Category Archives: Change Agents

So You Don’t Have a Lot of Hip Young Professionals…

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Posted by N. David Milder

Introduction

For over a decade Richard Florida and Joel Kotkin have dueled over the proper way to analyze regional economic growth and their conflicting political and urban/ suburban preferences. They do agree, however, on one very basic and critical point: in today’s world, economic growth is very dependent on knowledge and geographically will tend to flow to areas where the knowledge workers cluster. (1)

Unfortunately, many within the economic development community have come to have a disproportionate amount of focus on and regard for one type of knowledge worker, the young hip urban professional. Too often communities feel unable to secure their economic futures because they have few young hip professionals or are led into futile attempts to attract them. Frequently overlooked are other assets that these young hipster deficient communities do have and that could be leveraged into economic growth.

Attention to young urban professionals within the economic development community predates the Florida-Kotkin “debates,” emerging in the 1980s. Once called “yuppies,” by the 1990s that term had became pejorative and worn out because of the segment’s behaviors and luxurious lifestyle. Later, around 2000, Richard Florida came along with his creative class theory that helped refocus attention on young knowledge workers and artists whose presence and behaviors shaped the hip, open-minded and welcoming urban communities that are conducive to growing creative class clusters. (2) About the same time downtown real estate developers and retailers had discovered the economic clout of these young well-educated urbanites, whom some referred to revealingly as “walking wallets.” Some developers of downtown residential buildings even had them specifically designed to suit this market segment in terms of apartment layouts, amenities and leasing policies. (3)

Googling “the importance of hip young professionals in economic development” brings up a host of articles that proclaim the economic significance of having a throng of young professionals in your community. For example, an article in the Richmond Times Dispatch stated:

“Based on lessons learned from “urban hub dynamics,” the long-term economic prosperity of metropolitan areas will be based, in part, on how quickly a region can become recognized as one of these preferred places for young professionals to live and work today.” (4)

However, there has been a well-known unevenness in the ability of metro areas to grow and/or attract young, hip knowledge workers. Consequently, many cities that did not have a lot of young professionals or that were losing them to hipper cities, have taken on action programs specifically aimed at wooing them, e.g., Cincinnati, Pittsburgh, Richmond, Memphis, Tampa, Indianapolis, Baton Rouge, St. Louis, Milwaukee, Tallahassee, and Fresno. (5).

Even within young professional rich metro areas, the geographic distribution of the young professionals usually is lopsided, taking on a split that leaves the suburbs well behind the urban cores. Does that mean that these suburban communities and their downtowns are doomed economically because of their young professionals deficits?  For them to try to replicate big city hip neighborhoods on a much smaller scale in and around their downtown areas may be an appealing strategy, though one of often questionable viability. Consider Richard Florida’s explanation of why young professionals are drawn to urban locations:

“Urban living provides them with thicker job and dating markets, opportunities to share rent with roommates, and plenty of things to do in their off hours, from bar-hopping to attending graduate school.” (6)

Suburban communities that want to erase a young professionals deficit need to have sufficient and appropriate “thicknesses” and should ask:

  • Are they basically bedroom communities with a supportive downtown or are their downtowns regional commercial centers?
  • Can they generate enough knowledge worker employment opportunities nearby?
  • Can they provide a density of entertainment/leisure activity options that approaches those of large urban neighborhoods?
  • Can they reach a young professional critical population mass that can attract other young professionals?
  • Can they provide affordable and attractive downtown rental housing and will the landlords do leases when roommates are involved?

Perhaps suburban communities and metro areas with young professional deficits should have a more realistic perspective on the economic advantages of young professional populations and then take an in-depth look at other assets that they do have for leveraging economic growth.

Putting Young Professionals in Perspective as Economic Growth Assets  

Discussions of young professionals often conjure up images of brilliant young entrepreneurs such as Bill Gates, Steve Jobs, Larry Page, Sergey Brin and Mark Zuckerberg, who in their 20s founded huge high technology companies in a garage, a dorm room or a makeshift office. (7) These young business titans seem to demonstrate the superior entrepreneurship, high tech know-how and inventiveness of young professionals, an image that is also reinforced by reports of slower adoption of digital technologies by older age cohorts. (8)

Entrepreneurship. Some very credible research done for the Kauffman Foundation clearly shows that people in the 20-34 age group are not the most entrepreneurial, but the least. For example, a 2009 report by Dane Stangler found that:

