Chain stores can find Hawai'i market too far a stretch for their business

The good news: Mainland retailers are quick to say "Thanks!" to Honolulu Advertiser readers for putting them on top of our wish lists.

The bad news: Make that, "Thanks anyway."

Representatives of Target, Trader Joe’s and Olive Garden all said they had no plans for stores here in the Islands.

Trader Joe’s spokeswoman Pat St. John would have liked to pass the call to CEO John Shields, but he was out of the office. "I won’t be making a lot of friends," she said. Despite numerous inquiries the California-based chain receives from franchisees, would-be customers and even employees, there are no plans to open a branch of the discount gourmet foods store here.

No. 1 reason: shipping costs. Though employees already have aloha shirts as part of their uniform, she said, with the high cost of getting goods to Hawai‘i, "it wouldn’t be the same store."

Target spokesperson Kristin Jahnke said there are no plans "at this time, though we certainly do appreciate the interest." Target has stores in 46 states, and plans to open its first Maine store in October. Besides Hawai‘i, that leaves only Alaska and Vermont without the trademark red bull’s-eye.

"Right now, our growth strategy is focusing on our existing markets," she said. "Distribution to Hawai‘i would be more of a challenge. As it is now, we have regional distribution centers throughout the continental U.S. Products are brought to those regional centers and then distributed to our stores. In that system, it would be difficult to get product to Hawai‘i."

As for Olive Garden, director of media relations Steve Coe, whose parent company Darden also handles Red Lobster, Bahama Breeze and Smokey Bones restaurants, said it’s corporate policy not to discuss location plans "until it’s a done deal."

"Believe me, this is not the first call I get from the Islands," from media or from people who see the national TV advertising and wonder where the nearest eatery is, said Coe from his Orlando headquarters. "And I sympathize."

Darden operates 468 restaurants throughout North America, including five in Canada, though none in Hawai‘i or Alaska.

Several stores on readers’ wish lists have considered an Island locale:

Cheesecake Factory had signed a letter of intent to locate at Ala Moana Center’s entertainment expansion, but the project was suspended.

Crate & Barrel, Bath & Body Works and the Leslie H. Wexner group (Victoria’s Secret, Limited and Limited Express) have all prospected here, looking for the right location.

Rainforest Cafe had signed a letter of intent to locate at Ala Moana Center’s entertainment expansion, but the project was suspended.

Wolfgang Puck also had signed a letter of intent to be a part of a planned retail complex at the old Ala Moana sewage pump station, but financing fell through.

For every Mainland store that declines to set up shop here, Isle retail experts say, there’s a hugely successful one enjoying record-breaking sales.

Stephany L. Sofos, president of Sofos & Co. Ltd., a real estate consulting firm, and a retail expert, said Hawai‘i has advantages:

We’re a stepping stone to Asia.

We’re a captive audience with 1.3 million residents who have a tendency to be loyal once the store opens up.

There’s a revolving contingent of 7 million tourists, rotating every seven days.

"Because of that, sales per square foot are anywhere from 30 percent to 100 percent higher than in the Mainland U.S.," Sofos said. "Some of the best gross sales per square foot are found in Hawai‘i. Knowing that, (retailers) come.

"And because you’re a Mainland company, you can average and leverage your expenses through your scale of economy." (Translated, that means costs of human resources/bookkeeping/shipping can be consolidated in one Mainland office, with its lower overhead and labor costs.)

"So, you can actually lower the cost here, as opposed to a Hawai‘i-based company, whose costs are higher," she said.

The other side of the balance sheet: Outside what she called the "Golden Rectangle," the right location can be hard to find. The rectangle runs from Kapahulu to Kaka‘ako, Ala Moana to Makiki; it’s "your cream of cream of cream," an area that caters to the local as well as tourist market and sees lots of traffic.

Doug Smoyer, president of Retail Strategies Inc., says Mainland corporate types may pre-judge Hawai‘i as being too far away or too expensive.

"The Wal-Marts and Costcos and Pier 1, the ones who are doing so well, took the time to do their homework," he said. They "can do more business in a store in Hawai‘i than on the Mainland, sometimes two-three-four times more business. Most people won’t take the time to figure that out."

A good example of that is Trader Joe’s, he said.

"Trader Joe’s would do very well out here, could be two to three times" the business of a store on the Mainland, Smoyer said.

But the leasing fraternity around the nation is a fairly small one, Smoyer said. If word spreads around that the economy is bad, or Hawai‘i is a labor-unfriendly town, corporations become skittish.

And Hawai‘i allure may also work against it. Both Smoyer and Sofos say there’s a bad rap on Hawai‘i as being less efficient.

Smoyer said there’s an assumption that employees who to come to Hawai‘i will be so affected by Polynesian paralysis that they’ll begin to spend their time at the beach instead of on the sales floor.

"People worry about the fact that we don’t have four seasons, that we’re Asian-dominated and they may not have the correct products," Smoyer said. "They just have to take the time to come over and understand the market, and find out who is doing well and why. Take 100 retailers from a Mainland chain. Fifty of them have their Hawai‘i stores among their highest-volume stores."

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