Look out Gilroy? New outlets make a splash

Sak's Fifth Avenue in the Gilroy Outlets.

The Gilroy Welcome Center entices travelers to visit Gilroy by marketing the area’s boutique wineries, proximity to beaches and miles of hiking, and for the “destination shopping” boasted in the 147-store Gilroy Premium Outlets.

Sixty miles north, Livermore will soon market a strikingly similar visitors’ package.

Nov. 8 marks the grand opening of the Paragon Outlets at Livermore Valley, a 540,000-square-foot shopping complex featuring 132 stores including anchors such as Bloomingdale’s Outlet Store and Saks Fifth Avenue Off 5th, as well as high-end specialty stores like Burberry, Kate Spade and Prada.

Currently, the closest outlet center of this magnitude is the 120-store Vacaville Premium Outlets about 114 miles north of Gilroy.

The City of Livermore, which has been collaborating with Baltimore-based Paragon Outlets for seven years for this project, can’t wait for the boost they expect the new outlets to bring to the local economy. Livermore is the second location built by Paragon Outlets, the first of which opened in Texas this August.

“One reason we are thrilled about this is we’ve always tried to define Livermore as the heart of wine country, because it really is. But now with the outlets opening, we can market ourselves as more of a destination,” said Dale Kaye, president of the Livermore Chamber of Commerce.

Kaye said that Livermore and its surrounding areas are home to more than 50 wineries. In Santa Clara Valley, there are 22.

In what Kaye described as a “very collaborative effort,” the City of Livermore, the Chamber of Commerce, and Paragon Outlets will be working together to market Livermore as an tourist destination.

“These types of outlet malls tend to make a location a destination, whether that’s for a girlfriend’s type weekend at a bed and breakfast, with a spa and shopping day, or a day at the wineries,” she said.

If the Livermore Outlets do steal a significant chunk of Gilroy’s outlet business, the city could be in financial trouble. With 1 percent of all revenue from the outlet center trickling into the City’s coffers, the Gilroy Premium Outlets is the top magnet for sales tax capture in town.

Stores at the outlet center, such as Calvin Klein, Coach Stores, Nike Factory Store and Polo Ralph Lauren, consistently ranked in the City’s top 25 sales tax earners for the year 2011, in the same league as consumer giants like Walmart, Kohl’s and Gilroy Toyota.

But for now, Gilroy’s business-savvy community doesn’t seem too alarmed.

“I think they are far enough away that there isn’t a lot of angst here that they will create competition,” said Susan Valenta, Gilroy’s Chamber of Commerce CEO.  

The Gilroy Premium Outlets, owned by Simon Property Group, opened in 1990 with just a few stores, while more stores were quickly built.

Kaye said Paragon Outlets has been advertising the opening of their Livermore location in the San Francisco Chronicle, Diablo Magazine, Wine Country Magazine as well as other regional publications.

With Livermore’s location right on U.S. 580, Kaye said the city already tends to get a lot of stop-ins from people traveling from the Bay Area to Yosemite and Tahoe. But with the opening of the Outlets, Livermore plans to up their level of marketing to international tourists.

“We’re going to be quite aggressive with tour bus companies,” she said.

Jane Howard, Gilroy’s Welcome Center director, said that about 15 percent of people who stop by the center at south end of the Gilroy Premium Outlets near Forever 21 are international travelers, and that a major portion of Gilroy’s outlet business comes from tour group companies.

There is a possibility that Livermore’s “aggressive” marketing to tour bus companies could eat into Gilroy’s business – but it is unclear if management at the Gilroy Premium Outlets are worried about this happening. They declined to comment for this story.

With a looming threat that some of those precious outlet dollars may be lost to competition, City Administrator Tom Haglund says it’s important for the City to continue to look to new sources of revenue.

“The notion of increased competition for sales tax dollars from other communities over time does speak to the need to continually seek ways to diversify our local economy to include an expanded industrial base that can provide living wage jobs so that we are not placing all our eggs in one basket,” Haglund wrote in an email.

Valenta said that people visit Gilroy not just for outlet shopping, but for the “whole experience” –  from the boutique wineries to Gilroy Gardens, to the smell of garlic that can’t be found anywhere else, to the hospitality from Gilroyans.

“We don’t want to rest on our laurels, but we do understand how to show visitors a good time,” she said.

This culture of hospitality, Valenta said, spawned from the first Garlic Festival 34 years ago, and has been cultivated each year since then.

“When you are a community that draws 100,000 plus in one weekend, it just becomes part of your culture to embrace guests,” she said.

Howard agreed that Gilroy shouldn’t feel too threatened by Livermore’s impending ribbon cutting.

“I guess we’ll just have to wait and see if our numbers are different in upcoming quarters,” Howard said. “As long as we continue to have some kind of marketing strategy, I don’t think it’s something we should worry about.”

City Council candidates Terri Aulman and Paul Kloecker agreed that while Livermore may steal a tax dollar here and there, it won’t be enough to affect Gilroy’s budget. But they both said that this serves as a good reminder to diversify the City’s source of revenue by building up other businesses in Gilroy.

“I think there should be more effort to secure sales tax from the downtown area, and the rest of Gilroy in general, as opposed to just the Outlets,” Kloecker said. “Clearly the sales tax could be better than it is. The way to get that is to promote better business and give some incentives to business owners.”

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