 “Contrary to popularly held assumptions, it turns out that over the past decade or so, the highest rate of entrepreneurial activity belongs to the 55-64 age group. The 20-34 age bracket, meanwhile, which we usually identify with swashbuckling and risk-taking youth (think Facebook and Google), has the lowest rate. Perhaps most surprising, this disparity occurred during the eleven years surrounding the dot-com boom—when the young entrepreneurial upstart became a cultural icon.” (9)

 Furthermore, another Kauffman study by Robert Fairlee published in 2011 found that between1996 and 2010 the 20-34 age group’s proportion of new entrepreneurs dropped from 35% to 26%, while the 55-64 age group’s proportion rose from 14% to 23% (10)
Freelancers are self-employed, not committed long-term to a client or employer and usually not incorporated. They can be in a wide range of industries and occupations. In many of our urban creative clusters, “creative freelancing” also is a growing trend. For example:

“In a 2005 report, the Center for an Urban Future estimated that 22,000 “creative freelancers”—writers, artists, architects, producers, and interior, industrial, and graphic designers—lived in Brooklyn, an increase of more than 33 percent since 2000. The Brooklyn Economic Development Corporation has dubbed the area from Red Hook to Greenpoint the “Creative Crescent.” (11)

Many of these freelancers are Millennials, i.e., people born between 1977 and 1993. The online freelancer job mart oDesk (sic) had a survey done of “independent workers (freelancers) worldwide who had been active on odesk within 180days.” Unfortunately, no data was provided on how many respondents were from the USA, but, given that oDesk is based in CA and the website operates in English, one might reasonably presume that most respondents were American. Almost 2,000 of the freelancer respondents were Millennials and their views about entrepreneurship are revealing. They are certainly enthused by entrepreneurship though their understanding of the concept is rather untraditional: it is divorced from the notion of starting a business. As Rieva Lesonsky summarized their views:

  • For 90 percent of Millennials surveyed, being an entrepreneur means having a certain mindset, rather than starting a company.”
  • “Aspects of this mindset mentioned included being a self-starter, risk-taker, visionary and someone who ‘spots opportunity.’ ”
  • “Millennials see themselves as building entrepreneurial careers whether they work for someone else or freelance – they don’t necessarily have to start their own businesses.” (12)

In this respect, the Millennials’ “new entrepreneurship,” in both attitude and deed, may help channel them to corporate careers since it is exactly what corporations now are looking for in new hires. According to Eleonora Sharef of Hireart.com:

 “The most successful job candidates… are ‘inventors and solution-finders,’ who are relentlessly ‘entrepreneurial’ because they understand that many employers today don’t care about your résumé, degree or how you got your knowledge, but only what you can do and what you can continuously reinvent yourself to do.” (13)

 Creativeness/Inventiveness. Prima facie, it seems absurd to think that creativity and inventiveness halt completely or significantly after people reach 30 or 35. While there appears to be a lot of conventional wisdom on this subject and a number of opinion-based articles, there are surprisingly few rigorous studies. Also, the linguistic boundaries between being creative and being inventive or innovative are unclear, which makes analysis difficult. That said, if we take even a quick look at artists, be they in the visual or performing arts, they certainly appear to be creative well past their 30s, as the careers of people as diverse as da Vinci, Monet, Degas, Cezanne, Picasso, Matisse, Pollack, Grant, Olivier, Brando, Hepburn, Wilder, Lean, Ford, Allen, Kazan, Spielberg, Bach, Casals, Horowitz, Rachmaninoff and Perlman demonstrate. However, within those careers, many of the artists achieved one or more new styles or techniques that others saw as innovative and inventive. Cezanne, Matisse and Picasso, for example, were well known for their innovations, which continued on through the length of their careers. Among writers, many continued to produce works late in their lives, a small sample of whom might include Charles Dickens, Henry James, Mark Twain, Herman Wouk, Philip Roth, Agatha Christie, George Simenon and John Le Carré.

