These Downtown Emperors Too Often Are Not Wearing Any Clothes

As a child I was very taken by Hans Christian Anderson’s tale about The Emperor’s New Clothes, especially the part where every adult seems to go along with the new clothes until a child simply states that the Emperor is nude. Often in working on downtown revitalization I am reminded of that tale: lots of what appear to be basic axioms or essential parts of conventional wisdom about downtown revitalization are too often partially or entirely wrong. They are to me emperors with no clothes. Below I call some of them out and briefly explain why they are “nude.”

Emperor 1Urban Sprawl Is Killing Our Downtowns

Reality Check 1– This is a nice one. Thanks to the Great Recession, many recognized experts are now arguing that sprawl is ending. See, for example, John McIlwain at Brookings on the end of urban sprawl

Let us rejoice that sprawl now has a stake in its heart! However, what are the policy implications? Are they really simple and apparent? I believe we definitely need to put our thinking caps on and properly think this through.

Emperor 2 – Retail Gap/Leakage Analyses

Reality Check 2 – Doing a retail leakage or gap analysis is appealing because comparing supply with demand sounds like such fundamentally good economic analysis. But, there are a number of data reliability and interpretive issues that cloud their validity (are they measuring what they say they are measuring?)  and their value in program and policy development. First of all, collecting data on business firms and their revenues is a lot more difficult than one might think. The census is out of date by the time it is published. Business data from market research firms such as ESRI and Nielsen Claritas are based on data from InfoUSA, which does large national telephone canvasses of businesses and claims to be 95% accurate on the national level. However, on the local level we have found their data to often have far lower accuracy, and we now try to confirm the accuracy of their data before using them.

Another issue: the basic data on firms’ revenues and consumers’ expenditures are collected by two different federal agencies and, of course, they use two different sets of categories to organize the data. To be able to match the supply and demand data requires statistical manipulation and to my knowledge there has never been any published empirical test that demonstrates the accuracy of the data those manipulations produce.

Interpreting the leakages data also raises issues. For example, a surplus, where store sales are more than consumer expenditures, is usually seen as a situation where there is little prospect for future growth. But, according to niche theory, such a surplus may indicate a powerful retail niche that can expand its trade area. Another issue is that leakage is often seen as an indicator of growth potential, as the presence of “unmet local demand” that might somehow be more easily recaptured by a merchant who does not have to be all that capable. If the merchant is very capable, then he or she could fight for market share and then the whole leakage issue would be irrelevant. From policy, program and business recruitment perspectives, a business operator who will fight for and win market share is far more preferable than an operator who is looking for a situation where there is putative weak competition. Of course, the leakage analysis, does not get into the causes of the leakage, which often is that the competition is so strong that recapturing leaked sales is extremely difficult.

Despite these issues, we continue to do leakage analyses, but with very great care and considerable caution. We’ve found that doing a leakage analysis for a supermarket, restaurant or a women’s apparel shop, where we can gain a firm grasp on the business data gives us greater confidence than doing an analysis for all the downtown’s retail businesses. We also will use them when our prior research experience has given us an in depth knowledge about the local businesses or when the study area is small enough that we can readily confirm the accuracy of the firm-level data.

Emperor 3Street and Façade Improvements Will Attract New Customers and New Businesses

Reality Check 3 – Too many downtowns have followed this strategy and only succeeded in creating “decorated coffins.” Yes, these downtowns are more attractive, but after much effort and expense they are still deader than a doornail, with low customer traffic, little vibrancy and few, if any, strong new shops. Such physical improvements can be effective, but this is much more likely to happen when they are part of a comprehensive revitalization program that includes successful business recruitment, marketing, redevelopment and place-making elements.

The attractions of these programs are that they mostly require money, not innovative “rocket scientists”, can be done in a fairly predictable time frame, and provide visible proof of an organization’s ability to get things done. These should not be confused with economic impacts.

Emperor 4Nearby Strong Pedestrian Traffic Is Critical to a Good Downtown Retail Location

Reality Check 4 –This is a basic axiom of many downtown revitalization strategies and the cornerstone on which our understanding of “location, location, location” rests. Yet, there is pitiful research on it. Behind this axiom are three suppositions. The first is that there are a lot of pedestrians, though no metric has been presented that signifies when “a lot” has been attained. Second is that among the multitude of pedestrians many will be browsing and window shopping and incidentally discovering reasons to enter shops and make purchases. Finally, is the assumption that the more pedestrians passing by, the greater the likelihood that a store’s destination shoppers will pass through its doors.

