Contact: N. David Milder, Editor The ADRR — The American Downtown Revitalization Review 718-805-9507 [email protected]
THE CREATION OF THE AMERICAN DOWNTOWN REVITALIZATION REVIEW (THE ADRR)
There currently is no real professional journal for the downtown revitalization field. For many years, that has been strongly lamented by many of the field’s best thinkers. To remedy that situation, a band of accomplished downtown revitalization professionals are creating The ADRR. It will be a free online publication, appearing four times each year. The target date for the debut issue is now set for the June 1-15, 2020 timeframe, with the second issue aimed for the Sept 7-14, 2020 timeframe.
This ADRR is intended to be a lean and mean operation, based totally on the availability of free online resources and the time, energy and elan contributed by its authors, advisory and editorial board members, and its editor.
How to Subscribe to The ADRR
Those interested can now visit The ADRR’s website, www.theadrr.com , where, on the home page, they can sign up to become subscribers. This enrollment places the subscriber on a MailChimp mailing list so that they can receive New Issue Alerts (see below).
How Issues of The ADRR Will Be Distributed.
New Issue Alerts, containing the Tables of Contents of issues and links to their downloadable pdfs of articles are sent to subscribers via a MailChimp email blast and posted to the ADRR’s website. Each issue’s pdf files initially will be stored in a folder in ND Milder’s Dropbox account from which they can be downloaded. Subscribers can download only those articles they want to read and whenever they want to read them. The ADRR also can be found via Google searches.
The Content We Are Aiming For. Only manuscripts about major downtown needs, issues and trends will be considered for publication. They will be thought pieces and not just reports about a downtown’s programs and policies that its leaders want to brag about. Articles must have broad salience and their recommendations broad applicability within the field. The “voice” of The ADRR will be anti-puff, and very factual, evidence driven, though not dully academic. Discussions of problems and failures will be considered as relevant as success stories if, as so often is the case, something substantial can be learned from them. The ADRR will not avoid controversial issues.
Also, the focus of The ADRR will not be overwhelmingly on our largest most urban downtowns, but also provide a lot of content and relevant assistance to those in our small and medium sized communities, be they in suburban or rural areas.
Who Will Write the Articles?
Hopefully, they will be from people in a broad range of occupations – downtown managers and leaders, municipal officials, academics, developers, landlords, businesspeople, consultants, etc. — who have significant downtown related knowledge and experience.
Curated Articles and Wildflowers. Initially, the ADRR will solicit articles to prime the content pump. Once The ADRR is up and running some articles will continue to be solicited on topics deemed a high priority by the editorial board members. Each board member can select a topic to curate an article on and seek the author(s) to write them. However, there still will be a continual traditional general call for submissions (wildflowers) focused on subjects selected by their authors. All submissions, curated or wildflower, must demonstrate sufficient merit to warrant publication in The ADRR. All submitted articles will be reviewed by board members. We hope to see many submissions!
Article Length and Author Responsibilities.
There will be short reads and long reads. Articles of 1,500 to 5,000 words will be considered. Multi-part articles of exceptional merit and salience will also be considered. What counts is their quality, not their length. Authors must have their articles thoroughly proofread prior to submission. Poorly proofed manuscripts will be rejected. Guidelines for submissions may be found on The ADRR website.
Publication Schedule:
Published four times per year, with a minimum of 5 articles in each issue. Given that this is an online publication, from a production perspective, the number and length of the articles is not a particular problem. However, from an editorial and content management perspective, the number of articles and their lengths can quickly become burdensome.
How It Will Be Organized.
The ADRR will be published by an informal group for its first year, with no person or group having ownership.
Editor. During the ADRR’s first year, N. David Milder has volunteered to serve as its editor.
The Advisory/Editorial Board :
Jerome Barth, Fifth Avenue Association
Michael J Berne, MJB Consulting
Laurel Brown, UpIncoming Ventures
Katherine Correll, Downtown Colorado, Inc.
Dave Feehan, Civitas Consulting
Bob Goldsmith, Downtown NJ, and Greenbaum Rowe
Stephen Goldsmith, Center for the Living City
Nicholas Kalogeresis, The Lakota Group
Kris Larson, Hollywood Property Owners Alliance.