If we look at the worlds of science and technology a similar pattern emerges, with the exception of mathematics. Within academia it is commonly held that great mathematical achievements are overwhelmingly done by those under 30. Yet, Isaac Newton, who did indeed invent calculus when he was 24, then went on to invent modern physics when he was in his 40s. While Albert Einstein, Werner Heisenberg, Niels Bohr and James Watson did their best work in their 20s, Michael Faraday, Max Planck, Ernest Rutherford, Fritz Haber and Louis Pasteur did theirs in their 40s. (14)

Many of our digital wunderkinds have achieved or try to keep on making significant innovations later in their lives. Steve Jobs certainly made a splash in his 20s when he and Steve Wozniak invented the Apple computer, but he later founded Next and Pixar and many observers feel that his decades later contributions to the iPod, iTunes, iPhone and iPad were of equal or even far greater significance. Bill Gates also made major digital innovations while in his 20s and now is working on globally eradicating major diseases and improving education. Sergey Brin and Larry Page founded Google with their innovative search algorithm while in their 20s and now have their company working on such things as driverless cars and carbon free energy generation. Elon Musk helped found PayPal while in his 20s and now is involved in Tesla electric cars, SpaceX rocket launchers and SolarCity, a provider of solar energy systems. Furthermore, Silicon Valley is known for its many “serial entrepreneurs.”

One rigorous and interesting research project written in 2008 by Benjamin Jones at the Kellogg School of Management reported that the age of the innovators when they attain “great achievements in knowledge” is getting older and older: “The great achievements in knowledge of the 20th Century occurred at later and later ages. The mean age at great achievement for both Nobel Prize winners and great technological inventors rose by about 6 years over the course of the 20th Century. This aging phenomenon appears to be substantially driven by declining innovative output in the early life-cycle.” (15) Moreover, this research seems to show that “a 55-year-old and even a 65-year-old have significantly more innovation potential than a 25- year-old.” (16)

They Like Dense Urban Environments.  If young creatives are not more entrepreneurial or innovative than other age cohorts, then why have they captured the attention of so many within the economic development community? It is not because they play a critical role in Florida’s defining of the creative class, in which the pivotal, all important concept is that of the work people do, whatever their age or education. As Florida has explained, he developed his theory as an alternative to human capital theories of regional development:

 “Human capital theory uses educational attainment (typically the percentage of adults with a college degree), a very broad measure that excludes such successful entrepreneurs as Bill Gates and Steve Jobs, who didn’t graduate from college. My creative class measure is based on the work people actually do, as measured by detailed Bureau of Labor Statistics data. This allows researchers and economic developers to zero in on the actual occupational categories – science and engineering, arts and culture, business and management, meds and eds – that make up the creative class and other occupational classes….

 The creative class is not just a proxy measure for college graduates. Roughly three?quarters of college grads in America work in creative class jobs, but four in ten members of the creative class— 16.6 million workers—do not have college degrees.” (17)

 A more viable explanation of why the economic development community has focused so much of its attention on one subset of the creative class, the hip young creatives, is not the kind of work they do so much as where they like to live and their leisure time and entertainment activities. For decades, the economic development community was searching for a way to revitalize our nation’s urban areas. Numerous researchers, including Florida, Eugenie Birch and, even in some writings, Kotkin, have demonstrated that young professionals’ lifestyle preferences provide a potential solution path: they like living in dense urban environments and are flocking to them. (18)

Also interesting is that fact that this same research has shown that empty nesters, too, like dense urban living and are downsizing from their suburban single-family homes to urban apartments and townhouses. However, the economic development community has focused far less attention on the empty nesters than it has given the young hipsters.

While the hip young creatives may prefer living in dense urban areas, suburban areas can also attract large numbers of residents whose occupations fall within Florida’s definition of the Creative Class. (19) For example, in 2011, Morris County, NJ has 123,629 residents, 49% of the 269,714 in the labor force, who are in management, business, science, and arts occupations. (20) Many non-Millennial knowledge workers who have children prefer living in the suburbs. What proportion of them will move to urban core areas when their nests empty is unknown, but the odds are that significant numbers will stay in their suburban homes and/or communities, perhaps in their own downtowns in newly built or refurbished apartments. Other creatives/knowledge workers, the “lone eagles,” prefer to live and work in scenic rural “Valhallas.”(21)

Attraction for Employers. Many companies like to recruit the best and the brightest out of our nation’s top colleges and universities because they think they are accessing new ideas and techniques. Nonetheless, many firms also have a preference for hiring younger people that is based on bottom line reasoning. For example, it is not unusual to see a number of stories in the media about the age preferences in corporate hiring and the difficulties that people over 40 have in finding new jobs. Many firms prefer to hire younger people because they will work at lower salaries for longer hours, will probably be healthier and have more distant pension payouts than older and more experienced workers. One observer cited data showing that associates in one global law firm work an average of 2,462 billable and unbillable hours a year, 47 to 49 hour a week, though others in the industry claim the weekly total is probably closer to 60 hours. (22) It is not uncommon in New York City to hear claims that firms in the advertising, entertainment and legal industries “like to eat their young.”

