High-end retailers change strategies to attract sales

Wednesday, Dec. 26, 2001 | 9:54 a.m.

At Las Vegas' upscale shopping malls, there are signs -- literally -- of a struggle to attract customers.

"All Gucci on sale, 20 percent off;" "Versace 30 percent off;" "50 percent off Lillie Rubin; " "25 percent J. Crew sale."

The post-holiday sales started early; the merchants discounted goods well before Christmas to get shoppers in the door.

That's one of the tactics some of the Las Vegas luxury retail stores are using to survive a downturn that had its roots in the Sept. 11 terrorist attacks.

Mall executives at the Fashion Show, Via Bellagio, the Forum Shops at Caesars, the Canal Shoppes at the Venetian and Desert Passage at the Aladdin hotel-casino knew there would be trouble when Asian guests quit coming. Travel from Japan has been off between 40 percent and 50 percent, according to some estimates.

Japanese visitors are traditionally big spenders at the malls when they visit Las Vegas on their vacations, but many of them canceled their trips after terrorists hijacked and crashed four airliners on American soil.

George Connor, senior vice president of retail resort properties for Colliers International in Las Vegas and an expert on retail trends on the Las Vegas Strip, said the downturn in tourism by Asian visitors is a key factor in luxury retail being off -- but not the only factor.

In addition to there being fewer free-spending Asian tourists in the malls, resorts are attracting more bargain hunters than high-rollers -- a phenomenon gaming analysts also have said is responsible for reduced casino revenues. In an effort to attract customers to the hotels, resorts have lowered their room rates. And, as a result, they're getting bargain hunters that want a taste of luxury, but who won't pay for expensive meals or shopping trips.

The stores are seeing a downturn because they're filled with people who don't spend as much.

"The extremely wealthy are not going to be affected," Connor said. "The middle class and the upper-middle class is where you see a lot of change in spending habits. Those are the people who are more inclined to put off the purchase of a major expenditure."

And then, Connor said, there are some of the wealthy that have gone to the stores who simply are feeling conflicted about spending. Some have the means to spend, but have seen their investments take a hit in the last three months. Others simply aren't sure it's appropriate to spend on themselves when the rest of the nation is hurting.

"We're definitely seeing a void in the area of the international customer," said Maureen Crampton, director of marketing for the Forum Shops at Caesars. "That (Japanese) demographic spends three to five times what the average domestic customer spends. When you lose that, you really notice the difference."

But Crampton and Fred Walters, general manager of the Canal Shoppes at the Venetian, say Las Vegas retailers saw the potential for disaster as soon as it became clear that Asian visitors were going to stay home. Both malls reacted quickly before the damage became too severe.

Crampton said the Forum Shops pumped additional advertising into domestic markets.

She said in the fourth quarter, the mall spent "several hundred thousand dollars" in print advertising in Southern California and in broadcast spots on stations that can be received while on the highway from California to Las Vegas.

Walters said the Canal Shoppes introduced a successful incentive program -- shoppers who had $500 in same-day receipts at mall stores received a $75 gift package from the Sephora fragrance store and $35 in "spa bucks" that could be used at the resort's Canyon Ranch Spa.

Walters said the promotion has been so well received that the mall may extend it through Valentine's Day.

Other mall stores have used different tactics to head off the Asian downturn. Burberry, a clothing and fragrance store that has relied heavily on Asian tourists, for example, went to work marketing local customers to pick up the slack.

The sales, he said, are another tactic.

"We're seeing a lot of what are usually post-holiday offers out in the stores now," Walters said.

But not all the stores have been survivors.

A month to the date after the September attacks, the popular Duty Free Store closed its doors on the Las Vegas Strip. Bisou Bisou, a contemporary sportwear store, closed stores in the Fashion Show and the Desert Passage. Manrico Cashmere USA Inc. closed its Desert Passage store after it failed to draw the traffic owners thought they were going to get.

Nationally, some of the biggest names in luxury retail are suffering. Gucci reported in September that its 2001 earnings per share were going to come in at $2.60 instead of the $3 forecast.

Paris-based LVMH, parent company for stores with the Louis Vuitton, Christian Dior and Donna Karan labels, said October sales fell 5 percent.

Upscale jeweler Tiffany reported a 10 percent decline in third-quarter year-over-year sales. And Waterford Wedgewood reported September sales dropped 15 percent year over year and that the company was laying off 1,400 people.

Crampton, Walters and representatives of the Fashion Show said no more closures are on the horizon and retailers haven't sought lease rate concessions.

Mary Olson, store manager of the Louis Vuitton at the Fashion Show, said the company's Las Vegas stores "got the double whammy" because they not only had to endure the pressures of a weak economy domestically, but they also had to deal with the reduction in visits by Asian tourists.

"We used to get a lot of tour groups, but that is way down," Olson said. "Different markets (within the company) are affected more than others. In Los Angeles, San Francisco and here, we're feeling the crunch. But in the Midwest, Chicago and New York, of all places, where there's not so much dependency on the Asian market, numbers are way up."

Olson said stores at the Fashion Show only have to hold on for another year because in November 2002, "we get a whole new mall."

She was referring to the Howard Hughes Corp.'s 840,000-square-foot, $300 million expansion of the mall that will add Lord & Taylor, Bloomingdale's Home and Nordstrom stores as anchors and expand five existing anchor stores.

Each mall, in fact, has its own highlight reel of silver linings.

The Fashion Show has its big expansion; the Canal Shoppes are still riding the wave of the opening of the Guggenheim and Hermitage art galleries that have kept a big-spending clientele coming through the doors of the mall.

The Forum Shops still remain the most successful retail mall in the United States with annual sales of $1,200 per square foot per year for the 12 months ending in October.

"Realistically, we're expecting that to go down slightly when we get November's numbers," Crampton said. "But every year, we're amazed by the volume of people who come through. The traffic is phenomenal."

Louis Vuitton's Olson said volume is what makes the company's Forum Shops store more successful than the Fashion Show store, which relies more on local shoppers and is less susceptible than the Forum Shops to factors like the Asian downturn.

Crampton said for competitive reasons she could not disclose traffic volumes at the mall, but in previous years, it has averaged around 40,000 to 50,000 people a day.

archive