In the era of the great department stores, it was standard practice for them to build large stores close to each other. They knew that each would do more business when customers could easily have competitive choices. Think Macy's and Gimbel's. This is also true of all the wonderful shopping streets in the world. Competitors sit side by side, delighting shoppers and rolling up high grossing sales for their merchants.
Today, however, this is not the philosophy of the giant enclosed mall owners. They want to maintain their monopolies and are fighting tooth and nail around the country to protect their turf and stop other centers, particularly outdoor lifestyle destination centers, from being built near their malls. This is a national trend, not just one happening in the Los Angeles metro area, although my company, Caruso Affiliated, has been the target of two of these mall owners.
The first attack quite surprised us since our experience at the Grove confirmed for us what the great merchants of yesteryear knew competition is not only good for the consumer; it is good for the retailer. Every business within a couple of miles of the Grove experienced tremendous growth and many new ones opened. At the Farmers Market, for example, sales doubled for most stores. And the City of Los Angeles tax revenues went up 65 percent from the area surrounding the Grove. This number does not include tax revenues from the Grove. Even the Beverly Center has benefited from customers flocking to the area. Moreover, homeowners in the surrounding neighborhoods have seen substantial increases in their home values.
Perhaps more damaging than preventing the consumer from having greater choice is the scars left on communities from nasty election battles the final resort of these large mall owners. Generally run by people in a distant city, these companies are willing to abuse the public process, thwart elected officials' decisions and divide communities by financing referendums to keep out competition even after the lengthy public process has been completed and all required approvals have been gained. This happened in Glendale when General Growth Properties turned to the ballot box after the City Council and Redevelopment Agency approved our Americana at Brand outdoor destination across from its enclosed Glendale Galleria. After we won the election, GGP challenged the city and us in the courts. This cost the City of Glendale more than $1 million. There was also the personal cost of neighbor versus neighbor. Further, the Galleria's actions engendered ill will for its retailers because many locals vowed never to shop there again.
Now it's d & #233;j & #341; vu all over again in Arcadia. Just recently, the Arcadia City Council and Planning Commission unanimously approved a Caruso outdoor dining and retail center the Shops at Santa Anita designed for the south parking lots of the historic Santa Anita Park horseracing track. This unanimous vote followed two years of a public process that included hundreds of community meetings, significant changes to the center based on the community's input, and millions of dollars in design and legal work.
Create a foundation
From day one, Westfield, which owns the neighboring enclosed mall, pursued an expensive campaign to derail our center. Now we fully expect an election challenge. Who benefits? No one but the lawyers and political operatives who will wage this expensive war between our companies. And, it is simply bad business. As General Growth's current course of action shows, our center located next to its Galleria will be good business for both. Not one tenant has left the Glendale Galleria to move across the street to our center. And the Galleria is upgrading its property to better compete with us. The result: Glendale will have a new, vibrant shopping district with our Grove-like destination, a more appealing mall next door, and rivers of sales tax revenue from both.
On April 16th, I sent Westfield Chairman Frank Lowy a letter suggesting that we both lay down our arms and work collectively to benefit Arcadia. Instead of spending millions on legal challenges and a nasty divisive political battle, let's take the anticipated costs of such a fight $5 million each, $10 million total and create a Community Foundation that would be controlled by the City of Arcadia to spend as it wishes for libraries, schools, parks or other important city programs. Naturally this benefits our company because we can start construction immediately and get our center open. But we know it also benefits Westfield because we will bring new customers to its doors. And it benefits the city because new tax revenues will flow in sooner and it will have a foundation with an endowment that it can count on for years to come.
Let's take a lesson from Macy's and Gimbel's. Competition still pays off for the customer and it is still good business.
Rick J. Caruso is founder and chief executive of Caruso Affiliated.
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