Corporations also like to hire freelancers because of lower salary and benefit costs. As noted above, many firms may also like the millennial freelancers’ new  entrepreneurial mindsets.

How this will affect corporate office locational decisions remains to be seen. Certainly there is an interest in tapping this labor market segment in regions where they are present. Often, firms may not have to locate in downtowns to tap this labor market. When making locational decisions many firms will look at labor pools defined by 30 to 45 minute travel times, which means that many urban core young knowledge workers can be tapped from many suburban locations. Some firms may decide for suburban or urban locations depending upon the situation. Google, for instance, has not moved to San Francisco though it has hundreds of white buses transporting its employees everyday from the city to and from its headquarters Mountainview complex, an hour’s drive away. Yet, it also has a very large presence in Manhattan. Also, reverse commuting has been growing in many metro areas.

Population Size. The Millennials, of which the young urban hipsters are a subset, constitute the largest generation, about 23% of the US population, but they are outnumbered by the combined populations of the older and still largely active Gen X with16%, Younger Boomers 14%, and Older Boomers 10%. (23)

 Some Suggested Take Aways

  • There is little doubt that urban areas with a cluster of young hip creatives have a strong asset capable of driving a good part of their revitalization efforts
  • But, if you don’t have a heap of hip young creatives in or near your community, you may have lots of older creatives or some other assets, e.g., gas and petroleum trapped in shale rock, upon which your economic revitalization can be built
  • There probably are more knowledge workers and artistic people who are older than 35 years of age than younger
  • These “mature creatives” are more entrepreneurial and, at a minimum, just as innovative and creative as the younger group
  • In metro areas that are rich in knowledge workers, many of them probably live and/or work in suburban communities and these communities should have revitalization strategies that clearly recognize and leverage this asset
  • It should not be forgotten that many non-Millennial knowledge workers and artists also often live and/or work in dense urban areas, e.g., office workers, teachers and researchers, doctors, lawyers, nurses, architects, etc.

Disclosure

The author is not a Millennial, though he is quite fond of his friends and relatives who are.

ENDNOTES

1.  See for example: Richard Florida, The Rise of the Creative Class: And How It’s Transforming Work, Leisure, Community and Everyday Life, Basic Books, 2002, pp. 402; Joel Kotkin, The New Geography: How the Digital Revolution Is Reshaping the American Landscape, Random House.(November 2000) pp. 256. The family of terms creatives, young professionals, young urban hipsters, knowledge workers, artists are used in this article as basically referring to very similar if not entirely completely congruent groups of people, some being subsets of others.

2. Richard Florida, “Competing in the Age of Talent: Quality of Place and the New Economy,” January 2000, pp. 55

3. Personal interviews with developers from 2003 through 2007

4. John W. Martin and Jack Berry, “Winning young professionals,” Richmond Times Dispatch,  May 20, 2013

5 Haya El Nasser,  “Mid-sized cities get hip to attract young professionals,” Yahoo! News, October 10, 2003

6. Richard Florida, “The Fading Differentiation between City and Suburb,” Urban Land, January 31, 2013, Article 

7. Tom Agan, “Why Innovators Get Better With Age,” New York Times, March 30, 2013

8. Maeve Duggan and Joanna Brenner, “The Demographics of Social Media Users — 2012,” PewResearchCenter, February 14, 2013. http://pewinternet.org/Reports/2013/Social-media-users.aspx ; Kathryn Zickuhr, Generations and their gadgets, Pew Internet, Feb 3, 2011  http://www.pewinternet.org/Reports/2011/Generations-and-gadgets/Report.aspx?view=all

9. Dane Stangler, “The Coming Entrepreneurship Boom,” Ewing Marion Kauffman Foundation, June 2009, pp. 6 p.4. Kauffman’s research looks at “all new business owners, including those who own incorporated or unincorporated businesses, and those who are employers or non-employers.”

10. Robert W. Fairlie, “Kauffman Index Of Entrepreneurial Activity 1996 – 2010,” Kauffman Foundation, March 2011, pp. 28, p.9.

