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Why ‘upscale’ is still elusive - El Paso Inc.: Local News

Why ‘upscale’ is still elusive

Challenges in bringing high-end retail to El Paso

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Posted: Sunday, September 15, 2013 6:00 pm | Updated: 12:05 pm, Mon Sep 16, 2013.

When local billionaire businessman Paul Foster partnered with Dallas-based developer West Miller more than five years ago to replace a crumbling warehouse with a high-end shopping center, many hoped the project would attract the luxury brands the city had long lacked.

El Pasoans sent tweets, emails and Facebook messages to the developer pining for stores and restaurants like Pottery Barn, Crate & Barrel, Cheesecake Factory, Dave & Busters, Trader Joes, Nordstrom, J. Crew and IKEA.

Miller, president of Centergy Retail, has been selling the center for six years now. Like others who have been trying to court high-end retailers for a long, long time, he touts the El Paso region as one of the fastest-growing metropolitan areas in the nation and the largest international metroplex in the world – with a 50-mile radius population of 2.2-million people.

That is larger than Denver, Austin or San Antonio, cities that have Whole Foods, Neiman Marcus, Tiffany, Cheesecake Factory and the like.

But next month, the half-mile long shopping center named The Fountains at Farah opens near Cielo Vista Mall on the Eastside. It will have many stores that are new to El Paso, but no luxury brands.

So why does it remain so difficult to recruit high-end retail to El Paso?

National retail consultants, who are beginning to notice El Paso, say there is a significant opportunity in El Paso some retailers are missing because of the region’s isolation and the complexity of the market – with its international border, a military base the size of Rhode Island and unique border culture. Household incomes also remain low, although they are rising.

“The challenge is that retailers tend to be birds of a feather; you have a flock mentality. When they look at a particular market, the first thing everybody asks is: Who else is there?” said Neil Stern, senior partner at McMillan Doolittle LLP, a global retail consulting firm based in Chicago.

In the high-end strata of the retail market, the answer for El Paso is: not many.

One of the few exceptions is Apple Inc., which opened one of its coveted stores at Cielo Vista Mall exactly two years ago this week. At the outlet mall on the Far Westside, there are Coach, Johnston & Murphy and Brooks Brothers outlet stores.

“The trend is definitely in your favor. These retailers need to grow, and as they start to run out of the traditional or easy places to go, they are going to start to look for new places,” Stern said of El Paso and high-end national retailers.

Purchasing power

Miller, who has been building relationships with national retail chains for 30 years, said his team’s best retail recruitment tool has been the sales generated by the center’s competitor next door, Cielo Vista Mall. It’s among the top five malls in Texas in sales per square foot, according to Miller.

After six years trying to sell El Paso to retailers, Miller concludes: “We all need to work together – economic development officials, the chambers of commerce, universities – to find better information to prove the purchasing power of the region.”

For example, it is hard to obtain quality demographic information for the Mexican market, he said, and then to demonstrate to retail chains the significant impact Mexican shoppers have on the El Paso retail market.

Recruiting new tenants to the Fountains center often required convincing company executives to visit El Paso to see the market in person, Miller said.

“If enough people in El Paso and Juárez call in and write in and text and email these companies – Cheesecake Factory, Crate & Barrel, Williams Sonoma, J. Crew – then somebody will look up and say we need to go investigate this market,” he said.

A group of El Pasoans has created a Facebook page, “Bring IKEA to El Paso,” where locals are posting receipts and photos in front of IKEAs, showing how far they are willing to go to shop there. So far, the page has more than 1,000 likes.

But an IKEA spokesperson told El Paso Inc. the company will not consider any market with less than 2 million people and won’t count people across the border in Juárez.

That is one of the problems for those trying to recruit high-end retail to El Paso, Stern said. Site selection software used by retailers to identify potential markets often shows El Paso as a low-income city of 665,568 – ignoring nearby Mexico.

But anyone who has meandered through the parking lot at an El Paso mall on a weekend and seen all the Chihuahua, Mexico, license plates knows there is much more than that to the El Paso market.

“They are good customers, frankly,” Stern said of shoppers from Mexico. “A big portion of that population is buying in the states – we know that. It is a significant piece of retail opportunity, and retailers who have that flock mentality are missing it.”

Toe in the water

When Bob Ayoub bought his first shopping center in the Lower Valley at North Loop and Zaragosa in 1993, the average household income there was roughly $25,000, Ayoub remembers. Twenty years later, it’s as high as $45,000, he said.

Ayoub, president of one of the largest retail developers in El Paso, MIMCO, said the growing purchasing power of consumers here has been missed by many retailers. But he also said that El Paso household incomes need to continue to grow if luxury brands are going to consider the region seriously.

“Until we have the jobs here that generate the income that generate the spending power, we are not going to get those retailers,” he said.

Ayoub has championed the Fountains project, although he could be considered a competing developer. Even as many are criticizing the developer for not bringing high-end retail to El Paso, he defends Centergy Retail.

“It’s so important that we have a new store like Nordstrom Rack, even if it’s ‘not the Nordstrom we want,’” Ayoub said. “But it is Nordstrom putting their toe in the water, and if that store does real well, then they will start to think that maybe they should put a full-priced store here.”

