Fahey: How Macy's, Kohl's might fit here

When the only indoor shopping mall in Beaufort County was razed in 2013, there was one lone survivor: Belk, the mall's 80,000-square-foot anchor.

The Southern-style department store sits in its same spot, but is now across from Shelter Cove Town Centre, the open-air development on Hilton Head Island that replaced the failed Mall at Shelter Cove.

In a time when some have questioned the continued success of the traditional department store model, not only has Belk thrived locally, residents say they'd like to have even more department stores in the area.

The Island Packet and The Beaufort Gazette recently asked readers which national retailers they wanted in Beaufort County. Three department stores made the top 10 list -- Kohl's, at No. 3; Macy's, at No. 4 and Dillards, at No. 9.

Readers who suggested more department stores did so for a variety of reasons, but for Debbie Cook of Bluffton, Macy's brands are a staple in her wardrobe.

She recalled shopping at Macy's in her hometown of Columbus, Ohio, and the convenience of having multiple stores in one place, usually an indoor mall.

"Everything in Bluffton is so chopped up," she said. "You have to travel to shop."

Traditionally, department stores such as Macy's, Belk and Dillards anchor indoor malls. And because indoor malls are no longer seen as the ideal format for shopping, department stores have struggled right along with them.

But Marianne Bickle, retailing department chairwoman at the University of South Carolina, says the future is bright for department stores if they evolve to keep pace with shoppers' changing tastes.

"Department stores are becoming incredibly creative," she said. "They're learning how to better serve the customer. They used to sell everything, and only in brick-and-mortar stores. But now they are evolving into lifestyle centers."

Belk and Jordan Marsh were the original anchors of the 240,000-square-foot Mall at Shelter Cove, which opened in 1988. At the time, it included tenants such as Banana Republic, Victoria's Secret, Express, The Limited and four restaurants.

But in the 1990s, the mall began to struggle. JCPenney replaced Jordan Marsh in 1991, which was then turned into a Saks Fifth Avenue in 1997. This was then downgraded to an Off Fifth outlet in 2004.

Off Fifth relocated in 2011 to the then-newly refurbished Hilton Head Tanger Outlet Center 1 in Bluffton. Shortly afterward, the property was sold and Blanchard & Calhoun signed on to develop the new center, which features a mix of local and chain retailers. The mall was demolished in 2013.

Open-air developments such as Shelter Cove and the Tanger Outlets are on trend for the future of shopping centers, especially in the Southeast.

"I think we will be seeing an expansion of retail operations," Bickle said. "It may be outdoor lifestyle malls. It may be very refined and beautiful strip malls."

At the helm of developer Blanchard & Calhoun, Shelter Cove Towne Centre and a new Buckwalter development in Bluffton, with a Kroger Marketplace anchor, are two outdoor malls in Beaufort County.

More are planned -- Okatie Crossing, a massive commercial development at the intersection of U.S. 278 and S.C. 170, is set to break ground in 2016. Buckwalter Crossroads is a 67-acre site planned for the intersection of S.C. 170 and Bluffton Parkway.

In addition to new developments, Bickle said existing strip malls are going to undergo facelifts -- much like Pineland Station's transformation into Sea Turtle Marketplace on Hilton Head.

But this doesn't mean the mall is dead, Bickle said.

It just means a new approach -- particularly in the Southeast.

From left, Mark Senn of Blanchard & Calhoun Commercial and Don Barnett, of Kroger, speak to the crowd as Hilton Head mayor Drew Laughlin sits in a demolition excavator during a gathering outside Shelter Cove Mall in November 2012 to announce the start of work on the mall's redevelopment. | Jay Karr/Staff photo

Shelter Cove Towne Center, photographed on Tuesday from the party deck of Poseidon restaurant, is increasingly becoming an hot spot for tourists and islanders alike. | Jay Karr/Staff photo

HEAVY COMPETITION

Much like grocery and big-box stores, department stores are introducing models that fit a new consumer.

"Department stores are thriving," Bickle said. "However, only the best ones survive."

Macy's recently announced the closure of up to 40 underperforming stores by early next year. At the start of 2015, the company was only planning to open three new locations: one in Puerto Rico, one in Florida and one in Hawaii.

It might seem as though Macy's is struggling, based on its store-closings-to-openings ratio.

But Bickle says Macy's CEO Terry Lundgren is using the company's money where it is prudent -- which could mean adding more locations of Macy's Backstage, the chain's outlet store model rolling out in six locations in the U.S. this fall.

"In my estimation, he is evolving the Macy's brand and putting resources where it makes the most sense," she said. "The locations (that are closing) no longer satisfy the target market."

Macy's Backstage and other department store outlets, such as Nordstrom Rack and Sak's Off Fifth, are typically anchored in open-air developments.

These stores target a new demographic and reflect a change in shopping methods as people are increasingly seeking discounts at outlets and off-price retailers instead of paying full price at standard department stores.

Another top-demanded retailer in Beaufort County is similarly shifting its focus.

Kohl's, based in Menomonee Falls, Wis., opened a test store this year in New Jersey built around selling returned, yet still like-new, inventory. Called Off Aisle by Kohl's, items are sold at a marked-down price and all sales are final.

Kohl's differs from Macy's in that it has always typically anchored outdoor shopping centers rather than indoor malls, but the focus on adding off-price stores in addition to its standard stores echoes other large department store chains.

Off-price retailers such as The TJX Companies Inc., which operates T.J. Maxx, Marshall's and HomeGoods, have seen ramped-up growth, more so than traditional department stores.

In fiscal year 2014:

• TJX opened 116 new stores and Kohl's opened four stores.
• Nordstorm opened 27 Rack stores and three standard Nordstrom stores. Nordstrom Rack sales increased 17 percent from the year prior and revenue totaled 40 percent of the company's profits, up from 30 percent.
• Dillard's opened two new stores.

In Beaufort County, TJX has a strong presence: there are two T.J. Maxx locations, one Marshall's and one HomeGoods.

Department stores such as Macy's, Nordstrom and Kohl's appear to be trying to cash in on the budget-conscious shopper, which is driving higher volumes of consumer traffic.

Bickle says this heavy competition is very positive

"Retailers can learn a lesson from department stores," Bickle said. "Competition is good in retailing."

Considering the slower growth of adding new, traditional stores from Kohl's, Macy's and Dillard's, it's not realistic to think we could get a standard department store from these companies in the near future.

But stores such as Macy's Backstage or Nordstrom Rack may eventually move into town, perhaps to directly compete with the Saks Off Fifth in Tanger Outlets 1.

"Department stores (should be) very, very close to their competitors," Bickle said.

Follow reporter Ashley Fahey at twitter.com/IPBG_Ashley.

Related content:

• Belk agrees to sell the company for $3 billion to Sycamore Partners, Aug. 24, 2015
• Shelter Cove wins economic development project of year, March 5, 2015

This story was originally published September 10, 2015 at 1:52 PM with the headline "Fahey: How Macy's, Kohl's might fit here."