Category Archives: Innovations

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

Some Interesting Research About E-Commerce

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The Online Articles

A May 5, 2011 posting on ClickZ,  “Is Facebook Marketing Behind Macy’s Online Sales Jump,” suggests that that Macy’s efforts to pick up Facebook “likes”, which in 2011 grew to 800,000 was responsible for the 50.3% rise in the Macys.com and Bloomingdales.com monthly sales. The article also mentions that Foursquare and Twitter were used in this campaign.


A May 10, 2011 posting to the Business Insider by Pascal-Emmanuel Gobry, “Turns Out Social Media Marketing Doesn’t Work” reports on recent research done by Applied Predictive Technologies. The research tested “how much location-based services like Foursquare and Facebook Places can help local businesses.” It found an impact that is just “close to 2%.” (There is no clarity as to what the 2% refers to in the article, e.g., sales, visits, etc.”

Gobry advises Foursquare investors not to panic because the used social media may not have had enough time in the test to work and “Right now, social media marketing and advertising is in the experimental phase. We don’t really know what works and what doesn’t, fumbling in the dark.”


I consider customer service as a critical marketing tool, so another online article that recently caught my eye was by Joe Light and posted on April 25, 2011 to the Wall Street Journal’s website. Titled “With Customer Service, Real Person Trumps Text,”  the article reports on a large national survey conducted by American Express to find out how consumers want corporations to provide customer service. The survey found:
  • 90% of the respondents wanted customer service handled by live representatives over the telephone
  • About 50% like customer service delivered by online chat
  • Just a little more than 20% would use social networking sites
  • 20% said they would use auto-response phone systems
  • 70% said they would spend more with a company that provides good customer service , an increase from the 58% that felt that way last year.
My Take-Aways

I think Gobry hit the nail on its head, but that his remarks apply not just to social media marketing, but substantially to internet marketing in general. What is obvious is that large, savvy corporations with ample resources and large technical staffs  such as Macy’s and American Express are still trying to discover what really works and what doesn’t and many of them are still “fumbling in the dark.” 

The small merchants that populate so many of our downtowns lack the resources and skilled staffs of the large corporations and the results for them of a failed online marketing campaign are probably more dangerous. Advocating their involvement in unproven and for them complicated and expensive internet ventures is irresponsible. Yet, an internet presence is fast becoming an existential imperative for all merchants, be they large or small! Downtown organizations that want to foster merchant presence on the internet in most cases need to focus on programs that have some real proof of effectiveness and that make merchant involvement less complicated and more affordable.  I have always been fond of the Keep It Simple, Stupid (KISS) approach to program development and to my mind it applies here. For most small downtown merchants small, affordable, simple to do and easy to maintain steps may be the most viable.

Of course, there are always the exceptions, those marvelous exceptions among the small business operators. At the extreme they are the true innovators that may start in garages, small offices and small shops and create firms like Apple, Microsoft, and Limited Brands. While small business innovators of this high caliber are relatively rare, my experience suggests that there are 5% to 20% of a downtown’s merchants who may be open to some innovation and willing to take some risk. Should downtown organizations focus their efforts on this group or do they need to develop two-tier programs, one level for the more innovative-prone merchants, the other for the average merchant?

N. David Milder

The Use of the Internet by Downtown Organizations and Businesses

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About a week and half ago I went to a workshop put on by Downtown New Jersey that focused on the use of web sites and social networking media such as Facebook. While I learned a lot and thought the presenters did a good job — they certainly were enthusiastic — I still came away with my major concerns being unanswered.

 
Being Able to Afford the Time, Money and Skill Acquisition Needed to Create and Maintain a Website. For many years I have heard several other downtown revitalization and business development experts strongly recommend that downtown organizations and individual downtown businesses have attractive and effective websites. I certainly concur with the potential positive impacts of effective websites. Moreover, I agree that organizations, with say $300,000+ in annual revenues, can have at least a useful website and that it gets easier for them to have a really effective website as their budget increases.


