When shoppers head to Fair Oaks Mall in Fairfax, Va., they can be excused for feeling a sense of déjà vu as they walk from one end of the mall to other. During their trek they will come across two Macy's. The department stores almost mirror each other in size — one 220,000 square feet and the other 229,000 square feet — and both carry identical merchandise.

What gives?

Macy's ended up operating two locations at the 1.6-million-square-foot mall as a result of the 2004 $17 billion merger between Federated Department Stores and the May Co. Rather than shutter one of the locations, the retailer decided it could generate enough cash flow to keep both open, says Bill Taubman, COO of Taubman Centers Inc., the Bloomfield Hills, Mich.-based REIT that owns Fair Oaks Mall.

Federated/May may have been the most high-profile merger. But there are other events that contribute to the odd sight of malls doubling up on anchors. Names such as Montgomery Ward and Wanamaker's have disappeared. Other chains have had an “eat or be eaten” mentality. As a result, there are less than 10 major department store chains today, down from 35 in 1980. Consolidation has been ongoing in the department store industry for decades, bringing some much- needed efficiencies to the department store world. For mall owners, however, it has created a world of trouble — or opportunities, depending on how you look at it.

“It can be confusing to the customer,” Taubman admits. “One store would be better, but if you talk to Macy's or Dillard's, they say that the cost of consolidating the stores and expanding can often be more expensive than keeping both stores open.”

Splitting merchandise

Today, many mall owners are still working through consolidations — Belk's acquisition of 40 Parisian stores and the Federated/May deal, which rebranded a number of local, homegrown department stores, including Foley's, Bon Marché, Hecht's Famous-Barr, Marshall Field's, Kaufmann's, and Robinsons-May.

Across the nation, mall owners have had to deal with duplicate department stores. John Bemis, executive vice president and director of leasing for Jones Lang LaSalle's retail group, estimates more than 15 percent of malls across the U.S. have duplicate department stores. “The first choice is to have just one department store with all the merchandise under one roof. If that isn't an option and if the property cannot accommodate all under one roof, go with plan B to operate two locations.”

In some situations, like at Fair Oaks Mall, the department stores had operating covenants that required them to operate two distinct, full-line stores. In other cases, owners have allowed department stores to split their merchandise between the two duplicate stores. For example, Glimcher Property Trust's Mall at Fairfield Commons in Beavercreek, Ohio, is a dual Elder-Beerman property. The converted store offers ladies' ready to wear, cosmetics, shoes, fashion accessories and intimate apparel. The original 150,000-square-foot Elder-Beerman store houses the men's and children's department, as well as home goods and a 65,000-square-foot furniture gallery. The arrangement emerged late last year when Elder-Beerman's parent company, the Bon-Ton Stores Inc., converted its 130,000-square-foot Parisian store into an Elder-Beerman store. (Bon-Ton and Elder-Beerman originally became part of the same firm in October 2003.)

“If different merchandise is offered in each store, having two stores can be a good idea,” says Michael Glimcher, CEO of Glimcher Realty Trust, a Cleveland-based REIT. “With the merchandise split between the two stores, every category has more depth and provides more choices for our consumer.”

Similar to Fairfield Commons, Taubman's Sunvalley Shopping Center in Concord, Calif., is a dual Macy's mall, with the merchandise split between the two stores. Together, the two Macy's stores account for almost 400,000 square feet of the 1.3-million-square-foot mall. It's a solution that has worked well for both Taubman and Macy's, Taubman says, although he adds most mall owners would still prefer to avoid duplicate department stores.

In some cases, the owner has the prerogative to veto identical department stores and regain control of one. At that point, the owner has the option of re-leasing the space to another user of the same size or tearing it down and starting from scratch.

But, that can be a costly endeavor, Bemis points out, and most centers end up doing an adaptive reuse. However, class-A centers with high sales per square foot have been known to demolish existing department stores.

Glimcher, for example, decided to knock down the two-story Kaufmann's store at the 1.6-million-square-foot Polaris Fashion Place in Columbus, Ohio, and replace it with a 160,000-square-foot open-air lifestyle center scheduled to open later this year. “A lot of mall owners are going this route,” Glimcher says. “Given the popularity of open-air centers, it makes a lot of sense.”