.

Specialization Pays

To increase their chances for success, small businesses must specialize and avoid competing with large, experienced discounters, said Robert Bearson, a specialty store retailing consultant for a number of South Bay malls, including Del Amo.

Even the mighty Del Amo felt the effects of competition when Nordstrom and the renovated South Bay Galleria opened in 1985, Jones said. “We didn’t go down in sales volume, but our sales were flat or just even with inflation,” he said. “We did not get the growth in sales we would have expected.”

Del Amo’s 1987 sales through October were up about 5%, slightly ahead of inflation, with the all-important Christmas shopping season yet untallied, Jones said.

Officials at other South Bay malls said their sales were also hurt initially by the Galleria’s opening, but added that the market has stabilized somewhat as the Galleria’s newness has worn off.

Good Investments

In spite of strong competition, shopping center development and redevelopment projects are strong investments, speakers said at the UCLA Extension conference. Other kinds of commercial development, such as offices, can be riskier due to periodic high vacancy rates, they said.

Keith H. Karpe of Grubb & Ellis Co. said in an interview that the office vacancy rate is 17% in the Los Angeles Basin. By contrast, he said, the vacancy rate for retail space in Los Angeles is only 5% to 7%, with regional malls showing vacancy rates below 5%.

Speakers at the UCLA conference expressed confidence in retail developments as investments.

“Shopping centers--due to pre-leasing, long-term lease commitments and historically low vacancy rates--have proven over and over, through long periods of time, to be the safest development product in existence,” said Jerry Kramer, architect and head of the shopping center division of Nadel Partnership in West Los Angeles.