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Universal Studios Entering Competitive Retail Market

Wed., Sept. 24, 1997

Universal Studios, after years of watching archrivals Walt Disney and Warner Bros. gobble up profits with their 800-plus stores, has decided to join the cutthroat world of retailing.

Universal will launch its first store, using a movie-marquee entrance, at its Los Angeles CityWalk entertainment complex in mid-October as a prototype for a chain of stores. The two-story outlet, at the west end of CityWalk and next to the main entrance to the studio tour, likely will sell plenty of apparel, collectibles, videos and games.

While Universal lacks a single all-powerful character like Disney’s Mickey Mouse and Warner’s Bugs Bunny, it has plenty of firepower: the highly recognizable Universal globe logo and a stable of characters including E.T., Jaws, the Jurassic Park dinosaurs, the Land Before Time dinosaurs, Woody Woodpecker, the Wolfman, Frankenstein and Dracula.

The opening of the CityWalk site, next to the Malibu Ranch and Things From Other Worlds stores, will be the second launch of a studio store chain this year. In May, Viacom opened a store in downtown Chicago based on its “Star Trek,” Nickelodeon, MTV and Paramount properties, then recently indicated it might roll out a Nickelodeon chain.

Universal executives have said little about the concept other than confirming that plans for a chain are in the works. But earlier this year, it hired several retailing veterans to head a new consumer products group and launched an apparel licensing program.

“You don’t have to sell the concept of the studio store very hard because they work,” said Kevin Skislock, an analyst with Irvine-based investment bank L.H. Friend Weinress Frankson & Presson. “Everyone knows that Bugs Bunny is a Warner Bros. property, for example. So if you want to keep properties alive, operating stores is one way to do that.”

Disney was the first to take characters out of theme parks and into malls a decade ago when it launched the Disney Stores chain with a single outlet at the Glendale Galleria. The entertainment giant now has 440 U.S. outlets and 191 overseas, while Warner started in 1991 and now has 134 U.S. Studio Stores and 40 foreign sites.

Both chains not only have sold billions of dollars of Donald Duck key chains and Daffy Duck boxer shorts. They’ve also reinforced the Disney and Warner names as entertainment brands, according to Skislock.

“Operating stores is not just about selling more product,” he said. “What you’re trying to do is create brand name equity, like Disney has done. People have a clear idea of what the Disney name means when it comes to films.”

Universal’s stable of properties has plenty of the same potential, according to Skislock. “How about simply saying that E.T. will be in the store this weekend?” he suggested. “My 8-year-old daughter would probably be very interested in that.”

The studios’ operations, Skislock said, were in the forefront of combining entertainment with retail, which led to explosive growth of themed restaurants such as Planet Hollywood and new concepts in the so-called location-based entertainment sector such as the ESPN Store, Club Disney, Disney Quest, Marvel Mania and Sega GameWorks. The first three are Disney chains; the others are partly backed by Universal.

Analysts believe Universal Studios Stores is a sensible approach to strengthening the Universal brand name beyond its theme parks, movies and television shows. And they note that the competition is intensifying.

“Entertainment is moving to the consumer,” Skislock said. “There’s a race on to create more direct contact with the consumers, so instead of hoping someone from New York visits every three years, you put the store in Times Square.”

The merchandising is not the key part of all this, according to Peter Chernack, president of the Burbank-based Themed Entertainment Association. “These stores and restaurants are a new form of entertainment,” he said. “Retailing is becoming not just a place to shop but something that’s tied into experiencing the environment, whether it’s Nike Town or the Warner Studio Store, that’s presenting a whole attitude and lifestyle.”


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