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RIVAL CENTERS JOIN FORCES

By Edmund Mander

Salt Lake City’s Crossroads Plaza and rival ZCMI Center market themselves to shoppers as one destination.

The owners of Salt Lake City’s ZCMI Center Mall, built in 1974, could not have been terribly thrilled when developers built a new mall right across from them six years later. And they must have found the name of the new center — Crossroads Plaza — particularly galling, given that all a customer had to do was cross the road to get to it.

The new mall had four levels, to ZCMI’s two, and — enough to make any competitor seethe — its lineup of national retailers included a Nordstrom.

In the early days, the two centers did what any self-respecting malls would do under the circumstances: Each tried to steal the other’s shoppers. When one placed an ad in the local paper or initiated a marketing campaign, its rival followed suit, creating a promotions arms race of sorts.

All that rivalry is hard to imagine today. In one of the most unusual retail real estate relationships in the industry, the two downtown malls have forged a relationship so close that they market themselves jointly, share information about potential tenants, and work together in other ways.

But things didn’t start that way.

"We used to be buying the same amount of advertising area," recalled Melissa Wayment, the marketing director at ZCMI, which stands for Zion’s Cooperative Mercantile Institute — the mall is owned by the Church of Jesus Christ of Latter Day Saints. All of which was great for newspaper revenues, but it didn’t make a lot of sense for the malls. "We realized most of our shoppers cross-shopped; they just crossed the street."

And the reason people crossed the road was that the two malls were, and are, quite different. While the 525,000-square-foot ZCMI does have Eddie Bauer, Foot Locker and a department store anchor — which at press time was in the process of having its name changed from ZCMI Department Store to Meier & Frank, a division of May Department Stores, which bought the store in January 2000 — it is dominated by local tenants. Some of them, like Mormon Handicraft, trade on local history and culture.

Crossroads Plaza, which is owned by Crossroads Plaza Associates and managed by Institutional Property Managers, a subsidiary of Dallas-based L&B Realty Advisors, has mostly national tenants, such as Gap, Foot Locker, Discovery Channel Stores and The Limited. Besides Nordstrom, it is anchored by Mervyn’s and a cinema.

It became apparent to each mall’s marketing staff that they were not really competitors, and should instead market themselves as a single, downtown destination. Moreover, while they fought over customers, each year more and more of their clientele were shopping at newer, out-of-town locations. It was not long, therefore, before a degree of cooperation developed between the two. They started, for instance, coordinating sidewalk sales on Saturdays, recalled Tami Ivy, SCMD, marketing director at Crossroads Plaza.

Ivy was not so sure, however, how far the rival owners were prepared to take this new spirit of cooperation.

"My original thought was that this was going to be a hard sell," she said. "But it wasn’t at all, it made such sense."

So, in 1998, they pooled their advertising resources and began marketing themselves as "The Downtown Malls — At the Center of Everything." Instead of uncoordinated, tit-for-tat, reactive advertising, they could now save their money for well-planned, marketing campaigns. Furthermore, their combined marketing budgets — they budgeted $600,000 for advertising this year — enabled them to do a lot more, such as advertising on television, something they were never able to do previously. Their ads began appearing on billboards and buses, and recently they even paid a handful of SUV owners to have their vehicles covered in the Downtown Malls logo. The centers have a single Web site, and at press time were planning a joint gift certificate program.

The centers are coordinating their resources in other ways, too. Parking validations from one mall are good in the other’s garage. And, when a temporary tenant couldn’t find an in-line space at ZCMI, Wayment referred him to Crossroads.

"We speak to each other about everything," Wayment said. While Ivy handles advertising, Wayment takes care of tourism promotion.

This cooperation is timely, given that Salt Lake City is playing host to the Winter Olympic Games next year, and this has provided an opportunity for another joint program: The Downtown Malls have formed a marketing alliance with the U.S. Ski and Snowboard Team, with joint advertising, fund-raising and the sale of merchandise to benefit the athletes’ training.

But there is another, even more compelling reason to cooperate, generating echoes of the adage "my enemy’s enemy is my friend." Nearby, progress is under way on The Gateway, a 2.5 million-square-foot mixed-used project covering three blocks that will offer nearly 700,000 square feet of world-class shopping and entertainment.

The $375 million Gateway, developed by locally based The Boyer Co., has been bitterly opposed by the two malls and criticized by the city’s Mayor Rocky Anderson, as a threat to the downtown economy.

"This will be a third mall in a four-block radius; that’s an incredible amount of retail," David Neilson, Crossroads’ manager, told SCT last year (Shopping Centers Today, July 2000). "That could have a profound effect on the downtown — not a good one."

Executives at The Boyer Co., which plans to open The Gateway in time for the Games, insist that the project will be an asset to Salt Lake City and its downtown. Indeed, The Gateway will become part of the downtown, said Jake L. Boyer, project manager.

"For years and years we’ve been underserved by retailers," he said, citing a University of Utah report on The Gateway showing how out-of-town retail development has steadily sucked retail business away from the downtown; since 1980 the city’s share of the county’s retail sales has declined to 28% from 43% the report found, despite the creation of 10,000 downtown jobs.

Whatever its impact, The Gateway will be a reality next year, and executives at ZCMI and Crossroads know they are better off facing the challenge together. There already is plenty of evidence that, for these two malls, competition wasn’t as healthy as it is cracked up to be; like the rest of the downtown, both malls were experiencing declining or flat sales for years, Ivy said, but now they are showing year-over-year increases.

"Last year ZCMI Center Mall had about a 2% increase, which is better, since we were flat or decreasing for the years before," said Wayment.

Sales per square foot stand at $290 at ZCMI and $325 at Crossroads Plaza.

So does this serve as a model for malls elsewhere? For instance, has Dallas-based L&B Realty Advisors, which manages Crossroads, thought of doing the same thing in McLean, Va., where its Tysons Corner Center fiercely competes with General Growth’s Tysons Galleria across the highway?

The two famous rivals in McLean are too far apart, said John L. Gerdes, SCSM, CLS, L&B’s director of retail, noting the busy highway that runs between them, but there are other markets where the cooperation model could be applied, he said.

"It has to be a unique situation of proximity," he said. The malls in Salt Lake City are so close shoppers were not differentiating between them, he said. "It certainly made sense to link the two together."

It is a concept more developers should consider, opined Stan Eichelbaum SCMD, president of Cincinnati-based Marketing Developments, a retail development and marketing consulting firm.

"We tell all developers in our productivity assessments not to look just in their four walls," he said, but it is a lesson many have yet to learn. "Developers not only fight the surrounding environment that is a part of their critical mass, but in many cases they even fight the contiguous department stores."

Marketing alliances also could be forged between two malls that lie at opposite ends of a small market and do not compete for customers, said Gerdes.

But, although the agreement between ZCMI and Crossroads "raised some eyebrows in the industry," Gerdes said he, too, has not seen other rival mall owners teaming up.

All of which might seem a little surprising to Ivy and Wayment, who have found that, whatever might be said for healthy competition, cooperation is a whole lot healthier.

"Once we let the barriers down," Ivy said, "we found that it was incredible for us."

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