Paul R. Levy, Center City District, Philadelphia
Beth Anne Macdonald, Commercial District Services
Andrew M. Manshel, author
N. David Milder, DANTH, Inc
John Shapiro, Pratt Institute
Norman Walzer, Northern Illinois University
Articles in our first issue that will be published in June 2020
Michael Berne, MJB Consulting, Working Title, ” Bringing Downtown Retail Back After COVID-19”
Roberta Brandes Gratz, “Malls of Culture.”
Andrew M. Manshel, “Is ED Really a Problem?”
N. David Milder, DANTH, Inc., “Developing a New Approach to Downtown Market Research Projects – Part 1.”
Aaron M. Renn, Heartland Intelligence, “Bus vs. Light Rail.”
Michael Stumpf, Place Dynamics, “Using Cellphone Data to Identify Downtown User Sheds”.
The Spotlight: “Keeping Our Small Merchants Open Through the COVID-19 Crisis”
Katherine Correll, Downtown Colorado, Inc.
David Feehan, Civitas Consulting
Isaac Kremer, Metuchen Downtown Alliance
Errin Welty, Wisconsin Economic Development Corporation.
A few weeks ago, an article appeared in the Congress for
the New Urbanism’s ( CNU) online journal Public
Square titled “Why downtown retail is coming back ” (1). While the article had some valid and
encouraging points, overall it blurred over a very complex situation in which
retail in different types of downtowns
have different prospects for retail rejuvenation and growth. Most importantly,
there was no discussion of the enormous process of creative destruction that
the retail industry is experiencing, one that promises to continue for many
years to come, and that will strongly structure any rebound. Until we get a
better handle on what the new retail industry will look like we cannot get a
good notion about what the demand for retail locations and spaces will be.
Along that line of thought, the article also ignored the facts that any
comeback must be limited when the demand for retail space by national chains
has had a precipitous decline and 45% of the nation’s household GAFO (general
merchandise, apparel, furniture
and home furnishings, other miscellaneous retail) expenditures
are now being captured by online retailers.
The Public Square article makes much about increased retailer interest in “inner cities,” but this trend is anything but new. Major retailers have long been interested in and placed their stores in some types of dense urban locations. For example, by 1985, a ULI study was reporting a resurgence in downtown retailing propelled by growing CBD employment, an increasing appreciation of urban lifestyles, and a dramatic decline in the number of easy suburban retail project opportunities (2). They even have been going into highly ethnic downtowns since the late 1990s and early 2000s as evidenced by their presence in the outer borough downtowns of Jamaica Center, Fordham Road and Downtown Brooklyn in NYC. The article also failed to note that a whole lot of the major retail that is going into our inner cities is not going into their downtowns, but into large self-contained, car-oriented shopping centers that compete with the downtowns.
This raises two critical questions regarding the inner cities that
are very hard to now answer:
When the overall future demand for
retail space is very likely to be far lower than in the past, will inner city
locations really be getting substantially more retail stores located in them?
How many of those new inner city
retail stores will be locating in the inner city downtowns?
As for the retail chains, we know from past experience, their expressed interest
in locations often is not a good indicator
of where their stores will open.
The article also failed to note that most of our downtowns are in
small communities that always had few if any national chains– and that is unlikely
to change in the future. Nor did it discuss the prospects of the small
independent retailers these small downtowns must rely on.
Yes, it can be argued that new stores are opening, and downtown
retailing will not disappear. However,
since it is undergoing very significant changes in magnitude and operational
characteristics, it is still far too early to make any real sense of claims
that it is coming back.
UNDERSTANDING THE CREATIVE DESTRUCTION OF THE RETAIL
INDUSTRY UNLEASED BY THE GREAT RECESSION
What
we have been witnessing in the retail industry is not the oft mentioned retail
apocalypse, but a classic example, at the level of a whole industry, of what
Joseph Schumpeter called the process of
creative destruction — the “process of industrial mutation that
incessantly revolutionizes the economic structure from within, incessantly
destroying the old one, incessantly creating a new one.” While the media,
in its reporting on the retail apocalypse, has focused its attention on the
destruction, far less attention has been paid to the creation of a new,
vibrant and stronger retail industry, but one that may well require far fewer
and smaller brick and mortar retail spaces. That would mean far fewer and
smaller retail tenants for our downtowns.
