New outlet mall in Eagan signals a retailing shift

Outlet mall fans, the wait is over — and so is the long drive.

On Thursday, the Twin Cities Premium Outlets will open in Eagan within striking distance of Mall of America and less than 30 miles from the Twin Cities core. A 20-minute trip will get shoppers to name-brand retailers such as Armani, Steve Madden, and Vera Bradley, plus a host of new eateries like Chicken Now, China Max and Villa Fresh Italian Kitchen.

"Outlet malls are a bright spot as far as malls go. They have higher sales per square foot and lower overhead than full-line malls," said George John, an associate dean at the University of Minnesota's Carlson School of Management.

More important, the opening of the Premium Outlets in Eagan signals a shift in outlet retailing. With more than 1.2 million Twin Cities residents living within 15 miles of the new center, they no longer have to go the distance for outlet shopping, a departure from the 1990s when most centers were banished to the exurbs. Now there is more of a willingness among outlet and retail owners to locate centers closer to the action. The Eagan outlet will be just a few miles from the Mall of America, as well as shopping centers in Bloomington and Richfield. Outlet centers are also edging closer to full-line retail in cities like Chicago, Phoenix and New York.

That's a substantial change from outlets built in the early 1990s, which were placed 40 to 50 miles away from the metro to avoid competition, said Minneapolis retail consultant Jim McComb. "Back then department stores and retailers were very protective of their brands and customers, so a lot of fashion brands wouldn't locate in Minneapolis-St. Paul to avoid upsetting Dayton Hudson," he said.

But that distance from the area's core has already begun to hurt older outlet centers in Medford and North Branch. They've lost most of their Twin Cities shoppers and a lot of the bigger names have moved out. "You're seeing vacancies and closings," said Dave Brennan, co-director of the University of St. Thomas Institute for Retailing Excellence, noting that the opening of the new outlet center will have little to no impact on those developments.

Medford Outlet Center, which opened in 1991 and is 58 miles south of the metro, has seen departures of Mikasa, Geoffrey Beene, Big Dog, Black & Decker, Koret of California, Bonworth, Levi's, the Company Store and others. While many of those stores closed nationwide in a slew of retail bankruptcies, customers are disappointed when their favorites go. Lisa Klompe of St. Paul knows the mall is trying, but she wants a home furnishings store, a restaurant and more clothing choices. "There are more than a few empty storefronts. We came here often 10 years ago, but now it seems to be going a little downhill," she said.

A decade ago, nearly 50 percent of the mall's customers came from the Twin Cities, said Medford's general manager Sharon Paulson. Now it's 10 percent. Brennan thinks the center lost a lot of Twin Cities customers when Cabela's added metro stores. "The Owatonna store near the Medford Center was a huge draw. Husbands dropped their wives off in Medford and went on to Cabela's," he said. Most customers now come from Rochester, Mankato and nearby states. "A lot of customers from Iowa and South Dakota make five or six trips per year," Paulson said.

It's often rural customers like Lisa Rasmussen from Goldfield, Iowa, who are Medford's best patrons. They have little desire to drive to Albertville Premium Outlets — the area's other major outlet center — which they believe is too congested and has too many stores. "Medford is a good break in the middle of nowhere. We've been stopping here for years," she said as she shopped there last week.

But Medford is slowly getting a better store mix, too. It added Coach last week after years of customer requests. "Customers were ecstatic when Coach opened," Paulson said. A candy store will open later this month and a restaurant in October.

The Medford and North Branch Outlets have had to adjust their tenant mix to minimize vacancies. "People need bigger and better reasons to make a destination drive now," John said. They can get the same items on sale at Macy's as they can find at the outlet. Department stores have dramatically changed their pricing so that very little stock now sells at full price, he said.

North Branch Outlets commercial property manager Stephanie Balynas said about 15 percent of the center's traffic comes from the Twin Cities. "I'd like to say we're a destination, but … ," she said, trailing off.

In North Branch, Medford, and even Albertville, staying nearly full has meant adding stores that aren't outlets or have a mixture of outlet and regular-priced merchandise. In North Branch, that includes Fancy Nails salon, Maurices, GNC, Radio Shack and Toys 'R' Us. Medford has added local, independent stores such as an antique and gifts shop, a beauty salon, as well as non-outlets such as Planet X, Rue 21 and Christopher & Banks.

"It shows an air of desperation. They're trying to get any rent at all," Brennan said. "Eventually, they turn into value centers, not true outlet malls." By definition, centers must have at least 50 percent of tenants who are outlets to be called an outlet mall, said Linda Humphers, editor in chief at Value Retail News in New York.

Even Albertville, which has been a "home run" success according to McComb, currently has seven vacant storefronts and continues to add non-outlet stores such as Flying Circus Toys, K Fashion and Pebble Boutique in the Promenade. Aeropostale, Lids, Vitamin World and Zumiez in the main plaza sell mostly items at regular price.

Outlet malls have had to evolve since they were introduced in 1979. The factory seconds and returns aren't part of the mix anymore, nor are many of the defunct brands and even a few entire outlet malls, such as the one in Woodbury, have closed. "It was too close to the Twin Cities. They couldn't get good fashion outlet tenants because of Dayton Hudson," McComb said.

Still, the remaining Minnesota outlet malls can still boast occupancy near 90 percent. "They're facing competition from all over, but they're still surviving," McComb said.

John Ewoldt • 612-673-7633