My experience suggests that the impact of pedestrian traffic is most likely to be felt in large downtowns where pedestrian flows of thousands of people/hour are easily found, and 100,000+/day are sometimes reached. But, even here, because of e-commerce, surgical shoppers have emerged who are more focused, going to fewer shops and doing far less browsing and window shopping. The Internet also is guiding more shoppers directly to downtown destinations identified in their searches. Additionally, the Internet has changed a lot of these destinations into showrooms for shoppers who see and evaluate the merchandise first-hand, but then buy online.

Smaller downtowns – defined at some unknown cutoff point – with total daily pedestrian flows only in the 100s or perhaps even a few thousand, have never really benefited much from the browsing and window shopping customer. These downtowns frequently just do not have that many retailers that pedestrians are motivated to do much browsing. Moreover, the retailers in these towns usually do not often refresh their selections or windows, so the browsing is even less rewarding. Unless in a tourist area, the merchants in these smaller downtowns have been made or broken by their ability to be a destination for task-oriented shoppers. Strong destinations survived and weak ones disappeared – except when the weak ones endured, because there was no competition nearby.

I know of neither a simple metric nor a complicated formula that indicates how many pedestrians/shoppers are needed to support X square feet of a particular type of retail store.

Emperor 5Hair and Nail Salons, Spas, Gyms Are Bad for Downtown Retailing.

Reality Check 5 – Back in 2005, I wrote a column in the Downtown Idea Exchange on this subject. My argument then was that these firms are part of a “pamper niche” that are not only found in abundance in some of the world’s most famed downtowns, e.g., Beverly Hills, Midtown Manhattan, Paris, etc., but also in many smaller districts where they bring in a lot of women with demonstrated disposable income, who also like to lunch and shop. Downtown retail merchants are crazy if they do not develop cross-marketing programs with the operators of pamper niche shops.

I also argued back then, that because they did not have significant investments in stocking merchandise, pamper niche operators could afford to pay higher rents than retailers. That is why they often supplant retailers in many storefronts.

Today, my arguments all appear to be holding true, but due to the Great Recession, pamper niche operators are taking over even more storefronts as they are vacated by weakened retailers. In some districts, pamper niche shops account for most new commercial rentals.

Downtown leaders who attack pamper niche shops are really off base. Instead of criticizing them, these “leaders” should recognize the customer traffic they generate and help their retailers create cross-marketing programs with them.

Emperor 6 – The Multifunctional Character of Downtowns Gives Their Retailers A Unique Competitive Advantage

Reality Check 6 – The multifunctional character of downtowns and the traffic it generates supposedly means that downtown retailers need less power as a destination to be successful. The downtown, in a sense, generates a lot of traffic for them. But, far too often, the ability of downtown retailers to benefit from their district’s multifunctionality breaks down because of two factors: a) the downtown is too dispersed, so office workers, hotel guests and students are too far away to walk to district retailers, and b) the ability of retailers to captures sales from various “captured” daytime markets is inhibited by operational factors such as:

  • Companies trying to keep their employees in the building by providing cafeterias and subsidized meals
  • Retailers are closing their doors when hotel convention guests are ready to browse and window shop
  • Commuting students needing to quickly return to jobs, children, etc.

Although solutions are available, too many downtown organizations have given up on overcoming the dispersion and operational problems, giving up, in effect, on helping their retailers tap critical close-in market segments.

Other Often Naked Downtown Emperors

Here are some other “Naked Downtown Emperors” that I do not have enough space here to detail:

  • Attracting tenant prospects is the biggest challenge in retail recruitment – it’s more often a lack of appropriate locations with appropriate spaces
  • Increasing capacity will solve parking problems – easily finding existing spaces is usually the real problem
  • High crime rates hurt downtowns – crime rates are often comparatively low, it is the fear of crime that does the damage
  • Nobody will use the upper levels of a parking garage – they will if the garages are properly designed, e.g. see the garage at The Grove in L.A.

Are there others you would add to this list? Please let me know.

Now I feel like a proper curmudgeon!

BEING A DOWNTOWN CHANGE AGENT: Facilitating Change for Downtown Business Operators

Small Business Operators Are Slow To Adopt Changes

At conferences and other events where downtown managers congregate, the conversation at some time usually turns into a group therapy session focusing on the seemingly intractable, but certainly dysfunctional attitudes and behaviors of downtown business operators and landlords. Some of the dysfunctional behaviors raised might include deteriorating facades and signs, poor market research, lousy merchandising, “wrong” business hours, inadequate customer service, high rents, poor building conditions, harmful tenant selection, etc. Many readers, I am sure, know the rest of the litany.

