According to the authorities at each of Guam’s major shopping centers, the island appears to be in an upswing of retail activity judging from occupancy of retail space and interest in Guam by national brands.
“I think it’s healthy,” says Therese Kamm, general manager of the Agana Shopping Center. “In the past it’s been slow. We were struggling with tenants; we were starting to hit rock bottom. Now we’re 90% occupied.”
Inquiries from potential tenants are starting to rise again, she says, especially among food and beverage vendors and clothing and fashion retailers from Asia.
The interest in Guam from not just international, but stateside retailers, was seconded by Phillip Schrage — vice president of leasing and group operations for Goodwind Development Corp. and Grandview Development Corp., which owns and operates Micronesia Mall — who attended the annual International Council of Shopping Centers convention held May 18 to 20 in Las Vegas. The global gathering boasts “a year’s worth of business in three days” and attracts 1,000 exhibitors and more than 32,000 shopping center and retail representatives.
“There is a lot of interest in Guam this year from retailers at the convention, and Micronesia Mall may expand to meet the demand,” Schrage told Guam Business Magazine while attending the convention.
Any plans for expansion would be in addition to the interior expansion of stores already underway. “We have seven stores either under expansion or renovation, plus two new stores are opening in the mall from Hawaii also in the third quarter,” Schrage says.
Schrage says the stores from Hawaii are Jeans Warehouse, which will be opening in a 3,138-square-foot space by Back-To-School, and Lani Beach by Mireille, which is under construction to occupy a 1,900-square-foot space in Concourse 4. Those that will be expanding this year include Folli Follie, Step With Fashion, Tabaquera Gifts and the Pearl Factory. Additionally, Schrage says that ABC Stores and Lin’s Collection will commence storewide renovations this year.
Agana Shopping Center will also be welcoming Jeans Warehouse, which will open after the summer. Also moving in at Agana Shopping Center are subsequent locations of names already known in Guam — Subway Restaurants, which is under construction, and Port of Mocha, soon to come — as well as a new type of business for the island.
Kamm says the center is working on permits to break ground for SkyDrenaline Zone, an indoor skydiving experience that plans to open in June or July. Kamm says human nature is a dictator in the concept of supply and demand. “For as long as there is a demand, suppliers will supply,” she says. “And it’s very difficult to predict when that demand is going to disappear.”
“When” surely isn’t forecasted for 2014 as suppliers are showing a keen attention to meet industry demands.
One such response to industry demands is a new mall planned for Tumon by the developers of Micronesia Mall that is expected to be open by the end of this year. The 200,000-squarefoot structure will have an international food court and a 700-stall parking lot.
“With the addition of Tumon Bay Mall, we will bring to Tumon the best of what tourists want including the convenience and variety of a food court, longer shopping and dining hours, more parking than any other Tumon retailer, and an exciting mix of stores and attractions,” Schrage says. “In addition, there will be direct bus service between Micro Mall and Tumon Bay Mall.”
As for the island’s smaller shopping centers, one that is doing well attributes its continued success and consistently full occupancy to its location and quality of facilities. Oceanic Resources Inc. operates Pacific Place in Tumon and also Macheche Plaza in Dededo, both of which are doing well with regards to occupancy. According to Gregory Hartkopf, general manager, the convenient and adequate parking for tenants at both locations has also contributed to their success.
“[Our target market is] a good combination — getting both tourists and locals — but with so many hotels within walking distance, there’s no question the focus of our retail tenants is tourists,” Hartkopf says. “The touristoriented retailers seem to have done much better in the last decade than the local-oriented ones.”
The shopping trend is one of the more recurrent vacation activities on island. Subsequently, targeting more of the tourist dollar is how retailers are growing and succeeding. Maximizing foreign buyers simply boosts business.
“That was part of the strategy [at Guam Premier Outlets],” says Monte D.M. Mesa, general manager of the Guam Premier Outlets. “We get not just 1.3 million [visitors] a year, but every day there are new arrivals, primarily from Japan. That’s new money that is coming in, and we’re capturing at least 60% of those visitors […], and that’s a big chunk of the overall sales revenue that GPO continues to grow.”
That same strategy applies at Tumon Sands, where an appetite for luxury retail satisfies holidaymakers more so than the traditional trade area of local residents.
“Predominately the customers that shop here and at DFS will be tourists,” says Richard, president of Gemkell Group, which operates several luxury brand stores in Tumon Sands and The Plaza. Though the luxury shopping centers’ customer base spans visitors from Korea, Taiwan and more recently, Russia, “70% of the buyers on Guam for luxury retail are still Japanese,” he says.
A recent tax hike in Japan saw shoppers rein in their expenditures within the domestic market, whereas, come rain or shine on Guam, visitors liberally take advantage of tax-exempt shopping.
“The one advantage that we [have over] the mainland is that nobody here pays sales tax, and what you see on the price tag — whether it’s Tommy Hilfiger or Calvin Klein — it’s the same price that you will find in Hawaii or California. That is the biggest difference to the consumers here — that there is no sales tax, but you get the same price value that you will find at any outlet our tenants are at in the mainland,” Mesa says.
The lack of sales tax is a draw for tourists that does not go unnoticed by chains and franchises looking to expand their brands.
“Having tourists in your mix of potential customers appears to be a key ingredient for chains coming to Guam in the last few years,” Hartkopf says. “Even the ones opening at the malls seem to cater to tourists.”
