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Musical chairs at the mall

Amid the highest number of store closings in 4 years, a breed of innovative service sellers is moving right in.

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By Parija B. Kavilanz, CNNMoney.com senior writer

IPic Theaters feature 6-foot wide bucket "love seats" for two.
IPic Theaters also have high-tech bowling lanes next to them.
Malls are eager to fill in store vacancies with new concepts such as children's spas.
"MedSpas" offering quick Botox procedures have become hotspots in malls.

NEW YORK (CNNMoney.com) -- While the economic downturn is forcing bloated retail chains to shut some mall-based locations, it's also created an opportunity for a new breed of businesses eager to move into those vacant storefronts.

Among them are a new movie theater concept featuring oversized "love seats for two," wine and cheese bars, medical spas for a quick afternoon Botox fix, and even nightclubs.

What these businesses have in common in their focus on primarily selling services - or an experience - rather than products.

Retail watchers say this is a smart strategy, especially in a recessionary environment.

"Spending on entertainment and self-improvement services tend to be fairly recession-proof," said Malachy Kavanaugh, spokesman for the International Council of Shopping Centers (ICSC). "We've certainly seen that in past recessions."

It's no wonder that mall operators, nervous about declining mall traffic and sales, on top on rising store vacancies, are aggressively courting these non-traditional retail tenants.

In fact, the ICSC forecast that 2008 store closings could hit 5,770 stores, which would be the highest number of closings since 2004.

John Waller, vice president of mall leasing for CBL & Associates Properties, which owns about 80 malls nationwide, is acutely aware of that trend.

"We've given a directive to our leasing folks to go out and pursue non-traditional retail uses both for our enclosed and open-air malls," Waller said.

And those can even include single-store operations instead of chains, he said.

One example is 55°, located in one of the company's Florida malls. It's a wine bar where enthusiasts can sample wines, and collectors can purchase a locker and build their wine reserves over time.

Children's spas are catching the eye of mall operators. For instance, the Texas-based Sweet & Sassy chain not only offers kids haircuts but spa treatments such as manicures/pedicures, theme parties and a customized pink "Party Girls on the Go!" limousine.

The company currently operates 26 locations nationwide with another 30 new locations targeted to open in 2008.

Botox fix at the mall

Medical spas, or "Medspas", are turning into hotspots at malls, too. These spas offer services that include Botox injections and laser hair removal.

The International Medical Spa Association (IMSA) estimates that the number of mall-based medspas have jumped to about 2,500 from just 450 in 2004.

Why do malls appeal to this type of service? "Malls are the perfect place because people are already shopping there and they just linger afterwards," said Hannelore Leavy, executive director of IMSA.

John Buckingham, president and founder of Solana MedSpas, said he's excited about taking advantage of this year's store vacancies to open another 20 locations in malls.

All 50 of his company's spas are located in upscale strip centers and lifestyle centers, which are typically open-air malls.

"In the early days malls didn't understand our concept," Buckingham said. "Now they are literally seeking us out because we're drawing traffic."

The average cost of a Botox procedure is about $500 at his spas. That certainly isn't cheap at time when consumers are curtailing their discretionary spending.

But Buckingham sees it differently. "This is still so much cheaper than plastic surgery," he said. "When you have an addiction going on, it's not easy to give it up. People will give up their rent, dog food and car payment (rather) than this."

What's more, he said "looking good" becomes even more essential in a weak job environment.

"As people are downsized out of jobs and have to compete with younger, better-looking people, they'll see the need for a touch-up," Buckingham said.

Hamid Hashemi, founder and CEO of IPic Entertainment, is rolling out a "one-stop" entertainment concept built around a movie theater, bowling lanes, restaurant and bar all in the same complex.

He's already opened one location in Glendale, Wis., and will open 5 more between this year and 2009, including one at a former Home Depot Expo location in Chicago.

Hashemi said he was negotiating leases with Simon Property Group (SPG), the No. 1 mall operator, for space once occupied by major anchor department stores.

"We're expanding at the worst time, when consumer spending is going down," he said. "But movies are still the least expensive form of entertainment. People want to escape from their everyday reality."

He thinks evolving demographics are also in his company's favor. "About 30% of the population is between 21 and 45 years old. Many have disposable income and no kids yet," Hashemi said. "They want places to go out at night."

The advantage to malls is that the nighttime business doesn't cost incrementally more and generates additional revenue, Hashemi said.

ICSC's Kavanaugh agreed.

"In the past, the belief was that the big anchor department stores drove traffic. Not anymore," he said. "The mall experience can't be just about shirts, slacks and shoes anymore." To top of page

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