Many downtown managers also consider it almost impossible to “re-educate” most downtown business operators and landlords or to otherwise induce them to improve their business behaviors. Years ago, based on my own management experiences and field observations as well as reports from friends managing downtown districts across the country, I came to a kind of Bayesian subjective probability estimate that only about five to seven percent of downtown business operators and landlords can be retrained or otherwise induced to innovate.

However, more recently, based on my program development experiences in the Bayonne Town Center (NJ), I have come to believe that significantly more downtown business operators can be induced to change, if, and this is a critical if, downtown leaders, acting as change agents, can help make it easy for them to change.

How To Get Existing Merchants To Renovate Their Facades?

About four years ago I took on the management of the Bayonne Town Center Special Improvement District. The previous executive director had done a great job of getting a highly respected architect, Walter Chatham, to write design guidelines, which were then adopted by the city as an ordinance. The city was offering then, as it still offers today, strong financial incentives to stimulate façade and storefront renovations in the district: a shop with a frontage of 25 feet can get a grant for as much as $10,000; a corner shop can get up to $15,000. However, while new businesses in the district were improving their facades, none of the existing street-level business operations were doing so, though many storefronts badly needed renovation. Officials in city hall as well as the Town Center board of directors could not understand why the city’s generous financial incentive package was not stimulating more façade improvements in the district.

While I quickly ascribed this situation to the typical change -adverse way I believed small downtown business operators behaved, my intellectual curiosity and feeling of management responsibility led me over the next year to talk informally to many merchants about why they were not improving their facades. Here are the surprising conclusions I reached as a result of those discussions:

  • A lot more merchants than I expected were interested in improving their facades. My rough estimate would be somewhere between 20% to 25%, not my expected 5% to 7%.
  • Merchants who owned their buildings were more apt to be interested in renovation than those who leased their spaces. This was understandable since they had more to gain and one less decision-making gatekeeper to deal with
  • Almost no one had any idea of what kind of new façade they might want!
  • No one felt they had a good idea of how much a façade renovation might cost!
  • Few knew an architect or contractor who might help them! Most small business people will not have architects or contractors in their social networks. They often work long hours and lack the opportunities to establish such contacts on their own
  • There was wide spread concern about getting city approvals for their projects!
  • Almost everyone knew about the city’s façade improvement financial incentives.
  • A minority of those interested in doing a facade improvement felt that even with the city’s financial incentives, they still could not afford to renovate
  • Most of those interested in improving their facades felt that, with the city’s financial assistance, they probably could afford to renovate. They were not moving forward because they did not know how to proceed and lacked the time and energy to remedy this situation!

Facilitating Change

As I mulled about these findings some research I had done in 1989 came to mind. Back then I was trying to find out why manufacturing firms were moving out-of-state from the Bronx, a borough of New York City. My research indicated that:

  • These firms were successful, expanding and needed more space
  • They were too small to have a real estate specialist on staff
  • Management was too busy with their growing business to look for a new location
  • They often need specialized training for their blue collar workforce
  • They had concerns about high crime
  • Recruiters from out-of-state economic development organizations had come in and offered turn-key solutions that included low-cost new space, manpower training, low crime, etc. The recruiters made it very easy for the Bronx firms to move to their states. In other words, the recruiters had facilitated change.

A program that could facilitate change seemed precisely what was needed to unleash façade improvements in the Bayonne Town Center.

The Jump Start Façade Improvement Program

Consequently, I designed the Town Center’s Jump Start Façade Improvement Program sm.

This program provides each participating business operator with the following products and services:

  • A well-known architect in the field, Margaret Westfield of Westfield Architects visits with them to listen to any ideas they might have about their new façades
  • She comes back several weeks later with a rendering of their new façade, cost estimates for the improvement project and samples of the materials that should be used
  • The façade design, because it is done by one of the Town Center’s architect’s in conformance with its design guidelines, has assured acceptance by the city
  • The Town Center’s staff, if necessary, helps participants with the paper work for the city’s incentive program and provides them with contact information about contractors who have done successful façade projects in the district.

Of the five storefronts in the initial round of the program, two renovations have been completed and three are in process, with completions expected by August 2007. The second round of Jump Start has been completed recently. One entire building façade has been renovated; action on six other storefronts is awaited.

The slide show below shows three of the improved building facades, before and after their renovations.

