Discounters step in to spaces left by big-box retailers

Jul 1 2011 - 11:38am

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Customers Nick Lavarone, left, and Linda Stuertz browse the aisles at the Big Lots store in Fenton, Missouri, June 16, 2011. "I found this store very nice; it's clean and it's new," says Stuertz, who shops regularly at Big Lots. "When I see one, I'll stop. They have good prices and they have unique items." (Chris Lee/St. Louis Post-Dispatch/MCT)
Customers Nick Lavarone, left, and Linda Stuertz browse the aisles at the Big Lots store in Fenton, Missouri, June 16, 2011. "I found this store very nice; it's clean and it's new," says Stuertz, who shops regularly at Big Lots. "When I see one, I'll stop. They have good prices and they have unique items." (Chris Lee/St. Louis Post-Dispatch/MCT)

The hulking shells of former big box stores, victims of the economic downturn and the rise in online retailing, have quietly started filling up with commerce again.

The spaces formerly occupied by retail heavyweights including Circuit City, Linens 'n Things and Borders are now welcoming sellers of discounted designer jeans, used video games and surplus merchandise. Many of the new stores moving in trumpet terms such as "off-price," "discount" and "value" in their slogans.

Stores including Big Lots, Ross Dress for Less, Jo-Ann Fabrics and Nordstrom Rack are among the wave of retailers capitalizing on lower rents, the new frugality of shoppers and the struggle of mainstream retailers to retain consumers fleeing to better deals online.

With a business model that's better protected from online rivals -- selling items too cheap to be shipped cost-effectively -- discount retailers are expected to be a resilient player.

"These days, I think everybody is a discount shopper," said Tim Lowe, vice president of leasing for THF Realty, which owns and operates the sprawling Chesterfield Commons in relatively upscale Chesterfield, Mo.

Until recently, the last new major tenant in Chesterfield Commons was a Dick's Sporting Goods, built in 2007. But last month, a 23,000 square-foot Big Lots opened in the strip's former Circuit City store. A new Gordman's retailer and an Aldi grocery are being built nearby and are slated to open this fall.

And the other gaping hole at the Commons -- the empty Linens 'n Things -- was also recently claimed by Ross Dress for Less. The store has an opening date set for March of next year.

"We didn't want to put just anybody in," Lowe said. "We pursued Ross. We knew they were coming into St. Louis. And we wanted to expand our apparel offerings."

Ross Dress for Less, an off-priced retailer similar to T.J. Maxx, also has signed a lease to open a new store next year in the shuttered Linens 'n Things in Fairview Heights, Ill. The opening date has not yet been announced.

The store chain has been on a growth spurt of late and is making inroads in the Midwest. In 2008, the California-based company had 838 stores nationwide. But by the end of May, it had 998 stores, impressive growth given the country's jobless recovery.

A major catalyst to the changing retail landscape has been attractive leasing deals.

"These sites have been sitting empty for a couple of years, and so they are pretty cheap," said Sherif Mityas, a partner in the retail practice of the consulting firm A.T. Kearney. "So from a retail perspective, you can get sizable real estate at a pretty good discount."

Big Lots now has 13 stores in the St. Louis region, having opened two stores recently in the vacant Circuit City stores in Chesterfield and Fenton, Mo. Nationwide, it rolled out 80 new stores last year and plans to open 90 more this year.

The affordability of prime real estate has driven much of that growth, said Toni Fink, a company spokeswoman.

"We've been able to take advantage of a lot of empty Circuit Cities and empty World Markets," she said. "And so we've been able to get into nicer spots in more-upscale shopping centers."

The moves make sense, too, because more of Big Lots' customers seem to be coming from higher income levels. The stores have seen many "new faces" in the aisles in the past couple of years, Fink said.

The extreme discounters should remain strong even if economic conditions improve, retail experts say. Big Lots, for instance, thrived in the boom years before the recession hit, noted Martin Sneider, an adjunct retailing professor at Washington University. And it doesn't have the same sort of challenges as some of the other recent bricks-and-mortar casualties.

In selling bigger ticket items such as electronics, Circuit City and Ultimate Electronics competed against the 'sweet spot in what the Internet can offer," Sneider said.

But online retailers have proved less of a force in selling basic, cheap commodities, he said. What's more, many of these discount stores inspire foot traffic because their merchandise changes fairly quickly depending on whatever surplus goods it comes upon.

"There's a treasure hunt aspect to it," Sneider said. "You never know what you're going to find."

(c) 2011, St. Louis Post-Dispatch.

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