Waikiki’s retail landscape is headed for major changes as national big-name discount chains join the mix of high-end shops and small mom-and-pop operations in Hawaii’s tourist mecca.
Trendy fashion retailer Forever 21 is expected to open its biggest Hawaii store this fall in the space originally earmarked for Hilo Hattie at the Royal Hawaiian Center, while Ross Dress for Less is building a megastore — measuring nearly 40,000 square feet — targeted to open in 2011 at the site of the former Waikiki 1 and 2 Theatres.
Some small businesses fear they will be squeezed out of Waikiki when the retail giants open. Others see the addition of national discount retailers in Waikiki as welcomed competition and a boost to the destination’s general appeal.
"The reality is it’s probably going to be the death to a lot of small mom-and-pops," said Laurie Rodriguez, co-owner of Little People Hawaii, which opened in 1992 at the Outrigger Waikiki on the Beach and sells Hawaiian clothing and accessories for children. "The small independent business owners, they’re struggling — it’s just another nail in the coffin."
As taxes, rents and overhead costs — including utilities and employee benefits — continue to rise, business owners are becoming less profitable, she said.
"I’m worried for Waikiki when that Ross megastore opens up, we’re going to lose business, obviously," Rodriguez said. "If you’re a consumer, where would you go? We don’t have the buying power and don’t have the prices (to compete)."
Despite the start of an economic recovery, Hawaii travelers are still searching for bargains to stretch their dollars. Budget hotels were fuller than any other lodging category in May. And while increased occupancy has helped boost retail sales at Waikiki hotels, consumers are still eating out less and spending less overall, according to David Carey, president and chief executive officer of Outrigger Enterprises Group.
While the mainland discounters might be welcomed by budget-conscious consumers, others seeking authentic Hawaii products will miss the smaller mom-and-pop places if they are forced to close, said Pat Perreira, Rodriguez’s sister and partner at Little People Hawaii.
"There are people who come to Hawaii that want to see something more Hawaiian and different; it’s becoming harder and harder to find these days," she said. "That might be the reason why people are going to the outer islands — the charm of Hawaii is not in Waikiki."
She added that Waikiki is turning into a nondescript city that could be found anywhere in the nation, which "doesn’t make us look special at all."
Maureen Kilcoyne, owner of the Banana Bay and ‘O Kealakai sports- and swimwear stores in the Outrigger Waikiki on the Beach, said she has seen a lot of shops turn over because "Waikiki’s gotten really tough."
"More local stores are just disappearing," said Kilcoyne, whose family opened the business in the Outrigger in the mid-1960s.
Carol Pregill, president of Retail Merchants of Hawaii, said that while local chains have survived when national retailers come to town — such as local home improvement stores — "not all businesses have the resilience."
"Retail is a highly competitive industry. It’s unfortunate but it is what it is," she said. "You can’t really keep out what appears to be harmful competition. The reality is we could very likely see the demise of smaller retailers. It always boils down to the mix of what’s offered there."
Bobbi Chaville, a Ross spokeswoman, said the company is bringing more value and options to consumers and "could in fact drive some traffic to the area."
Jack Pomeroy, owner of Immanuel Enterprises, parent company of Elephant Walk in the Hyatt Regency Waikiki and Hilton Hawaiian Village as well as Soul Lei on Kalakaua Avenue, agreed that the large discount chains could create a synergy for retailers and ultimately bring more foot traffic to Waikiki.
"The space today is vacant and a wreck — that’s worse for the industry than anything else," said Paul Kosasa, president of ABC Stores, which has 37 Waikiki locations. "The fact that you can bring some life back in that area is actually a good thing."
But Perreira worries that the mentality of the customer changes when you add discounters and makes it harder for nondiscounters to make it.
The new developments will put pressure on retail sales and could lead to smaller stores seeking rent concessions from landlords or going out of business, according to retail analyst Stephany Sofos.
"The bottom line is what doesn’t kill you makes you stronger," Sofos said. "The small guys around will have to get a lot more creative with how they market and display themselves, or they’ll die."