Downtown Retail Part II. Survive, Manage Effectively and Reposition

It is essential for downtown retailers to keep the proper perspective. While the media frequently ask and answer the recession question, no one to our ken has suggested that we are entering a depression resembling what this nation experienced during the 1930s. Consumers have not stopped shopping, though they may be spending less, purchasing a different basket of merchandise and making consumer purchases based on new weights for the variables in their decision-making calculations. The consumer expenditure pie has shrunk, not disappeared, and merchants will be facing tougher competition to capture their individual slices. Some retailers will close, while others are likely to open, though overall vacancies may increase.

Although it is true that a few firms can grow during a recession — e.g., MTV, Silhouette Blinds, Trader Joe’s, and the iPod were all launched during economic downturns – most retail experts recommend a more prudent response to tough economic times that emphasizes three key objectives: survival, effective management and repositioning. For some downtown retailers, effective management and repositioning will be essential to their survival.

A. Effective Management
To get through the stressful economic conditions anticipated for the coming five years downtown retailers will definitely need to carefully manage their resources. This may require more inventiveness than just making across the board cuts. For example, the need for some form of effective and affordable advertising will be greater than in fat economic times, but finding the money for it and deciding how to advertise can be a real challenge for small merchants when newspaper readership is in a steady decline, print advertising is losing both its effectiveness and popularity, and ad clicks on Google have flattened. 1

B. Repositioning
Tough economic times create good opportunities for downtown retailers to take stock and rethink their businesses. For example, instead of making a 20% across the board cut, a merchant could reposition by cutting out an entire underperforming line and using the money saved to introduce a new one that is better suited to the current economic conditions.

Or the merchant might develop a stronger, yet affordable customer service program to counter his customers’ increased desire for low prices. Along these lines a merchant might devise a program to encourage “customer advocacy.” Advocates – some experts call them Store Apostles — will “like your store, recommend you to others, buy from you and stay with you.” 2 Whether a shop has customer advocates or customer antagonists can have a big impact on its bottom line, especially in tough economic times: a small core group of customer advocates may account for as much as 50% of a store’s sales and profits. 3 A recent study of customer advocates among apparel shoppers found that the two characteristics that were most important to them were that the shopping experience be pleasant and enjoyable and that it is easy to do. 4 The biggest attitudinal difference between an apparel store’s advocates and its antagonists was on their perceptions of whether or not the store had an “always fresh and new product selection.” 5

Customer antagonists can pose a real problem: about 31% of shoppers tell many people about their bad experiences and 48% of customers will avoid a shop because someone told them about having a bad experience there. 6

C. Strengths Of The Unscathed
A recent magazine article identified some retailers that appear to be weathering the current recession unscathed. It is probative to review the explanations given for their enviable situations: 7

• Tiffany & Co.: “… wealthy folks still have Valentine’s Day and wedding gifts to buy. Luxury retailers without an international presence are the ones struggling. ‘Tiffany’s end results were pretty good because they don’t only sell to clients looking for affordable luxury but to very rich customers who are not necessarily impacted by the U.S. dollar’ says Dave Sievers, retail practice leader at Archstone Consulting.”
• Wal-mart: “…on the other hand, does better with sales of food and nondiscretionary items, which continue to perform solidly.”
• Urban Outfitters. “No other store looks like them. The catchy windows draw people inside. The funky clothes sell themselves.”
• Costco: “They offer constant newness and incredible value.”
• Walgreens: “…leads the drugstore sector in sales and profits with 1,600 24-hour stores (out of their 6,237 outlets), convenient locations and easy online access.”
• J.Crew: “… made the designer business affordable through brilliant product development. Now customers get cashmere sweaters and tailored suits for less than high-end labels.”
• Kroger: “The largest traditional food retailer in the U.S. is doing well because its stores are convenient and people still need to eat.”

The following factors can be distilled from the above comments:
• A focus on non-discretionary consumer items
• A very upscale customer base
• Convenience
• Value through price alone or a high design quality per dollar ratio
• Merchandise and shopping environments that are unique and frequently refreshed

The discussion above is not exhaustive, but it is hopefully a good place for many downtown merchants to start when thinking about how to adapt their operations to the economic conditions that are likely to dominate their downtowns over the coming five years.

1. Julia Angwin and Joseph Hallinan, “Newspaper Circulation Continues Decline, Forcing Tough Decisions –,” Article Here.
Louis Hau, “Newspaper Ad Decline Accelerates –,” Article Here. Robert Hof, “Google: What Goes Up…,” Article Here.
2.Melody Badgett, Maureen Stancik Boyce and Jeffrey Hittner, Why advocacy matters to apparel retailers :Customer focus requires apparel retailers to dress for success, IBM Institute for Business Value, 2007, pp.14, p.2
3. Michael J. Silverstein and Neil Fiske, Trading Up: The New American Luxury, Penguin, New York, 2003, pp.305, p. 18
4. IBM Institute for Business Value, “Customer Focused Apparel Retailer Study.” 2007
5. Melody Badgett, Maureen Stancik Boyce and Jeffrey Hittner, Why advocacy matters to apparel retailers :Customer focus requires apparel retailers to dress for success, IBM Institute for Business Value, 2007, pp.14, p.8
6. Ibid. p.2
7. Kristina Dell, “Retail Stars of the Recession – TIME,” March 18, 2008, Article Here.