My problem is: Can most small businesses and small-budget downtown organizations really have effective websites? Many small and medium sized downtowns have numerous businesses that are in the $150,000 annual sales range or perhaps even less. With few, if any, full-time paid employees and modest revenues, these shopkeepers usually work long hours and may not have either:
  • The computer skills needed to create and maintain a website
  • Or the time to acquire them
  • Or the funds and networking skills needed to hire an outsider to build and maintain the website.
These problems can be particularly acute when it comes to a small merchant  building an “e-store.” The chores of keeping the online inventory current and packing and transporting the sold merchandise can be daunting.  
 
Of course, what most downtown managers also know is that getting their small merchants to advertise is very often analogous to pulling teeth. So, if they are resistant to shelling out less than say $100 for a co-op newspaper ad, you can expect that getting them to even entertain a website they fear might cost in the thousands of dollars is likely to be far more difficult. Moreover, if they cannot have online stores, they may doubt the value of a website that is simply something akin to a fancy directory listing.
 
Much the same is true for small downtown organizations — small budgets constrain what can be done — but, my online observations strongly suggest they have both better skill sets for the  electronic media and a greater willingness to spend a significant portion of their budgets on them than the small merchants. Many of their sites are good at promoting their downtown events and sharing news relevant to the downtown community that the local media might be overlooking. They  usually have an online business directory, while some even try to provide a webpage for each business. 


But, too many fail to take on business development functions by providing essential, easy to find and easy to use information that would be useful for a business looking for a new location. This can range from demographic data to information about prevailing rents and the town’s permission and approvals process. 


While small businesses probably will always lag in the creation and quality of their websites, there are reasons to believe that in the coming years there will be significant improvement among them:
  • The younger among them are more adept and comfortable with using computers and the internet — and with time the proportion of the internet capable will rise and be dominant
  • There are website hosting services appearing that make the creation and — most importantly — the maintenance of a website much cheaper and easer to do. They use templates and modules to achieve the fast, easy and affordable website, but they also bound a site’s creative potential.  We are redoing our DANTH, Inc website, under the guidance of our website consultant 180 Interactive,  and using one of these services. I’ll report on the experience in a later posting.

When Is Electronic Social Networking the Answer? At the risk of sounding like an electronic Luddite, I am having a difficult time figuring out how something like Facebook or Twitter could provide real added value in the marketing of DANTH. Though I can see their value to some large downtown organizations and consumer products companies, I keep feeling that many small business people are in a similar position to mine:

  • I barely have the time to operate my business and still write a blog, maintain our website and write periodic email blasts. Where will I find the time and energy to also deal with a Facebook presence, which to me seems like another resource demanding website? 
  • My company does not generate enough “news” to keep a constant information flow through any communication channel  
  • Our clients do not usually come to us from the web, but through word of mouth. They then do go to our website to get more information about us and to “confirm” the positive messages  they have received from other sources. What added value can Facebook offer that has a sufficient cost/benefit justification?
  • The times have been economically desperate and in such conditions people often look for “silver bullet” solutions. The faddish popularity of Facebook and Twitter suggest to me an unthinking groping for magical answers to tough problems. 
I think that there is a real resource threshold for small businesses to properly utilize websites, blogs and the social networking platforms. To do all of them properly and advantageously demands proper staffing and the resources to pay them. To do just one properly takes skill and effort — and time.
 
Our firm’s approach to the design of our website and this blog is based on a set of marketing objectives we want to achieve. So far, we cannot see any objectives that a Facebook or Twitter presence could help us achieve. Perhaps, if we had DANTH events or if we sold my books directly from our website we would have a different assessment of the electronic social networking opportunities.  
 
My fear is that too many downtown organizations are doing Facebook and Twitter without having any substantial strategic justification, but simply because more and more downtown organizations are doing it. I fear, too, that many small businesses are falling into the same trap.
 
 
Are We Taking Our Eyes Off of the Real Prize?  A week or two ago our friend and strategic partner Mark Waterhouse of Garnet Consulting Services sent us this link to an article.
 
