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Fire Sale: Mulholland San Francisco was among the latest stores to shutter.

Marketing Row

Struggling Santana Row shopkeepers say urban hipsters, not suburban families, are the ticket to retail survival

By William Dean Hinton

IT'S FRIDAY NIGHT on Santana Row, the ersatz European village that is supposedly one of San Jose's most happening places. If you look in the right places, you see plenty of nightlife. Blowfish Sushi, inside the Valencia Hotel, is so full that the sound of happy diners spills onto the sidewalk. Tables are full underneath heat lamps outside the Mexican restaurant Cazuelas, Businessmen hustle inside Yankee Pier for seafood.

In the shops, though, not much is happening. Clerks seem startled when you walk in. Off the record, they joke about ghost towns and tumbleweeds blowing down Santana Row's main strip.

This past weekend, three Santana Row stores closed their doors. Mulholland San Francisco, a high-end men's store, and the jewelry stores Cou Paris and Fiona. Those stores join three shops and an art gallery that closed last year. Ordinarily three stores shuttering would cause a commotion. But there's less concern about Mulholland, Cou Paris and Fiona because they were owned by the same investment group, headed by Steve Guttman, former CEO of Santana Row's parent company, Federal Realty Investment Trust.

Merchants are concerned, however, about stores yet to close.

"I think there are a lot of stores leaving," says Sandeeb Jaiswal, owner of d'tor, a clothing store geared toward young, trendy, urban shoppers. "Business is so bad for a lot of retailers. I understand quite a few stores are leaving. Some are unable to break their leases. Nobody is making any money. If they tell you they're doing great, they're lying."

Says Elisa Bruley, owner of Elisa B., an upscale women's boutique: "My expectations were enormous, and those expectations have not been met."

How could this be? Just last November, the Mercury News reported that Santana Row sales were better than projected for this fiscal year ending in June. Under the headline "Santana Row Finding Its Niche," the article explained that sales-tax revenue was almost two-thirds toward the projected $1.5 million goal.

Even today, Jan Sweetnam, Federal Realty's West Coast chief operating officer, says sales through Christmas have been positive. "I hate to speak on behalf of our retailers," he says. "But I can say we feel the overwhelming majority are successful and happy."

Those who aren't have a steady supply of criticism, largely aimed at the mall's marketing concept, which one merchant called "pathetically weak." Instead of the young hip crowd, the marketing department has relied on such family-friendly events as petting zoos, an ice skating rink and sidewalk presentations to lure shoppers. Sweetnam defends the events, but some merchants fail to see the point.

"That kind of marketing never, ever pays off for us," says Bruley, who also owns a store in Southern California. "In Pasadena, it was the same thing. It's important to give to charities. That should be part of our marketing plan. But we're missing the boat if we think adults attending family-oriented events will go shopping. They don't have the freedom to shop. Their emphasis is on entertaining the kids."

Sweetnam also defends management's campaign to bring shoppers down from the peninsula. "We already have a pretty good penetration rate in the South Bay," he says.

But some shop owners say the peninsula has enough high-end retail. "They don't see anything hot about Santana Row," one says.

And reaching out to shoppers 40 miles away raises questions about who is the likely Santana Row customer. The outdoor mall has no anchor tenant in the tradition sense--a Macy's or Nordstrom or J.C. Penny to define a core clientele.

That means the marketing department has to make an educated guess what the "psycho-graphics" of shoppers might be. Those are the demographics of people not only wealthy enough to shop but who have a desire to buy in upscale markets. "Sometimes these things are not easy to read," says Stephen J. Stephanou, executive vice president of Madison HGCD, a retail leasing and consulting firm specializing in high-end retail.

Without an anchor tenant, Santana Row becomes identified with the smaller shops, some of which don't mesh with the young urban dwellers hitting the V Bar Lounge. Mulholland, with its stoic $400 button-down shirts, wasn't the right mix. The elite Salvatore Ferragamo, which opened in November, probably won't fit either. "That's not a great strategic move for [Ferragamo]," Stephanou says.

Merchants say the most successful strategy has been fashion shows and party-type events. Elisa B. hosted a DJ night that Bruley says brought more sales than she imagined. Jaiswal presented his own fashion show in December with 49er wide receiver Terrell Owens in attendance. A jazz show hosted by management was also successful.

A simple thing Santana Row can do is supply a monument directory--a map showing where customers are in relation to stores they hope to find. Merchants say such simple items are a no-brainer. Yet a year and a half after opening, the mall has yet to install one. Sweetnam says a directory is coming, hopefully in time for a theater opening this summer, which merchants are counting on to lure shoppers. They shouldn't get too excited. Moviegoers might turn out to be like diners--spending money in all the wrong places.

"People shop for certain kinds of things when they're going out," Stephanou says. "Apparel is a separate shopping trip."

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From the February 5-11, 2004 issue of Metro, Silicon Valley's Weekly Newspaper.

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