The
Industry’s Latent Problems. Prior to the Great Recession, the retail industry was largely
ignorant of the truly bad shape it was in:
As Elizabeth Warren’s book, The Two Income Trap, showed several years before the Great Recession, many middle income households were being financially squeezed by stagnant income growth and quickly rising costs for housing, healthcare, childcare, transportation, and education. Their retail spending was often sustained by home-based loans and/or racking up large credit card debt. The Great Recession turned these households into today’s deliberate consumers who are more cautious about their spending, much more value oriented, and demanding of bargain prices. Gone are the middle income shoppers who “traded up” prior to the Great Recession.
In 2009, a team at McKinsey predicted that by 2011, the internet would be involved – i.e., play some role – in 45% of all retail purchases made in the USA (3). The vast majority of the retail chains seemed ignorant of that already well established trend and did not have very robust online presences, much less viable omnichannel marketing strategies. The shock and hurt the Great Recession threw at so many retail chains, the resulting consumer search for value, low prices and convenience, and the emergence of the “to the internet born” millennials, all led to a growing participation in internet shopping.
Far too many of the retail chains were very badly managed and, of course, their leaders never owned up to that fact. Forever 21’s recent going into Chapter 11 is a classic example of this, see https://www.nytimes.com/2019/09/29/business/forever-21-bankruptcy.html . Unfortunately, too many observers of the industry did not either. The problems proved to be myriad. Worst of all were ill conceived growth strategies based simply on opening more stores. Abetting that problem was a surprising ineptitude in decision-making about where to open new stores, how large they should be, and how close they should be to a chain’s other stores. Too often locational decisions were made not by rigorous analysis, but by following where other retailers were locating, especially their favored co-tenants. The old axiom that retail chains are like sheep — they like to herd — was all too true. The net result was that the chains had too many stores that were also probably too large, and too often in less than desirable locations. Many chains were also burdened by carrying too much debt, especially when they were bought out by financial firms seeking to maximize how much money that could extract from the retail operations. These new managers were not merchants, but MBAs trained in financial manipulations. The large debt burdens caused many bankruptcies. In search of profits, corporate managers cut the size and quality of their in-store sales forces, thus substantially diminishing customer service. Then, too, many chains lost contact with their customers by failing to provide the entertaining ambience, convenience, customer service, sizing and merchandise they wanted. Some chains even failed to notice that their customer base was aging out or moving on.
Chain managers began to look more at the value
of the real estate they owned or leased than increasing the profits from retail
sales. Hudson Bay, for example, closed the Lord & Taylor mother store on
Fifth Avenue in Manhattan not because it was losing money, but because of how
much money selling it could generate. This trend continues.
Across the nation, in the years before 2009,
especially in many of our most successful downtowns, be they in big cities or
affluent suburban or tourist communities, many properties with retail spaces in
them were bought for very high bubble-like prices. That meant that retail rents
would have to increase substantially. Moreover, the financing of these deals
often meant that the retail spaces contractually had to be rented to credit
worthy retail chains. When the Great Recession severely struck the retail
industry, these properties and their ability to attract retail tenants were
placed in a very precarious position. The purchase of the “Devil’s Building” at
666 Fifth Avenue in Manhattan was a prime example, but there were so many
others.
While
one can be hopeful that today’s retail chains and those of tomorrow will be far
better managed than those of the past few decades, their past performance
warrants some skepticism about their future behavior. Prudence also suggests
that we can expect them to continue to make many serious errors, especially when
subjected to the very strong pressures created in a process of creative
destruction.
The
Substantially Weakened Demand for Brick and Mortar Retail Locations and Spaces. The Great
Recession brought these problems to a boil and resulted in many well-known
retail chains going out of business, while many others are still fighting to
stay open.
Countless thousands of chain stores have
closed since 2009 – for example, 7,000+ in 2017 and 7,000+ again in the first half of 2019.
GAFO retailers were hardest hit, especially
department stores and specialty apparel chains.
The surviving chains are looking for fewer new
locations, are being far more selective about locations when they do so, and
their new stores are about 25% smaller than those the chains opened in the
past.
There are about 1,350 enclosed malls in the
U.S., but experts believe that only 200 to 400 are needed (4). Most class “B” and “C” malls are doomed to
closure and reuse.
Also, many malls and open air shopping
centers, to stay popular and solvent, are converting retail spaces to other
uses such as entertainment, personal services, food and drink. Some malls are
even adding housing and hotels. According to Costar, between Q1 of 2010 and Q1
of 2019, malls added about 13.9 million SF of entertainment space while open
air centers added about 52.8 million SF of entertainment space (5). Most likely
these additions were done by repurposing prior retail spaces.