The Kick Start Building Renovation Program

Based on the success of the Jump Start program, the management of the Bayonne Town Center leaped at the opportunity to obtain a technical assistance grant from the Community Preservation Corporation (CPC) to create the Kick Start Building Renovation Program sm. Kick Start is aimed at stimulating district landlords to renovate the upper stories of their buildings and create market-rate residential units.

The CPC is a very large and successful nonprofit that uses CRA funds from over 80 banks and insurance companies to fund housing projects in NY, NJ and CT.

The Kick Start “treatment strategy” is again to facilitate change, this time by having the CPC’s architect-engineer provide each participating Town Center landlord with a feasibility study that describes how many residential units might be built on their property, the types of units that should be created and cost estimates for the project. The CPC also will be ready to finance feasible projects. Furthermore, because of the CPC’s reputation, it is anticipated that the feasibility studies will help ease their associated renovation projects through the city’s permissions and approvals process.

At the time of this blog posting, Kick Start is underway, but none of the three initial feasibility studies have been completed.

Facilitating One Change Can Help Facilitate Other Changes

As consultants have long known, developing a client’s trust and confidence in you and your firm is essential for having your recommendations implemented. Downtown managers, when acting as change agents, face a similar challenge with the business operators and landlords in their district. The Jump Start Program has helped to significantly increase the trust and confidence that district business operators and landlords have in the Town Center’s management team. This is true even among those who have not participated in Jump Start, but knew what happened in it. This has stimulated not only interest in participating in Jump Start and Kick Start, but it has also made some landlords more willing to work with us on business recruitment and redevelopment projects.

Some Additional Observations

My experiences with Jump Start strongly suggest that money, while not a negligible factor, is certainly often not the prime factor that impedes change and innovation among small downtown business operators. Knowing what can be done and easy access to needed professional assistance are also very strong factors.

The city’s permissions and approvals process also can have an enormous impact on downtown change and innovation. The Town Center has city legitimated design guidelines and its architect determines whether or not submitted designs are in accordance with them. The Town Center is thus able to provide designs for renovated facades that are guaranteed to be accepted by the city. This factor alone reduced anxieties about delays and escalating costs among the participating business operators.

Downtown Friendly Store Formats, Facades and Signs

Over the years I have seen downtown developers, landlords and store owners propose retail store formats, facades and signs that are appropriate only in a highway or shopping center setting. They invariably claim that the retail chain demands exactly what they are proposing. Sometimes they go on to claim that their way is the only way the chain does things. Consequently, I have tried to accumulate photos that can be used to disprove these assertions. I have tried to find examples that are “downtown friendly,” i..e., that have appropriate scale and acknowledge and encourage pedestrian activity. I have also included some that I just plain like — as well as examples of some things to avoid.

This posting is an elaboration of two earlier postings on this subject. More photos will be added periodically over time. A slide show on this posting is provided below.

Downtown Friendly Store Designs 2 – Subway

What happened a few years ago when a Subway opened in the Bayonne Town Center demonstrates an important point — it isn’t always the retail chain that causes problems with a new store’s façade or signage.

The franchisee opened his shop and mounted a back-lit sign without getting necessary approvals from the city. City approvals require a letter from the Bayonne Town Center Management Corporation (BTCMC) stating that the design of the new façade (including signage) is in compliance with its façade design guidelines.

The franchisee finally applied for BTCMC approval, but, since the guidelines prohibit back-lit signs, the design was rejected. The city made him remove his sign. The franchisee maintained that Subway required the use of back-lit signs and that if he could not do so he would have to close his shop. His landlord became irate about possibly losing a quality tenant — and the BTCMC certainly wanted the Subway in its district.

The situation was saved by Walter Chatham, a well-known architect who the BTCMC hired to review new façade designs and assure their compliance with its design guidelines. Chatham noted that Subway used a number of sign formats and that the one they used in historic districts would be in accord with the design guidelines. Begrudgingly, the franchisee put up the sign suggested by Chatham.

I learned from this experience that chains can have many formats for their storefront signs. To illustrate this point, I have posted above three Subway signs from Bayonne, NJ; Forest Hills, NY, and Columbia, SC. (If the signs are not visible, double click on the empty boxes where they should be.) Such variation can allow the signs to fit in better with the overall design of the buildings in which the Subway stores are located. This makes good business sense.

In this case study, the problem was caused by a franchisee who tried to avoid abiding by existing rules and regulations — not the chain.

This case study also shows that it is great to have design guidelines, but real enforcement is essential if they are to have their intended impacts.