Officials: Keeping customers means staying on top of the competition
With the success of the Third Street Promenade over the last decade, its competitors have both modeled themselves after it and built upon its failures.
One shopping area — the Grove off Fairfax Avenue in Los Angeles — is often referred to as a primary competitor by business owners and officials who run downtown Santa Monica. They wonder how much the Grove cuts into Santa Monica’s marketshare.
In recent years, the Grove has taken customers away from the Promenade because it offers the same popular outdoor shopping experience without the drawbacks inherent to a public setting.
While the Nordstrom-anchored Grove is a private mall with a deep-pocketed parent company, the Promenade is mix of businesses on a public street. That means less money for marketing, and bigger problems with parking, homelessness and regulating the influx of chain retailers.
City officials and local business owners keep close tabs on the Promenade’s competitors because millions of dollars in revenue for City Hall is at stake — 1 percent of all taxable sales wind up in city coffers.
Consumers have a choice of where to shop, and the two malls — which are similar in a number of ways — both heavily compete for their dollars. Both are set up along an outdoor street. Both feature live music, top-notch restaurants, movie theaters and a mix of retail outlets. Both have Farmers Markets.
But while the Grove has a sanitized feel, the Promenade has a more eclectic character, officials say.
“We’re not spit-shined,” said Kathleen Rawson, executive director of the Bayside District Corp., a nonprofit that runs downtown with City Hall. “We have an urban reality that you don’t see in other places.
“Because this is a public space, you have as many challenges as opportunities, that’s for sure,” she added.
As the Promenade moves towards its 15th year, officials say the biggest issues facing the three-block mall are homelessness and the lack of cleanliness, as well as parking and traffic issues and balancing the mix of retail and restaurants. Another major issue Bayside officials and merchants have complained about are the filthy alleys that serve as the Promenade’s main access point from the parking garages.
Officials have addressed the homeless issues through new legislation now being enforced that make it illegal to camp in business doorways or distribute food to large groups in nearby parks. They’ve also asked for more money for lighting on outlying streets and other improvements. Meanwhile, City Hall promises to expand and upgrade the parking structures downtown.
Bayside spends about $500,000 on marketing out of its $897,000 annual budget.
Rick Caruso, founder and CEO of Caruso Affiliated Holdings, which owns the Grove, declined to say how much the Grove spends on marketing or what its annual budget is, but said that most of the money is spent on magazine advertisements. The ads target families, households with high incomes, tourists, and the movie and studio industries.
There is not a single vacancy in the 50-plus shops at the Grove, despite the laggard economy. Meanwhile, the Promenade, which has more than 80 stores, has two vacancies — the old UCLA building and what was once Hennesey and Ingalls — and another four properties that are vacant but rented.
At 440,000 square feet, the Promenade is quite a bit smaller than the 575,000-square-foot Grove. Restaurants make up about 28 percent in both malls.
Rawson said 20,000 to 30,000 people visit the Promenade each day, on average. The Grove, on the other hand, attracted 16 million last year, an average of 44,000 a day, Caruso said.
“Third Street Promenade is a great street, but it can get very seedy on the weekends and the evenings,” Caruso said. “A woman with children, I think, feels much safer at the Grove.”
“A woman with children, I think, feels much safer at the Grove.” — — RICK CARUSO Shopping mall owner
Ruth Elwell, a member of the Bayside board and a local business owner, said the Promenade can learn a few lessons from the Grove. But she said the Promenade has the potential to be a much stronger destination because it’s situated in the heart of Santa Monica, with the Pacific Ocean just blocks away and plenty of room for growth onto neighboring streets.
“I’ve been to the Grove, they’ve done a nice job,” said Elwell, adding that it seems safer and cleaner than the Promenade. “But they can hardly match our facilities. When the tourists, when they come into this town, they love the city, they love the position — they don’t like the panhandling.”
Promotional documents say the 17-acre Grove, which opened in March of last year, has an “authentic feel and sense of permanence that usually emanates only from places that have evolved over time.”
But while the Grove will stay virtually unchanged in the coming decades because of its physical constraints, Bayside officials said foot traffic on the Promenade will increasingly spill onto neighboring streets, where new developments are adding housing and merchant space. The overall effect will make downtown even more attractive to shoppers, officials hope.
Rawson said she is watching closely the design standards being discussed in City Hall and that she one day hopes for a connected downtown with solid pedestrian flow from the beach up to Seventh Street. She also said that the movie theaters, which are becoming outdated as technology improves, will need to be remodeled.
“It’s an 18-hour destination,” Rawson said. “And having people within walking distance is going to strengthen that even more.”
“It’s an 18-hour destination. And having people within walking distance is going to strengthen that even more.” — — KATHLEEN RAWSON Executive director, Bayside District Corp
But Caruso said the Promenade will always have a tougher time with some issues because it is public. He pointed to a new law that limits the storefronts of new merchants on the Promenade with the aim of encouraging smaller businesses downtown.
“We have the advantage that we control the whole property,” he said. “The City (of Santa Monica) doesn’t have that advantage and, frankly, their problems are more complicated because they don’t have that control.
“The local merchant in my opinion always adds the most flavor and intrigue of any of the merchants because they’re on the property — they personalize it, they make it feel more like your part of town. It’s like knowing the shopkeeper when you go there. And that’s a problem the Promenade has.”
Originally published in the Santa Monica Daily Press print edition on September 19, 2003. Read the original PDF.