There is little reason to believe that similar
trends are not also occurring in a large proportion of our downtowns. For
example, over the past decade, I’ve seen large amounts of former retail space
being leased to pamper niche – hair and
nail salons, spas, gyms, martial arts studios, yoga and Pilates studios, etc. –
and health care operations in downtowns across NY and NJ.
There has also been “vacancy rate creep.” Back
in the 1980s, a rate above 5% signaled cause for some concern and 10% a
problem. Today, a 10% vacancy rate seems to have become accepted as the new OK normal.
A recent 2019 report by Morgan Stanley found
that while “…e-commerce penetration reached 11% of total retail sales at the
end of 2018” that “e-commerce penetration in the GAFO segment” was
now over 45% (6). GAFO retailers are often the ones downtown leaders most want
to recruit.
This huge
capture rate achieved by online merchants plainly indicates that there will be
substantially less need for GAFO brick and mortar spaces. Will rebounding
downtowns, especially those in our inner cities, really be winning the lion’s
share of this reduced demand?
The
Small Merchant Problem. According to Statista: “There were 19,495 incorporated places registered
in the United States in 2018. About 84%, 16,411 of them, had a population under
10,000.” In contrast, only 10 cities had a population of one million or
more and only 310, or about 1.5%, had a population over 100,000 (7). For the
vast majority of these incorporated places, small independent merchants will be
their most likely retail tenants and tenant prospects. Many of these downtowns
have never had a retail chain, while others were able to attract some non-GAFO
chains and, more recently, dollar stores.
As
can be seen in the table above, the very small merchants, those with 0 to 9
employees had the lowest decline in numbers, -7%, between 2007 and 2012, a strong indication
that they were among the least hurt by the Great Recession, though there was
considerable variation by state. Among them was a huge number of nonemployer
firms. Many of them may have stayed open because the owner also had another
job. Among the small merchants, those with 10 to 19 employees probably account for
many of these small towns’ strongest
retailers. They suffered a significantly
higher decline, -15%, a sign they were hurt more by the Great Recession. They
may have been more vulnerable because they were more likely to have had
outstanding loans.
The
vicissitudes these small merchants have faced were quite different than those
faced by the national chains. For one thing, since most of them were not
offering GAFO merchandise, they were less apt to be hurt by the growth of
internet sales. In the years prior to the Great Recession, any small GAFO retailers were likely to have felt
the brunt of competition from big box stores such as Walmart and Home Depot.
Instead, most small town retail businesses were mainly focused on local,
neighborhood type needs such as food and beverages, health and beauty products,
and arts related products. However, in many smaller and less affluent
downtowns, dollar stores appeared and won substantial market share – even from
Walmart.
Small
town primary trade areas are likely to be small geographically and sparsely
populated. If they have under 15,000 people that is too small to support most
independent small GAFO retailers – unless they adopt an omnichannel strategy that also produces
revenue flows from online sales and offsite sales in distant market areas.
A
major challenge for these very small
merchants is the level of local consumer spending, since it directly impacts
the cash flow they are so dependent on. Those in communities where household incomes are hardest hit
will feel the pain most. Those in communities where income and population
growth are stagnant will likewise probably work hard just to tread water. Retailers in small communities with strong household
incomes are more likely to prosper.
Other
major challenges for these small merchants are their skill sets and abilities
to start and maintain a successful business.
By definition, half can be expected to have below average skill sets. According
to BLS data from 2016, about 56.1% of retail startups fail within their first
five years. That means that the smaller downtowns towns dependent on small
merchants can likely expect significant churn with the resulting need to either
recruit or develop new retailers. A possible confounding problem is that
nationally the number of startup firms seems to be diminishing, having fallen
by 19% between 2007 and the first half of 2019 (8). How much this holds true
for small retailers is not now apparent, but if the number of small retail
startups has diminished, that could have important implications for many
smaller downtowns.
The
Green Shoots of the New Retail. On the other hand, there are many signs that brick and mortar
retail will not be completely disappearing, though how many locations and
how much physical space will be required are not now known. Here are some
of the positive signs:
Most Americans still prefer to shop in brick
and mortar stores — 64% according to a
2016 Pew Research Center national survey; 78% also said it’s important to be
able to try a product out in person (9). Several other surveys have over the
years had similar findings. The problem has been that the types of stores
retailers have offered shoppers have not been what many of them wanted! That is
beginning to change. There has been a big increase in retail chain concerns
about better instore experiences and more convenient transactions (purchasing
and deliveries).
