"This town has been nervous ever since Nixon," one of Washington's major merchants said last week over a hamburger and low calorie soda in a shopping center lunchroom.
Washington consumers are a conservative, cautious lot, he explained. The government workers are still the most important customers, and lately the Carter administration has given them plenty to be cautious about:
Civil Service reform legislation may threaten their traditional job security, the administration's tough bargaining with postal workers could stall the escalator under other government salaries, and the mushrooming General Services Administration scandal adds to the general anxiety level.
As a result Washington area consumers didn't spend much money last month. The official August retail sales statistics aren't in yet, but the numbers will not be good. Assured that his competitors wouldn't read his name, the man with the hamburger and Tab summed up the month: "We'll make last year's profit, but we won't beat it."
Alfred Taubman smiles when he's asked about the Washington retail scene. "This is not only one of the half dozen best markets in America," answers Taubman, the founder, owner and president of the biggest shopping center developing company in the nation. "This is a tremendous market."
The Taubman Company opens its first Washington area project on Tuesday, a 1.3 million square foot shopping center at Gaithersburg in Montgomery County, 23 miles from National Airport, called Lakeforest.
Sears, Hecht's, J.C. Penney and Woodward/Lothrop are the big stores and when the center is full there will be another 140 little ones, among them the first A&W rootbeer-stand-turned-restaurant in a shopping center and the first Washington store of Gantos, a midwestern "missy clothing chain."
Taubman built the lake (three ponds, actually) planted the forest, wrapped the center in brick and topped it with a white roof perforated with skylights. When the sun isn't shining, lights come on in the skylights. "The pattern of light, the pools of light are always the same," the master developer said while escorting a tour through the nearly completed mall. "We try to create the same kind of environmental day and night."
Lakeforest will produce $120 million in sales the first full year of operation, the developer predicts. The mall won't even be fully leased by then. By the time all the stores are opened and doing the kind of business they have to do to pay for the Taubman Company's environment, the annual volume ought to be twice that.
Al Taubman says his company operates shopping centers the way a department store chain operates stores. "Each one is part of the system." A department store company couldn't serve the Washington market with a single store and neither can Taubman. Two more shopping centers are already planned, one in Fairfax County, Va., where Interstate 66 meets Route 50, and another at Glen Burnie. Md. Are even three shopping centers enough to meet the demands of the market? "We hope it will require more than that," answers Taubman.
Where Alfred Taubman goes in Washington, J.C. Penney follows. "We are anticipating a major penetration of the D.C. market," Penney's PR-man Henry Rusman said last week as Penney, the nation's third largest retailer, prepared to open at Lakeforest.
Besides the Lakeforest store, which opens Tuesday, Penney's has announced it will be an anchor store in Taubman's Fairfax project and Rusman admits "there are rumors about us "joining Taubman at Glen Burnie."
Penney's biggest unit in the area, at Springfield Mall in Virginia, is described by company executives as "a very successful store" and is one reason for the chain expanding here. Another is a corporate strategy of moving Penney's from its rural, midwestern base into Eastern and urban markets.
With seven stores in the Washington-Baltimore region, Penney's share of the market is acknowledged to be substantially less than those of Montgomery Ward - already open across the street from Lakeforest - or Sears Roebuck & Co. - at the opposite end of the new mall.
The job of bringing the 160,000 square foot Penney store up to the corporation's sales standards of $200 per square foot is in the hands of Jack Jaqua, a vetern Penney's manager who opted for running stores rather than moving into corporate level management.
Developing a store like Lakeforest to maturity used to be a five-year project, Jaqua said. With computer wands that read prices and computer brains that keep track of sales, he added, "we should be able to do it in three years, maybe four. If it takes five, something's wrong.
If something's wrong, Jaqua will answer for it. Even more than the other big chains, Penney's gives its managers a free hand to run their stores with the certain knowledge that if the store fails to meet the company's sales and profit standards, all it will need is a new manager. Jaqua is not fazed by the task. With conviction that would make Dale Carnegie proud, he grins to a visitor, "I can't tell you how good I feel about this store."
"I only talk to reporters when we open a new store," begins Allan Bloostein, who in accord with corporate policy keeps a relatively low profile as president of Hecht's, the Washington-Baltimore division of the May Department Stores of St. Louis.
That's going to mean a lot of talking in the next two years. Hecht's plans to open at Lakeforest this week, at Security Mall on the Baltimore Beltway next August, in Annapolis next October and in the Taubman center in Fairfax County in the spring of 1980.
Agressive expansion and agressive merchandising are part of the Hecht strategy, which is aimed at the entire Washington-Baltimore market. "Each of our stores is really a separate submarket," Bloostein points out, but the 19 Hecht stores cover a total market area that is the fourth largest in the country, and probably the best in the May chain.
It's not a fast growing market like some Sunbelt cities - department store sales here are up about 8 percent this year, compared to 12-13 percent in several other markets - but Washington is an affluent, upscale market whose consumers continually demonstrate their willingness to consume.
"You have to move with your customer," says Bloostein, explaining why the newest Hecht store - the first to use the company's new logotype - is such a contrast to the company's downtown flagship. "You have to move with the customer and move a little ahead of them."
Moving ahead of the customer means putting a much larger juniors department in the Lakeforest store, because Montgomery County women are younger and more fashion conscious. It means more young men's clothing too, although plenty of it will be purchased by people who are neither young nor men.
And it means a shop called "What did you bring me?" that answers its own question, a new in-store monogram department, an on-the-premises flower arranger and an in-house photography studio for the advertising necessary to communicate the latest Hecht images to the customer.
There are hints of Hecht's new upscale competition throughout the store - a bunch of Bloomingdales bleached wood, crystal bells that could have come from the Neiman-Marcus catalogus, evidence of I. Magnin-style California fashions - but Bloostein said Hecht's is not attempting to move beyond the economic reach of its traditional department store customers.
"Fashion and value," he says, reciting the mantra of merchandisers. "Value is a very important part of our strategy. We have to offer value. Inflation is on the minds of everybody."
May Department Stores doesn't make public the volume figures for its various divisions, but trade sources put Hecht's in the $300 million class for both Washington and Baltimore and say its growth rate is on the high side of the range for department stores. Comparisons with rival Woodward/Lothrop - about a $250 million a year business - are difficult because the marketing areas of the two chains are not the same. The answer to the question "which is the biggest department store in the market?" depends on how the market is defined.
The Woodies and Hecht stores at Lakeforest are identical in size, 150,000 square feet, but Hecht's has set aside an additional 20,000 square feet for future expansion. The company has only once before - at Tyson's Corner - been certain enough of future growth to build in additional floor space, Bloostein said.
But the Hecht president points out that retailing has become a much more difficult business in the last five years, a change he thinks began about the time of the 1973 war in the Middle East.
"In the sixties you could make your plan and pretty much expect to meet it." he explained. "Things have changed, it's much more difficult. Now you design for changes, you plan for the things you don't expect."