Specialty discounting takes root in heart of Big Apple

Discount Store News, Nov 27, 1989 by Richard C. Halverson

Specialty Discounting Takes Root in Heart of Big Apple

NEW YORK - Specialty discounting - aside from consumer electronics - is showing signs of life in Manhattan at a time when many of the most prestigious department stores are struggling and on the auction block.

Marshalls, Lionel Leisure, Kay-Bee Toys, Toys "R" Us, and Modell's Sporting Goods have opened or plan to open new units in the heart of New York City, while upscale retailers like Bloomingdale's, B. Altman's, Saks Fifth Avenue, Bonwit Teller, are fighting for their very existence.

Indeed, Altman's parent, Australia-based Hooker Corp., was warning a bankruptcy court at presstime that it would have to liquidate six of its seven units if it couldn't find a buyer.

Marshalls, the off-price apparel and soft home goods chain, is renovating second floor space for its first big city store in the country, DSN has learned.

Marshalls plans to open the Manhattan store next September in the former May Department Store unit on Union Square. May once was a full-line discount chain in New York City, and the Zeckendorf Company is developing the six-story building located across from its Zeckendorf Towers complex overlooking Union Square. Meanwhile, a half block away, Lionel Leisure opened in mid-November its second Manhattan Kiddie City toy supermarket.

Lionel opened its first Manhattan Kiddie City unit last year on 34th Street, a block from Macy's flagship store and next door to one of nine Herman's World of Sporting Goods units in Manhattan.

And, Kay-Bee Toys, a sister division of Marshalls in the Melville Corp., opened its first Manhattan store three weeks ago in the A&S Plaza, an urban shopping mall developed in Gimbel's old flagship store. An A&S Department Store, which opened in September, anchors the plaza located two blocks below Macy's.

Also in the A&S Plaza, Modell's Sporting Goods is set to open its fifth Manhattan unit by the end of the month.

As another indicator of interest in Manhattan specialty discounting, Toys "R" Us announced plans to build its first Big Apple unit in the Herald Center, located between the A&S Plaza and Macy's. A court fight over ownership of the financially troubled center, however, have placed those plans in limbo.

The Phillipines government has been trying to appropriate the building on grounds that the late president Ferdinand Marcos bought it, along with three other Manhattan properties, with money he allegedly looted from the government. Three weeks ago, the holder of a $56 million mortgage on the property foreclosed, and the nine-story building sold on the auction block for $25 million.

TRU "is delighted" about that development, a company source said. "We're still interested."

Marshalls, which now operates 340 stores, is a suburban chain operating in strip centers. The Union Square unit will be the first urban store for Marshalls and one of 40 total stores it plans to open in 1990, said a source in its real estate department.

It will take the entire second floor of the May building, occupying 33,400 square feet, or about 5,000 square feet larger than a typical Marshall's. But it will be considerably smaller than Marshalls' new superstore concept of 50,000 to 60,000 square feet.

A second floor location will be another departure for Marshalls, now offering ground floor entrances from suburban strip mall parking lots.

A Marshalls source scotched rumors that the apparel off-pricer also plans to open a store in Herald Center.

"It's a new type of thing for us," he said. "I doubt that we would open a second store until we test the first one."

The Kiddie City store on Union Square opens on the ground level and offers additional selling space on a basement level and second floor. With a total of about 30,000 square feet, it is somewhat smaller than Kiddie City's first Manhattan store of 36,000 square feet on two levels.

Both toy stores offer about 18,000 sku's, virtually the same offerings as a suburban store with the exception of bulky items: juvenile furniture and disposable diapers, said Joel Weiner, director of advertising.

The selection at Union Square is slightly scaled down from its 34th Street location but also includes wheeled goods. "We were surprised at how many customers bought bicycles and took them home, still in the carton, on the subway," Weiner said, "We had to expand the selection of wheeled goods."

"New York has proven to be a successful market for us," Weiner said. "We see the potential for expansion in other New York boroughs, as well as in Manhattan."

Kiddie City also has opened a unit in the Bronx, another of the five boroughs that comprise New York City.

Kiddie City's Manhattan store is maturing and has shown positive results, said David Leibowitz, senior vice president and retail analyst for American Securities Corp.

"It's no accident that Toys "R" Us is following suit," he said. "Being the first kid on the block has worked out well for Lionel."

The Kay-Bee unit in A&S Plaza occupies about 6,200 square feet, compared with an average of 3,600 square feet for Kay Bee's suburban mall locations.