Some chains have continued to do well through
these apocalyptic times – off-pricers such as TJ Maxx; dollar stores; grocery store chains such as
Wegmans, Kroger and Aldi, and beauty product stores such as Sephora and Ulta.
Many “old” retailers seem to be learning new
tricks. For example: Best Buy and Target have made notable comebacks; Walmart
has created an impressive internet operation; Kohl’s is experimenting with
smaller stores, bringing in Amazon returns,
and putting Aldi groceries inside its stores, and Chico’s has reportedly found new online
marketing legs.
More retailers are realizing the importance of
customer relationships and how convenience and instore experience can help
build them.
While chain stores have been closing, they
also have been opening, if at a lower rate. Old Navy, for example, plans to
double its store count and penetrate smaller communities.
Internet birthed retailers are opening brick
and mortar stores. They need them to be profitable! It remains to be seen how
many stores they will open. Many of them reduce their space needs and costs by
not keeping merchandise inventories onsite. Many of them like affluent downtown
and neighborhood shopping district locations.
Most importantly, retailers are now avidly
adopting omnichannel marketing strategies that see both brick and mortar stores
and their internet assets as related
ways of connecting to their customers — and often on the same transaction. For
example, it is becoming increasingly popular for shoppers to make a purchase on
a retailers website and then pick it up at the retailer’s nearby physical
store. Retailers are finding that physical stores can stimulate visits to their
websites and conversely that websites can stimulate visits and sales in their
brick and mortar stores.
Retailers are increasingly finding that besides
making sales, physical stores can play many other valuable roles related to
interfacing with shoppers, e.g., being places to pick up purchases,
experience/try out merchandise or
receive pampering amounts of customer service. Their annual sales consequently
may be a poor indication of their true value to the retail chain – or to the
landlords of their leased retail spaces.
Experimentation with smaller stores has been
going on for many years now. Walmart famously tried to do so in some rural
areas, and retreated. Now, a number of other chains are trying out smaller
stores that allow them to enter dense urban markets where their larger formats
cannot fit and/or would create traffic and/or political problems. Target has
been the most visible. The argument can be made that this is an extremely
important experiment for downtown retail growth. If the chains can learn
how to do the smaller formats successfully more will fit not only into dense urban
downtowns, but also into suburban and some rural downtowns. The key to their success
may be how they use the internet and AI
or AR to augment the smaller selections of merchandise they can offer in the
smaller spaces.
As I have noted in an article in the IEDC’s
Economic Development Journal, there is a definite trend in some rural and
suburban communities for new residents, drawn by the area’s quality of life
assets, to open new retail shops (10). In several instances, these shops and
eateries have become some of the best in the downtown. Quite often, those QofL
retailers have been facilitated by the market shares yielded by the department
stores and specialty retail chains that closed in failing nearby malls. It
should be remembered however, that many of these closing retail operations had
well below average market shares – that’s why they failed – and what they gave
up was also prone to being captured to varying degrees by the remaining retail
chains and online merchants.
LOOKING
AT SOME DIFFERENT TYPES OF DOWNTOWNS
Trying
to present a full typology of downtowns would require an arduous and
complicated effort that would likely
divert attention from the main subject of this article. Additionally, just
looking at a few examples will amply serve the purpose of demonstrating different
retail outcomes.
Urban
Downtowns and Commercial Districts. One well-known retail expert was quoted in the Public Square
article as arguing that : “Retailers have saturated the suburbs and the next
underserved market is the inner cities. And they are also thinking that it will
be a trend and growth market.” I found that use of the term inner city somewhat
confounding since I have heard it used overwhelmingly to refer to the core poor
parts of a large city that are usually heavily populated by “minority” groups,
while I think the expert was really using it as a broader synonym for “dense
urban areas”. Within dense urban areas
several different types of retail districts can be found if categorized just by number of stores and shopper affluence –
there is not just one type of inner city retail, district. Here again, to
maintain some brevity, I will focus on a select few. I will look at Manhattan and other NYC retail districts simply
because of the ease of finding relevant
data because of my past research on them.