11. Kay S. Hymowitz, “How Brooklyn Got Its Groove Back: New York’s biggest borough has reinvented itself as a postindustrial hot spot.” City Journal, Autumn 2011,  www.city-journal.org/printable.php?id=7527

12. Rieva Lesonsky, “Millennials Are Rewriting the Rules of Work and Entrepreneurship” reports on a survey that had a full sample of 3,193, of which 1,958 were Millennials and was done by Millennial Branding for oDesk. For the oDesk slideshow on the report see: http://www.slideshare.net/oDesk/millennials-and-the-future-of-work-survey-results

13. As described in Thomas L. Friedman, “How to Get a Job,” New York Times, May 28, 2013, NYT Article here

14. See: http://www.scieditco.com/images/agescientists.html

15. Benjamin F. Jones , “Age and Great Invention,” Kellogg School of Management,  April 2008

16. See Tom Egan above

17. Richard Florida, theatlanticcities.com/jobs?and?economy/2012/07/what?critics?get?wrong?about?creative?class/2430/

18. Eugenie L. Birch, “Who Lives Downtown,” November 2005 • The Brookings Institution • Living Cities Census Series, pp. 20

19. Kris Hudson, Wall Street Journal, May 15, 2013,”Is Generation Y a ‘Game Changer’ for Housing?”

20. Source: U.S. Census Bureau, 2007-2011 American Community Survey

21. See: Philip M. Burgess, “Lone Eagles Are a Varied Species,” The Rocky Mountain News, April 12, 1994 and Joel Kotkin, The New Geography cited above

22. Steven J. Harper, “The Tyranny of the Billable Hour,” New York Times , March 28, 2013, http://www.nytimes.com/2013/03/29/opinion/the-case-against-the-law-firm-billable-hour.html

23. Pew Research Center’s typology of generations was used with national census data for 2011 to compute these population estimates.

THE NEW NORMAL REQUIRES MORE DYNAMICALLY MANAGED DOWNTOWN ORGANIZATIONS

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Introduction

Since even before the onset of the Great Recession at the end of 2007, a new normal for downtowns has been emerging. Downtown retailing, office use, entertainment niches, housing development, population growth, transportation use, etc. have all experienced significant changes. From my discussions with downtown leaders and merchants, municipal economic development officials and developers, my reading of many articles, my participation in online discussions and my assessments of a number of revealing recent RFPs, I have concluded that the vast majority of downtown leaders and their organizations are not adjusting to these rapidly occurring changes. Too often they demonstrate that they are scarcely aware of them, let alone adjusting their operations to deal with them. Some of these changes represent potential growth opportunities, while others pose strong existential threats.

Downtown Retail’s New Normal

In this posting I will focus on retail. Over the past five years the demand for retail space has changed dramatically. For example:

  • There’s been a paradigm change in consumer behavior with the emergence of the “deliberate consumer” who spends less and with greater deliberation, considers needs more than wants, and who uses credit far less often.
  • The Internet is now involved in over 45% of all retail sales — if retailers are not in on the search, they are unlikely to be in on the sale
  • An integrated multichannel approach to retail is increasingly necessary– brick and mortar, internet, b2b sales, trunk shows, concierge services, etc. —  for merchants large and small.
  • The impacts of the internet and the recession have been strongest on GAFO merchants, with the big box stores and small merchants among them hit the hardest. Small downtown merchants who sell GAFO type merchandise are at a growing disadvantage if they do not have an effective presence on the Internet to complement their brick and mortar stores, yet most lack the required resources and skills to create and maintain such a presence. Without an effective e-commerce capability, these small merchants are likely to fail and produce more vacancies that are hard to fill.
  • In many medium and large downtowns, small independent merchants are disappearing at alarming rates because of unaffordable high rents, decreased consumer demand and strong e-commerce competition.
  • Nationally, the amount of retail space decreased by 259 million SF between 2001 and 2011 and is expected to drop by another 210 million SF by 2016. (1).  The number of real estate experts who recognize that the nation has far too much retail space has grown substantially.
  • The suburbs are saturated; growth opportunities are shifting to dense urban areas and possibly some ex-urban areas.
  • Today, only about one-third of the 1,300+ malls in the U.S. are high-growth, investment-grade properties; another one third are in deep trouble and prone to either closing or being re-purposed. (5) The successful malls are increasingly taking on the look and functions of successful downtowns and adding many non-retail functions.
  • Big box and category killer stores – e.g., Best Buy, Staples, Circuit City, etc. – have been hit hard by both the recession and strong e-commerce competitors.
  • Generally, retail chains are looking for fewer and smaller locations. Internet sales mean that many now require less on site storage space for inventory (4).  Many use the resulting cost savings to pay for improvements in their own e-commerce capabilities, while others are developing the smaller formats to ease entry into tight urban contexts.
  • But, the smaller formats eventually may also go into suburban and ex-urban locations, once the chains master them. This may mean that Walmart, Target, Best Buy, et al may be trying to enter more, not fewer communities.
  • Banks are no longer gobbling up prime downtown retail sites with their branches as a result of e-banking, especially the growth in mobile.
  • Many downtowns continue to report significant vacancies and that, when filled, the likely new tenants are personal and professional service operations, not retailers.
  • Downtown food related operations (e.g. groceries and restaurants) and personal services have been the most successful sectors from 2007 through 2012.