Nordstrom Rack is the off-price retail division of Nordstrom Inc.

If a Nordstrom – not a Nordstrom Rack – were to come to town, a lot of other specialty retailers would follow, said Dallas-based retail consultant Steven Dennis in an email interview.

But he also added, “I would not expect a Neiman Marcus or Saks any time soon.”

Dennis was Neiman Marcus’ senior vice president of strategy, business development and marketing before he opened his own consulting firm, SageBerry Consulting, in 2008.

Full-price high-end brands, he said, are rarely willing to locate in a shopping center with off-price shops, such as Nordstrom Rack, which was one of the first retailers to announce it would open a store in the Fountains center.

Attracting luxury brands to a new market often takes getting just one or two to take a leap of faith and test the market, said Stern with McMillan Doolittle.

“A lot of cities have done that with aggressive marketing,” he said. “They’re talking about their city; they’re talking about the opportunity in their city and trying to dispel some of the concerns.”

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9 comments:

  • madmike272 posted at 1:40 pm on Fri, Sep 27, 2013.

    madmike272 Posts: 10

    We just moved here from an assignment at the American Embassy, Mosacow and from what I have observe, there is indeed a legitimate market for upscale stores and restaurants here in El Paso.

     
  • pthoma2942 posted at 3:59 pm on Sun, Sep 22, 2013.

    pthoma2942 Posts: 2

    Destination XL is the old Big & Tall Men. There was by Ciello Visa and another at the Outlet Mall. Both on closing to open Destination XL

     
  • pthoma2942 posted at 9:50 pm on Sat, Sep 21, 2013.

    pthoma2942 Posts: 2

    Very interesting and informative article. I am not surprised there is not an Ikea here there is one in Dallas and none in Ft Worth or Arlington. There is one Whole Foods in Ft. Worth none in Arlington. Friends in Oklahoma City are begging for one. I am surprised there is not an Off Sak's at the Fountains as you nearly always find the next to Nordstrom Rack.Hope it will come. I am really surprised that a Trader Joe's hasn't opened since they are in Tucson and Albuquerque which means we are smack dab in the middle of their distribution area. The operations that surprises me the most is In&Out burger. Maybe those will come soon. Don't hold your breathe for a Nordstrom or Nieman Marcus since we don't even have an " " Dillard's or Macy's.

     
  • JerryM posted at 10:46 am on Thu, Sep 19, 2013.

    JerryM Posts: 1

    Here is where the problem lies. El paso should not have to rely on Juarez numbers. This article points out the main flaw on why El Paso is the way it is. El Paso should stand on its own not be forever anchored to Juarez. This is why these "upscale" chains have refused to come here. El Paso is growing and should market what itself for what it is. We have Ft. Bliss, UTEP, and soon the ballpark. We have thousands of visitors each year coming through here and we can't market that?? Why is it that other desert cities like Tucson, and Phoenix have grown but yet we stay stagnant. It's because they decided to think new while we want to hold on to that old mentality. It's pretty sad we can't get Texas based chains like Whole Foods or D&B here. Seriously?? And as far as what Miller and Foster are spewing, I don't buy it. They make millions and millions, one even sits on the regents board and yet they have no power to influence anyone to come here. I mean Foster got the ball park to move forward so why can't he make the push for bringing a Whole Foods.

     
  • Kalimba posted at 4:33 pm on Tue, Sep 17, 2013.

    Kalimba Posts: 4

    I would definitely become a Trader Joe's customer, but then again, I compare to what I've seen in real busy areas.. A company like Cheesecake Factory must run like a factory in order to deliver to their investors, and I just cannot imagine 45 min. waiting lines in El Paso for a restaurant, as much as I'd love to see them here!

     
  • Texian posted at 2:39 pm on Mon, Sep 16, 2013.

    Texian Posts: 1

    Although there are exceptions, people in El Paso generally don't want to pay the price of high-end items in high-end stores. There is often a general outlook of "they are cheating me..." at all level of business when the idea of actually making a decent profit is present. I'm a native and have lived in El Paso for much of my life, have worked at jobs and have done and still do have business in El Paso. I have done business for 20 years in Dallas, Austin, and in other areas of Texas. El Paso is the most difficult because of the poverty mindset that hangs like a cloud over much of the business climate. I love El Paso, but people have to want to spend money without government help in order to create new money.

     
  • SF_EP posted at 10:18 am on Mon, Sep 16, 2013.

    SF_EP Posts: 55

    El Paso deserves to have these good quality stores and restaurants in our city by now! we have the market for them,it's just the matter of will they relocate here?
    I would sure hope so![beam]

     
  • Scott Weaver posted at 10:17 am on Mon, Sep 16, 2013.

    Scott Weaver Posts: 11

    We should definitely have a Trader Joe's by now, and perhaps a Whole Foods. El Paso's chamber needs to put a full court press on these companies to get them to understand El Paso's, and the border's potential!

     
  • beate posted at 8:42 am on Mon, Sep 16, 2013.

    beate Posts: 4

    Well written article. I know I have been one of many who was hoping that we would get more high end retailers. But, having read the article I will do more than complain. I will do my part to let these companies know who we are, what we have to offer and that shopping on line at their sites or going out of town to shop their stores is not what we in El Paso deserve. Come here, take a look and move your butts here.