by Denise Trowbridge, New Orleans CityBusiness 25th Anniversary Issue, April 2005

Twenty five years ago, few New Orleanians would have guessed that K&B would go out of business or Maison Blanche’s holiday icon Mr. Bingle would hang outside of the Dillard’s at Lakeside Shopping Center in December.

But the city’s retail business landscape has changed dramatically in the past quarter century, with long-standing New Orleans-owned retailers disappearing and big-box stores, suburban malls and independent upscale boutiques flourishing in their wake. During that time, a number of economic factors converged —the mid-1980’s oil bust, an influx of national chain stores and a swelling tourism and convention business— and changed the way New Orleans residents shopped.

Canal Street, once a lively shopping destination ripe with locally-owned retailers such as Krauss, Gus Mayer, Goldrings, D.H. Homes and Maison Blanche, was the hardest hit. Plagued by a rash of bankruptcies and the shuttering of its anchor stores, Canal Street became the symbol for the beleaguered New Orleans economy in the post-oil boom 1980s.

The Leon Godchaux Clothing Company filed for bankruptcy and closed its flagship store in 1986. D. H. Holmes, founded in 1842, closed three years later; the company was acquired by Dillard’s in 1989. Krauss Department Store closed in 1997 after 94 years in business and Maison Blanche closed after 101 years in 1998.

“The oil bust really changed the retail landscape of New Orleans from 1985 to 1995,” said Sydney Besthoff III, the former owner of New Orleans’ defunct K&B drugstore chain. “Local retailers became heavily leveraged and couldn’t handle the decline in revenue.”

“Downtown stores were hit the hardest,” said Darryl Berger, the principal of Darryl Berger Companies, Inc. He is a real estate developer specializing in retail projects, including The Shops at Canal Place and Jackson Brewery. “All of a sudden, white collar people were laid off or transferring to Houston. Office buildings in the CBD were empty.”

Downtown shopping was supplanted by suburban malls, further pressuring locally-owned retailers. The Esplanade Mall, anchored by national chains, opened in 1984 and Lakeside Shopping Center — in a bid to compete — underwent intensive renovations the same year.

“Locals started shopping in Kenner and Metairie because they didn’t want to deal with downtown traffic or wind up with a parking ticket,” said Paul Meyer,the fourth generation manager of Meyer the Hatter; the store has operated at Canal Street and St. Charles Avenue for more than 100 years. “Specializing became the key to survival. You had to have something no one else had.”

Shopping centers also took advantage of a riverfront renaissance spurred by growth in the city’s convention and tourism sectors. Saks Fifth Avenue and The Shops at Canal Place opened in 1983, followed by Jackson Brewery in 1984 and The Riverwalk in 1986. “As part of a large chain, we were able to weather economic ups and downs,” said Carolyn Elder, Saks Fifth Avenue’s vice president and general manager. “When we opened there was nothing at the foot of Canal, but the expansion of the convention center, an influx of tourists and the cruise ship business have helped us.”

The late 1980s and 1990s signaled a spurt in big-box retailing: The first Wal-Mart arrived, as did Home Depot and Circuit City; then, A&P, Walgreen’s and Winn-Dixie expanded.

“Specialty chain stores picked off New Orleans retailers’ business,” Berger said. “The high-end business went to Canal Place, the medium-price point stores were replaced by chains like The Gap, and people who used to shop on Canal Street went to Target and Wal-Mart.”

By the mid-1990s, New Orleans felt the squeeze. Covington-based Campo Electronics filed for bankruptcy in 1997 and closed the last of its stores in 1998.

The Schwegmann’s Grocery store chain, which once had 23 locations in New Orleans, went out of business in 1999 citing a heavy debt load and increasing competition.

K & B, the drugstore founded by Sydney Besthoff and Gus Katz in 1905, had 200 stores in seven states when it was purchased by Rite Aid in 1997. “Most New Orleans retailers closed because of a combination of debt and bad management,” Besthoff said. “K&B was doing just fine. We weren’t having problems competing with national chains, but I wasn’t getting any younger.”

Ultimately, Besthoff said, K&B closed because his heirs were not interested in taking the helm.

Magazine Street emerged as a retail force in 1998 and 1999, with small boutiques filling the gaps left by chains. “The street started to turn around and we got a major influx of new stores, thanks to a surge in tourism,” said Alan Watts, the managing director of the Magazine Street Merchants Association.

The emergence of boutiques and the presence of big-box retailers isn’t a New Orleans-only trend, said Bill Barnett, Ph.D., an associate professor of economics at Loyola University’s College of Business Administration. “It’s happening in most cities. American culture is homogenizing. There has been consolidation across all sectors. Large companies have been expanding into new markets and either compete with local companies or buy them out.

“Home-grown retailers have had to either grow to the same size as their competitors, find a niche or go out of business,” said Barnett.