Current Response Patterns

Here are some of the response patterns I have observed:

  • There is a strong propensity to believe that, once the ill effects of the Great Recession are overcome, there will be a return to the way things were prior to 2007. Few are aware of the structural changes in the demand for retail space and many of those who are have not really grasped their full implications.
  • There seems to be little recognition that for the foreseeable future it will be much harder for most downtowns to attract retail chains than in the pre-2007 years and that if they want to have any significant retail, they increasingly will need to:
    • Accurately know which retail chains they can realistically expect to attract
    • Go beyond traditional retail marketing and promotions and get deeply into economic gardening type operations aimed at developing and growing small merchants.
  • No one is talking about whether, in the new retail environment, a small “big box” store, like a 15,000 SF Walmart, could be a good thing for their downtown. But, I bet that within the next five years this will be an issue for a surprising number of communities.
  • As talk of downtown multi-use projects has started to come back, the inclusion of retail seems to be divided between those who see retail returning to its pre -2007 days and those who believe retail is now too risky to include at all. Perhaps there is a viable middle ground of fewer retail tenants who can be recruited to and succeed in such downtown projects.
  • Local political leaders too often still expect new downtown mixed use projects will attract a bevy of trophy retail tenants.
  • A surprising number of downtown leaders will acknowledge the need for local merchants to develop a multichannel approach with a strong e-commerce component, but not want their organizations to get too involved in assisting their merchants make this transition. This seems to be largely due to their own lack of knowledge about e-commerce , often age related, and their organizations’ financial constraints.
  • On the other hand, a good number of downtown leaders do want to help get their merchants involved in e-commerce and some have programs to do so. However, too many of these programs are simply e-directories and do not provide the merchants with needed marketing and transaction functions. Few appeared to based on a knowledge of how websites, emails and the social media are used by shoppers and which market segments are most drawn to each of them.
  • The complexity of developing an effective downtown program that can facilitate small merchant e-commerce capabilities is evidenced by the fact that our largest retailers are still trying to figure out how to merge their e-commerce and brick and mortar operations and how to effectively use the social media.
  • The recently announced reorganization of Staples is a good example of this. Motivated by declining sales, adverse consumer trends, the growing importance of its online sales, Staples’ new strategic plan calls for: increased investment in its online and mobile capabilities, further enhancing its multi-channel strength by uniting the management of its online and brick and mortar operations, expanding the range of the merchandise it sells, and an overall 15% reduction in retail store square footage to increase their productivity. The later will entail both store closings and downsizings. (2, 3).
  • Few downtown or Main Street organizations have tried to strategically face the problem of what to do with their excess and often vacancy –prone retail spaces.
  • Faced with vacancies, many downtowns have welcomed, as inevitable, personal and professional service operations as tenants for vacant prime retail locations. However, the lack of enough high quality retail spaces has long been a fundamental barrier to revitalizing downtown retail sectors, so communities following this tack may be severely harming their long-term retail prospects. Admittedly, filling these vacant prime storefronts is highly desirable, but perhaps more innovative and retail-friendly responses could be developed, such as:
    • Tying rentals to service operations to a high vacancy rate (say 12%) in the downtown or blockface
    • Targeting the vacant prime storefronts for such uses as a retail incubator or a location for other types of start-ups
  • The vast majority of the staff and financial resources that downtown organizations now allocate to improving their district’s retailing still goes for old style events and marketing programs. Few of these programs have been evaluated to determine their ability to stimulate more sales and customer traffic. Too often, however, their expense and organizational inertia leaves few dollars left for the development and testing of new and more effective marketing programs.

