Retail Roundtable: Is Downtown struggling?

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October 25, 2004 // UPDATED 4:27 pm - April 25, 2007
By: Sarah McKenzie
Sarah McKenzie

Is Saks Fifth Avenue's pending departure a bellwether of Downtown retail's health?

The fashion-concious Gaviidae Common anchor's January closing has raised concerns about the shopping scene's vitality.

Some retail observers, however, paint a more optimistic picture and predict new stores catering to Downtown workers and residents who value convenience and good deals.

For instance, City Center, one of Downtown's largest and least-filled shopping centers, is in the midst of a major overhaul to attract a new breed of stores focused on basic services.

Andrea Christensen of Colliers Turley Martin Tucker, a commercial real estate firm, is assisting the City Center makeover, which should be visible by year's end. Christensen (pictured on the cover) said repositioning is needed.

"There are 180,000 people Downtown on a daily basis, and they will continue to shop Downtown -- but is the mother of three who lives in Blaine going to come and shop on a regular basis?" she said. "I think people are looking for things that they can buy during lunch hour where they can get in and out quickly."

Mayor R.T. Rybak said Saks' departure should inspire community and business leaders to launch a new marketing campaign to attract retailers serving Downtown's workers and residents.

"What you're seeing in Minneapolis -- one of the strongest downtowns in the country -- is the reinvention of Downtown retail. We don't need to imitate 5th Avenue, nor do we have to imitate outlet malls, or suburban strip malls. This is a unique climate," he said.

As for Saks, Rybak doesn't believe the closing signals bad things for Downtown retail.

"I don't think people should read one thing into Saks' departure beyond the fact that they underinvested in their store and did almost no marketing. They got pretty much what they gave, which was not much," said Rybak.

He added that Downtown is well served by other high-end retailers, such as Marshall Field's, 700 Nicollet Mall, and men's clothier Hubert White, 80 S. 8th St.

"Retail is organic -- it changes and, in the best sense, evolves to meet the market," Rybak said. "There has been a big change from the 1980s when we were on our knees begging people to be retailers here and now when we have 30,000 people living here, 165,000 people working here, and an extremely strong convention and visitors business."

Rybak's retail wish list includes a grocery store, an electronics store such as a Best Buy, and outdoor sports stores such as REI or a running store. He said at least three grocery chains are taking a hard look at the market.

Rybak also wants the business community to do more for smaller, independent businesses threatened by condo-boom gentrification.

"We need to protect fiercely the small, unique, one-of-a-kind businesses like Shinder's and Let it Be Records so that Downtown is unlike any shopping center. It's a one-of-a-kind place," said Rybak, a former leasing agent for the Downtown Council. "We need someone who goes out, beats the bushes and acts like a super-leasing agent for this whole shopping center called Downtown."

Independent retailer Nate's Clothing, 27 N. 4th St., is one of those unique places that has survived and thrived as family-run business for 87 years.

Nate's owner Alan Witebsky said the men's clothier has seen high sales in recent months, largely because of Target's recent decision to ditch business casual. "I just think Downtown is still a good area. It's definitely good for shopping," he said.

Nate's has also seen an influx of new customers who live along the riverfront.

"There's definitely more excitement in the business. With a lot of people moving in the Downtown area, it's going to bring Downtown shopping back," he said.

Others haven't seen business pick up.

Ben Horn, owner of the Warehouse District Finnish design showroom, FinnStyle,

115 Washington Ave. N., said the condo boom hasn't helped his bottom line yet.

Minneapolis Retail Analyst Jim McComb, a frequent Saks customer, said several factors have fed the high turnover, including the Mall of America's 1992 opening and Minnesotans' affinity for casual wear.

"Prior to 1992, Downtown Minneapolis was the largest shopping area in the upper Midwest, and it was the place to come if you were looking for something special and unique. It was the best shopping location," McComb said.

Nicollet Mall has said goodbye to several retailers in the past several years, including The Conservatory, an upscale shopping center, City Center's Carson Pirie Scott and its successor Montgomery Ward.

McComb said retail has steadily declined Downtown while new restaurants and skyway eateries appear to be on the increase.

"[Downtown's] position in the market was eclipsed by the Mall of America, and it never found another niche. You then have to figure out how to survive as number two, and I didn't see that happen in Minneapolis," he said.

McComb also cites Minneapolis tastes.

"This is a difficult market for fashion department stores. I think part of is that we have a very casual lifestyle here -- second only to California in the level of casualness in our lifestyles."

David Brennan, a University of St. Thomas marketing professor who worked at Target Corp., said Downtown retail changes are consistent with changes throught the Midwest.

There's more demand for discount retailers, such as Target, Marshalls and Kohl's, he said. Saks may bring its mid-priced Herberger's chain to fill its Gaviidae space, and will keep its dicount Off Fifth outlet.

"Consumers are looking for places where they can get the same goods for less," Brennan said.

The trend bodes well for Downtown big-box retailers, such as Target's 900 Nicollet Mall store.

Christensen, City Center's consultant, said Target's sales have been way above projections. Shoppers, however, have different habits Downtown than at suburban Targets.

"It's outside the box for [the corporation]. When I got out to the suburbs, I'm going in and buying $100 worth of stuff. When I go into the Target Downtown, I'm buying $50 worth of stuff, but I'm going more regularl," she said.

Despite Target's success, Downtown's retail market continues to get weaker each year, Brennan said, citing holiday spending surveys collected by St. Thomas.

"Each year, the Downtown area of Minneapolis has declined -- not as rapidly as St. Paul, but more than the regional malls," he said.

The Downtown Council wants to change that trend. For instance, its TCF Holidazzle Parade gets glitzier each year and draws more than 500,000 spectators.

The parade offers "hot seats" in a heated, covered grandstand for those who spend at least $150 at Downtown stores.

The "hot seats" sold out the first week of December in 2003, said Lisa Dinndorf, the Council's director of marketing and special events. All told, "hot seat" spectators spent $375,000 Downtown in 2003.