It is from a New Haven newspaper and it details how the merchants in downtown Guilford, CT have prospered right through our nation’s Great Recession. No where does it mention the merchants’ slick use of the social networking media. But, there are vivid descriptions of merchants who work hard to have the right merchandise for their customers, who provide a deep level of customer service and who avidly recommend other nearby merchants to their customers. All of this is perhaps just a part of “Being A Successful Merchant 101,” but apparently they are actually doing it in Guilford. The part of the story about the merchant referrals had a particularly strong resonance for me because:
  • I have become increasingly convinced that this is one of the most effective and inexpensive ways to do cross marketing in a downtown
  • I have also become convinced that most downtown organizations do a lousy job of encouraging cross marketing.

Furthermore, I have not heard of any similarly effective downtown cross marketing effort that is based on electronic social networking. 

 
The Bottom Line. I am all for e-marketing and using websites, blogs, social networking platforms, web photo galleries, etc., as long as they can fulfill an organization’s strategic objectives and fit within its resource constraints. Most importantly, I fear that downtown business operators and their downtown organization’s leaders are shifting their attention and resources so much to the web that they will forget the importance of mastering the non-electronic ABC’s of being a successful merchant. If you have dull merchandise, fail in customer service and have not learned how to work with your fellow downtown merchants to generate and SHARE customer traffic, no amount of adept electronic marketing will save you…or your downtown.  
 

The Often Slow Pace of Implementation

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Last week we were in Garden City, NY. Back in 1996, DANTH had recommended that the site of a gas station on the very important corner of Franklin Avenue and Seventh Street would better serve the community’s needs if it were redeveloped by a project having retail on the ground floor and residential units above. I was happy to see that our recommendation finally was being implemented (see photo on right).


The fact that close to fifteen years had passed between recommendation and implementation strongly reminded me that downtown revitalizations seldom occur quickly and usually require patience. Some downtowns have been in the revitalization business for 40 or 50 years. For example, the formal revitalization effort in the Jamaica Center commercial district in Queens, NY, started back in 1968. The improvements have been steady over these years, with the total amount of investment attracted to this district totalling well over $1 billion by 1987 and the investment flow continuing on to this day.

Other downtowns seem to be overnight successes, but years of unnoticed hard work usually precede their rocketing economic upswings. In the mid 1990s, for example, downtown Englewood, NJ, attracted a significant number of national retail chains and eradicated a 20% retail vacancy rate. Many outside observers noted how quickly this downtown had turned around. Mayors and council members in other NJ communities envied this quick success and wanted to replicate it in their downtowns. Few of these observers knew of the 10+ years of prior planning, improvement projects and coalition formation that enabled Englewood’s “overnight success” to occur. 


One of the most important things that Englewood’s political leadership did was to form a common strategic outlook among the city manager, mayor and city council. This took time to forge and energy and attention to maintain. Unfortunately, many local political leaders in other communities do not understand the need for such a strategic coalition and/or do not have the political time or patience to create them. 


Sadly, the need for a revitalization effort to have some patience can slip into lassitude, inaction and redevelopment doldrums. Then, impatient local political leaders can give the downtown revitalization organization a badly needed kick in the butt.


As a general rule, DANTH recommends that clients treat a downtown revitalization effort as never ending, not something that in a few years they can strike from their To Do lists. Success not only has to be won, but then also maintained.   
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AFFORDABLE DOWNTOWN RETAIL RENTS

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Introduction. As we slowly emerge from the Great Recession the time has come for downtown organizations to work hard on encouraging small independent retailers to seek affordable rents and for landlords to offer them. If they do not, downtown retail will contract and street level storefronts will be occupied even more by financial and personal service operations – or remain vacant for long periods of time.

True, in many downtowns retail rents have declined during the Great Recession, often substantially. In one I recently visited, for example, asking retail rents have dropped from $45/SF to $30/SF and in some instances even $25/SF. But, as we creep out of recessionary conditions, it is critical that in most downtowns retail rents do not regain their unaffordable levels.

In the new normal, small downtown retailers will be facing increased pressures to keep their operations lean and mean because capturing sales from today’s deliberate consumers is far more difficult than from the abnormally free-spending shoppers of the 1990s and 2000s. One budget line item they can focus on is the cost of the spaces they lease for their stores. This is a major long-term business expense and it is important that these retailers do not pay more than they can afford. It is also a business cost where “newbie” retailers dominate those going astray, though badly inept or unscrupulous merchants also tend to pay a lot more than what savvy merchants would deem affordable.