The fall of the dollar against the yen meant significant implications for retailers. Riding the tailwind of a weaker yen while accepting the frailties of the marketplace, Hawes acknowledges the decreased spending potential of Japanese visitors. Hawes says luxury retail is affected by the yen depreciation at both Tumon Sands and on a macro level.
“Right now we’re in a bit of a lull with the psychological effect of the yen on our Japanese customer, but the yen has stabilized. It’s about 1.02 today. If you look 18 months ago, it was .80 to the dollar. […] Typically there’s a 20% to 30% [price] failing versus what they would pay for goods in Japan or Korea because these brands have adjusted the model. But that still doesn’t get around the fact that the customers are coming in with less money and less dollars to spend,” Hawes says.
“So they come with 30% less spending power. Despite whether you’ve got great customer service or a desirable location, the fact is that the majority of the customers coming don’t have the same wealth,” he says.
Innovative promotional campaigns alongside longer hours of operation, one-stop convenience and trolley transit prove effective in attracting shoppers shopping with less.
Forward-thinking businesses analyze more about the customer base than just nationality and who’s on vacation. In fact, Hawes has picked up on another trend in Gemkell’s stores.
“The customers coming to Guam more recently have been a younger customer. The large segment of the buyer would be a [female with an office job] between ages 18 to 30. As the package price to come to Guam has been reduced, there is a younger profile coming.”
Though Hawes says Guam may be viewed by Japanese tourists as a cheaper destination than Hawaii, “Gemkell opened Givenchy last year on Sept. 23, and in August 2012 we opened Balenciaga, so we continue to believe in Guam as a destination.”
With a younger customer base comes the need to cater to their interests and way of getting information. Guam retailers continue to recognize the explicit need to connect to customers via multiple channels and touch points simultaneously and interchangeably. Having a website and social media presence helps businesses capture leads, identify promising opportunities and better understand how customers perceive their products.
“Everybody is very mobile in terms of their communication, and we need to engage that,” Mesa says. “Here at GPO we believe we’re the leaders in social media campaigning.
“There are a lot of residents of Guam who order online; there is a market for that,” Mesa says. “I don’t believe it will replace a retail store — an actual experience of going to what they call ‘brick and mortar.’ Some of our tenants are from a national program that offers online sales, and for Guam, 32 miles is not too far, so people could buy online and pick it up at the store here.”
Still, online shopping has had an effect, particularly on smaller stores.
“I think we are seeing a decline in the small local retailer,” Hartkopf says. “Both online shopping and big retailers are squeezing them out of the market, except for the few that have found a niche. On the bright side, you can see that small local businesses that find and focus on their niche can compete with the chains.”
Guam’s industry seems readily open-armed to welcome U.S. superstores known to be crowd-pleasers, and Mesa says GPO is pushing to attract more national outlet stores. With chains like Ross, Macy’s and the like, there are many more brands that would seem to fit well in Guam, yet are not present. Hartkopf has some thoughts as to why certain household names have not yet embraced the island.
“Obviously, our remote location and relative small market is a big hurdle,” he says. “The amount of effort that goes into opening one store on Guam with limited growth potential is a deterrent. Some chains that franchise don’t spend the time to understand our demographic and put unrealistic requirements, such as requiring the franchisee to open too many locations, and that kills the deal.”
Hartkopf further suspects other chains’ unwillingness to open in Guam comes down to a slim-to-none potential for profit. “I think a big difference about Guam when talking about chain stores coming here is that we do not fit the mold of mainland demographics. This has been great for some chains, like K-Mart and Ross, where their products and prices match up well with what [the local population is] looking for. In addition, they both also appeal to the tourists,” he says.
Hawes notes the availability of space, the number of people inhabiting the island and broad ignorance as probable rationale for brands not investing in Guam. He says certain brands like HM, Zara Yunho and Forever 21 would likely be quite successful in Guam.
“[…] they are at a lower price point, more volume, so they want to come here; they want to put a 10,000-squarefoot space. So there’s the availability of space,” he says.
However, it may not be the right space or simply that the spaces available have not been effectively marketed, he says.
“You might say, ‘There’s an empty shopping center down in Tumon across from the Fiesta Resort, a de-funked Korean project with about 200,000 square feet of building space. Why aren’t big-box operators or other retailers that need more space going there?’ For one, it’s up to the owner or developer of that to really go out and market and put a strategic plan and a tenant mix strategy to sell the whole concept — the synergies of tenants — that is needed to make a critical mass attraction,” Mesa says.
These brands also may be deterred by the population size of 175,000, Hartkopf says.
“What I think they don’t realize [is that] with 1.2 million tourists, they would be successful,” he says. “I would not be surprised if in the next three years, one of those groups would come here. Those sorts of franchise brands would definitely be popular, I believe.”
Proliferating the list of deal killers, Kamm adds, “I have spoken to [some bigbox retailers] personally. They don’t think the market is big enough. A lot of the big names have actually been here. They’ve poked around and spoken to all the shopping centers and picked our brains. If the warehouses are not in Hawaii, the shipping costs are very expensive. It’s too prohibitive. The break points are too high. It’s a number crunching game.”
While the Guam market may be a hard sell for retail goods, food service is another story, as can be seen in the number of restaurant chains and franchises.
“It seems like a lot of interest is for restaurant concepts rather than retail,” Hartkopf says. “In general, this seems to be the trend: retail space being leased for restaurants.”
With many of the chain restaurants in Guam constructing their own freestanding facilities out of which to operate, there comes a concern for over saturation of the market, but Mesa says he doesn’t see it as saturation.
“I see it as, there is still a great opportunity. It’s survival of the fittest.”
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