What Is Needed

The response patterns described above strongly suggest that if downtown leaders and their organizations continue in their “same old, same old” views and operational behaviors, painful failures and missed opportunities are highly probable. What is happening with retail is also frequently happening in the office and entertainment sectors.

Downtown leaders need to recognize that the new normal has emerged and that it is very dynamic, characterized by a frequently changing socio-economic environment. This means that their organizations’ strategies and programs must be frequently assessed and updated to assure their continued relevancy and efficacy. It also means that downtown organizations need to have strong line items in their budgets for developing and testing out on new programs, program evaluations and strategic updates. It also means dropping or down-sizing longstanding, but ineffective programs. All of these are now quite anathema in too many downtown organizations.

Endnotes:

  1. Mark Heschmeyer, “Storefront Loss Equals Warehouse Gain”, CoStar Group News: National, Dec. 14, 2011
  2. Joe Weisenthal,  “Staples Announces Major Store Closures — Will Take A Charge Of More Than $1 Billion”, Sept. 25, 2012, 8:21 AM Business Insider www.businessinsider.com/staples?store?closures?2012?9
  3. Lisa Eckelbecker, “A change of space: Staples again finds smaller is better”, Worcester TELEGRAM & GAZETTE, June 26, 2011
  4. Mark Heschmeyer, “ Virtual War Games: Brick and Mortar Retailers Battle Online Retailing,” CoStar Group News: National, November 09, 2011
  5. Randyl Drummer, Can This Mall Be Saved? Elements Needed for a Turnaround Include Lower Debt, Deep Pockets, CoStar Group News: National , October 10, 2012

Downtown Multichannel Retailing

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DANTH, Inc. has just released a research paper I wrote on downtown multichannel retailing.  I prefer to think of it as backdoor retailing, with electronic and non-electronic variations. In any case, the topic is important because downtown retailing is undergoing an enormous change — one that will not be reversed even when the economy recovers from our Great Recession — towards multichannel/backdoor retailing. Downtown merchants and leaders who do not adapt to this new paradigm will be left behind, more dross produced by capitalism’s creative destruction.


You can download a free copy of the research paper at: 
http://danth.com/storage/pdf/Multichannel.pdf

N. David Milder

On the Passing of Steve Jobs

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I greatly admired Steve Jobs for his ability to innovate, but most of all for his view about how to live your life. The latter is captured in this quote from his 2005 commencement speech at Stanford University:


“Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma — which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.” 


Too many downtown organizations are staid and stale. A strong dose of Steve Jobs’s philosophy would do them a world of good. They need to follow an important Jobs dictum: Think Different!  Also, they certainly could benefit from a Jobs-like fanaticism that their programs are well-designed and actually work, producing strong positive results. As a downtown business recruiter, Jobs, who strongly opposed asking consumers about the new products they wanted, would never ask local residents for the names of specific retailers that recruitment efforts should target. 


 These organizations also could definitely benefit from the kind of strategic vision that Jobs displayed since he returned to Apple’s helm. 


And one more thing.  In 2007, I bought an iMac  and immediately had a lot of problems with it. On a whim, I emailed Steve Jobs and detailed my problems. In response, I received a call from Apple and about a week later a technician came to my office and completed a thorough overhaul of my iMac. Is there another CEO in the USA you can email and get a similar response?

GETTING THEIR STORIES TOLD — WHAT PETITE BUSINESSES NEED FROM E-MARKETING

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Morristown’s Treasured Businesses
  
France Delle Donne, the director of development at the Morristown Partnership (in NJ), recently sent me a link to a new posting to their website called Morristown’s Treasured Businesses.  I took a look and thought it was just terrific! One of the best things I have seen on any downtown organization’s website in a long time. It’s so different from the dull, static, list-based or e-business directory like structures that I typically see on the webpages of these organizations that deal with merchants. It got me thinking about what I liked so much about it and why. I concluded that, though it had many attractive aspects, it was its ability to provide a narrative for each of these business operators that was most important. Storytelling is a critical factor in successfully marketing a downtown and its businesses, though too often overlooked. Branding is a more widely accepted marketing concept, yet the strongest brands gain their power from denoting some kind of story, even a short one. 
 
