Stores' short moves pay off

Just across the way can be where the shoppers are lurking

Jumping with Giant

`It's a lot easier than moving into a brand new area'

March 31, 2002|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

For retailers, the grass may be greener just across the street.

Mass discounters such as Wal-Mart Stores Inc. and grocery chains such as Giant Food Inc. use store relocations in their existing markets as a way to increase visibility and sales.

In some cases, companies close one store and move to a newer, larger store right across the street. In others, a retailer's customer base has moved farther away as suburbs expanded, and moving a store a few towns over is a way to keep up with the shift.

Either way, it's all about staying ahead of the competition and getting a good deal on a bigger store space in which to sell more goods.

"Even a couple blocks away can make a big difference," said Steven C. Baumgarten, an equity analyst who covers big-box and discount retailers for Parker/Hunter Inc. of Pittsburgh. Relocating is "a way of keeping your stores new and modern-looking when you put up a new store. ... It's a lot easier than moving into a brand-new area and having to do mass advertising to get people into your store."

Retailers are "constantly re-evaluating vacancies in the marketplace, or ways to improve their location, be it through a larger store or better visibility," said Howard Makler, chairman and chief operating officer of Excess Space Disposition Inc., a firm that is marketing more than 20 million square feet of surplus space for lease or sale nationwide.

Take Giant Food Inc. This year, the Landover-based company will open 10 stores, but four are relocations. In Maryland, the chain is closing small, older stores in Bethesda, Rockville and Baltimore, and moving virtually across the street to new, bigger locations. In Rockville, Giant will close its store on North Washington Street and move across the street to a new store on the former site of a Hechinger's.

In bigger stores, says Giant spokesman Barry F. Scher, "we are able to present more products, newer merchandising trends, like more prepared foods, than we could in an older location. So it gives us an opportunity to build upon the business we have at a current site and an opportunity to attract new customers with a new, larger and better-merchandised store."

Sears, Roebuck & Co. followed a similar strategy with its recent moves in Maryland. Last week, the retailer opened three full-line department stores in the state, but two were relocations. The company, which has about 870 stores, moved from smaller, older stores in Hagerstown and Annapolis to more visible, busier regional malls. It nearly doubled its square footage in the moves, and added a combined 140 employees.

"It's just the Darwinism of retailing," said Thomas H. Maddux IV, president of the commercial real estate firm KLNB Inc., in talking about Sears' new Maryland stores, including its first Harford County store, at Harford Mall in what was once a Ward's. "Harford County really wasn't a significant trade area up until the last five or 10 years," he said. "Everybody's there now. Retailing follows the residential population."

A trend among chains

Sears isn't alone in refining its place in its existing markets. Other big retailers also are on the move:

Wal-Mart's plans this year include the opening of 50 discount centers and 180 to 185 Supercenters; 110 to 115 of the Supercenters will be relocations or expansions.

Fast-growing Target Corp. in the first three months of this year opened 32 stores, four of them relocations. The retailer plans to open 110 stores this year.

In its last fiscal quarter, which ended Feb. 1, Lowe's Cos. Inc., the world's No. 2 home improvement retailer behind Home Depot Inc., opened 16 stores that included three relocations.

"Our first preference is to expand where we are ... and that's really contingent upon our property owners," said Wal-Mart spokesman John Bisio. "Otherwise, that leaves us with the option of having to relocate, and generally we'll try to relocate down the road from our site because it just makes sense for us to do that for the convenience of our customers."

Biggio said Wal-Mart is trying to upgrade some of its discount stores into Supercenters, which are bigger (109,000 to 220,000 square feet) and sell more products, including groceries.

"I think of the Supercenters that we've opened in the last five or six years, about 70 percent are stores that we've expanded or relocated within the community," Biggio said.

Said Howard Davidowitz, chairman of national retail consulting firm Davidowitz & Associates Inc. in New York: "[Wal-Mart's] main strategy is relocation. How common is this? Very."

Nationwide, the amount of total leasable retail space in the nation grew from 10.59 billion square feet in 2000 to 10.81 billion square feet in 2001, according to Boston-based Property & Portfolio Research LLC, an independent real estate research and forecasting firm. That figure is all-inclusive, from big-box and free-standing stores to strip centers and malls.

The firm forecasts 2 percent growth this year to 10.99 billion square feet.

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