Looking at the other side of the coin, it is also in the interest of landlords to offer rents competent retailers can afford. In the new normal, far fewer stores will be opened by national chains and, among those, a smaller percentage than in the past will be placed in downtowns. Landlords, as a result, will need many local independent retailers to fill their storefronts. This will also be true to a significant degree for those who have built new mixed use buildings with expensively constructed ground floor storefronts. Additionally, as their rents reach ranges considered unaffordable by savvy merchants, the more likely they are to attract incompetent or sleazy businesses and also more likely to have storefronts stand vacant for long periods of time.

Defining Affordable Retail Rents. A useful formulation for determining an affordable retail rent is roughly 15% of the shop’s annual sales. DANTH’s merchant surveys and personal interviews with merchants over many, many years as well as the work of other firms, such as Urbanomics, found that downtown merchants generally felt that they could afford total rent costs that were 8% to 12% of their annual sales. However, more recently merchants say they are OK with 15%. While there is certainly some error factor present here, 15% is probably plus or minus just a few percentage points off the correct number. The major thrust of the analysis presented below is not affected by this error factor.

In a typical medium-sized downtown, independent retailers with annual sales of $500,000 to $1 million are relatively rare. Most independent downtown retailers would be quite happy with sales in the $300,000 range and joyous with sales around $450,000. Though in large downtowns the sales happiness range can be higher, the 15% rule applies everywhere, so I’ll stick with the retailers in medium-sized downtowns to simplify my argument.

The table above depicts information about:

  • How much rent is affordable to retailers with $250,000, $300,000, $350,000, $400,000 and $450,000 in annual sales. You can do the calculations for higher annual sales
  • How many square feet of space this “rent money” can buy at various prices per square foot.

The table also shows how with increased rents more and more of a downtown’s most successful merchants cannot afford to occupy the amount of space they might even minimally need for their operations. Look at how quickly even “small” spaces in the 1,500 SF to 2,000 SF range become unaffordable. At $40/SF not even a retailer with sales of $450,000 can afford a 2,000 SF; at $50/SF even a 1,500 SF storefront becomes out of reach. Of course, for the $300,000 shopkeeper, that happened at lower rents: a 1,500 SF shop is unaffordable at rents of $31/SF and 2,000 SF at $22.50.

Affordable rents should be tied in with balloon leases, where rents increase at an agreed upon rate as the retailer’s sales grow. Some savvy downtown landlords are already using balloon leases.

To The Groaners. To the downtown managers and Main Street managers who groan that is impossible to deal with landlords:

  • Dealing with downtown landlords and doing it effectively is part of your job. If you are not doing it, start doing it. If you do not know how, learn how. If after all that you still can’t deal effectively with landlords, get another job.
  • Every occupation has jerks; but they also often have a lot of reasonable, effective and even innovative people. This applies to landlords, too.
  • Find the landlords you can work with to implement an affordable rents program, then use them as a model to recruit others
  • One thing is certain: if you do not try, nothing will happen.

To landlords and developers who groan that they need high incomes from their new and expensively constructed retail spaces to pay off their loans:

  • You are big boys, you like to brag that you are big boys, so act like big boys
  • You either goofed in your calculations or you really did not understand that in most downtown mixed use projects outside of places like Manhattan and downtown Chicago, etc., the residential and office rents, probably for some time, will have to subsidize the retail spaces. This is especially true of unproven, revitalizing downtown locations
  • Given the current economic conditions your options are really either affordable rents that will diminish your losses or long-term vacancies and continued lack of retail rental revenues

To landlords who believe they should get market rate rents as defined by the highest asking rents they’ve heard about in the district:

  • Your unaffordable rents are likely to produce vacancies, because so few accomplished retailers would be interested, or perpetual churn, because you are likely to attract inept or schlocky merchants who are prone to failing or disappearing
  • This will affect the resale value of your property and this is not a great time for any commercial property
  • Have you really calculated the difference between the income that an affordable rent will yield and the zero dollars you will likely reap from the months your stores stay vacant because you want higher rents?
N. David Milder