The High School’s Involvement Was Critical 

Morristown High School’s Broadcasting and Journalism departments approached the Morristown Partnership about doing a project on Morristown.  After an initial meeting and assessment of resources , the Partnership brought them a proposal for   “Morristown’s Treasured Businesses.”  With significant development taking place in Morristown’s business district over the past five years and an influx of new businesses moving in, the Partnership felt it timely to focus on independently-owned businesses that have been in operation for 25 to over 100 years and weathered a variety of economic cycles. According to the Partnership: 

“We wanted to use this opportunity to connect established businesses with the younger constituency in our community. The hope was to raise a cross-generational awareness and appreciation about treasures in Morristown, including businesses and the human connections associated with them. It had all the components to tell a great story. The High School embraced this idea.”

 
Fifteen of the 55 businesses that fit the selection criteria were then interviewed and filmed by the students. A total of 48  students were involved in all phases of completing these merchant “documentaries.” The finished films were then posted on the Partnership’s website for the public to view and vote for their favorites.

 
Downtown organizations seldom have the resources to do everything they want, so having other organizations, such as the local high school, get involved is a really good idea. In Morristown, the high school faculty and students not only got involved, they did so for a novel, needed and effective program.
 
Additionally, as the Partnership recognized, high school students are an important retail market segment in Morristown — and in many other downtowns — so relationship building with the high school and its students is a good idea for the Partnership as well as many other BIDs and SIDs. 
 
Coping With the Longing for Trophy Retailers Syndrome 
  
Another reason I liked Treasured Businesses so much is that it addresses a critical problem faced not only by the Partnership, but by many other downtown organizations as well: local residents focus on the trophy retail chains that are not in their downtown, but do not acknowledge or appreciate the good small merchants who are there. 
  
Another is its use of the dynamic short movies to enable the local business operators themselves to talk about their shops and their histories in the community. As they tell their stories , these merchants become alive to the viewer, allowing the latter to develop some involvement in the stories and some attachment to the merchants.
 
The Decline of Storytelling About Local Businesses That Has Accompanied Downtown E-Marketing

For many years, from roughly the mid 1980s until fairly recently, many downtown organizations found that doing newspaper inserts and special magazines were strong marketing tools. They gave these organizations the  capability to send strong editorial content, that they created and controlled, to both potential consumers and commercial tenant prospects. At the heart of these publications, their most effective components, were stories that convincingly conveyed to the reader that the businesses or the downtown characteristic covered by that story were interesting, unique and/or — most importantly — a discovery. But, the times are “a-changin.”  Downtown organizations are quickly shifting their attention to e-marketing and their websites, e-newsletters and Facebook pages. My visits to many of these websites suggest that this shift from print to electronic marketing has been accompanied by a steep decline in the story-telling their marketing utilizes.

One reason for this trend may be that the easiest, cheapest and quickest ways to present information about local businesses on websites are in list/directory formats that primarily focus on category descriptors of business functions combined with basic contact information. In a few instances a short descriptive paragraph or two, perhaps even a photograph is provided. But, even fewer if any of these formats produce real stories about the local businesses. It’s more like name, rank and serial number, slam, bam, thank you mam. Also, using text to tell a story usually takes more words and time to read than most “webmeisters” advise for a webpage. 
 
The short movies provide an e-commerce, non-text technique for effective short storytelling. It has a strong personal component to it and thus can evoke viewer feelings and involvement.

Storytelling May Be How E-Marketing Can Best Help Really Small Merchants  
 
Since my work on the ‘deliberate consumer” I have been concerned about how the small business operators , say those “petite” firms with annual sales under $300,000/yr
   

  • Can be stimulated to make the management and operational changes they must implement if they are to survive
  • And how downtown and Main Street organizations can help them to make these changes. 

As I have written in some recent postings to this blog, having an effective e-commerce presence is probably one of these necessary innovations, but:
 

  • A full-fledged e-store is probably too complex and resource demanding to be a viable option for these merchants 
  • The directory type formats on either the business’ or a downtown organization’s website, even when blown up into full webpage formats, do not have sufficient impact to warrant the time and effort needed to create and maintain them.

 
I would argue that the best thing that their website or a page on their downtown organization’s website can do for one of these “petite” businesses, is to tell their story. That is what Morristown’s Treasured Businesses does for these businesses. It provides a model for other downtown organizations to emulate, even if some tailoring to their situations probably will be needed. 
 
Again, the teachers and students at Morristown High School are to be strongly commended for their participation in this program and for doing such a good job on it!
  
N. David Milder