The Crème de la Crème. This is undeniable: in our major cities, for countless decades there have been major CBD retail corridors that have attracted hordes of trophy retailers– e.g., Fifth Avenue and Madison Avenue in NYC, Newberry and Boylston Streets in Boston; North Michigan Avenue in Chicago ; Rodeo Drive in Beverly Hills, and Walnut Street in Philadelphia. The retail chains show how much they value such locations by not only being there, but by how much they pay to be there. For example, retail rents on the prime part of Fifth Avenue in Manhattan run about $2,871 PSF and about $960 PSF on Madison Avenue – see table above. The retailers often are there as much for the marketing opportunities provided by a “flagship store” as for the actual sales they make. That said, those sales can be huge. Back in 2009, the Apple store on Fifth Avenue reportedly had sales of $350 million, or about $35,000 PSF! Nearby Tiffany reportedly did about $18,000 PSF. (I’ve tried unsuccessfully to confirm these stats. I do not doubt that the sales PSF are very high, but they being that high, I am not sure.)
The
table above is from a report by Cushman & Wakefield on 11 of Manhattan’s
major retail submarkets. Unsurprisingly, Manhattan has tons of retail because
it has a large, affluent population, hordes of people working there and loads
of tourists, especially from abroad, who spend lots of money in retail shops.
The lowest retail asking rent is in the
table is $243 PSF and the average is
$860. It is reasonable to assume that most of the retailers paying such rents
were doing so because they expected commensurate sales revenues and profits. This
shows another basic and perhaps mundane point about our retail chains –they
have long entered urban commercial districts and been prepared to pay very high
rents when they saw a lot of affluent people living, working, playing and
spending in them. The question about retail interest in dense urban
areas has really been about their willingness to enter less affluent inner city
areas.
However, even these affluent submarket areas can have their problems. The Cushman & Wakefield data also show that across these 11 strong submarkets, about 21% of the commercial space is “available”, i.e. vacant or up for lease. In turn, that level of availability suggests that in these strong urban submarkets, something is not quite right. It very probably has little to do with their addressable consumer markets. Most of those consumers have benefited from income inequality, not been hurt by it. More likely are problems associated with the involved real estate properties and their tenants. Some proof of this is that when asked rents have been lowered, the availability rates also went down. There also is a real possibility that there is just too much retail space on the market, even in these posh market areas. It will be very interesting, for example, to see what happens in the 34th Street district after all the new retail space built by Related and Brookfield in and near Hudson Yards is fully activated. Also, greater retail chain entry into urban districts will depend on a lot more than just their desire to do so. It will also depend on local landlords and, as Walmart and Target have learned, the approval of city politicians. Surely, NYC is not the only big city facing such issues. Many of these major city downtowns, for example, have seen the closing or down-sizing of their department stores.
Long Successful Densely Populated Urban Districts. Here in the Borough of Queens, there are two shopping areas that demonstrate that retail chains also have long known about, located in, and succeeded in dense non CBD urban market areas with high expenditure potentials. They are also interesting because they have quite different operational characteristics and customer bases that exemplify what is happening in many of our non-crème de la crème urban commercial districts. Austin Street is a narrow two-lane street that runs parallel to the six- lane Queens Boulevard one block to its north. For about 100 years it has been the shopping area for Forest Hills Gardens and Forest Hills. Since about 1980, it has attracted upper middle income shoppers from an even wider area as such retailers as Gap, Gap for Kids, Banana Republic, Ann Taylor, Benneton, Loft, Nine West, Barnes & Noble, Victoria’s Secret, Aldo and Eddie Bauer decided to locate there– see photos above. Over the years, it has had its ups and downs usually in sync with the general economy. Recently, the B&N closed and one of Target’s “small stores” took its place, and Banana Republic and Ann Taylor have converted to “outlet/ factory” formats. In recent years, more national chains have closed than opened, with retail spaces being replaced mainly by eateries such as Shake Shack, Bare Burger, and high quality Asian restaurants, and personal services such as non-appointment doctors offices and barber shops.
There
are few large commercial spaces on this traditional street, the largest being
the one Target occupies that has about 25,000 SF. Attempts to redevelop
this area to create much larger retail spaces would almost certainly create
a political storm and likely be defeated. If retail chains are to increase
their numbers on Austin Street it will likely be by those able to use value
oriented formats that do not require large spaces, such as the current Ann
Taylor and Banana Republic factory stores. There is no existing space for
another retailer of Target’s size, or a small Whole Foods or a small
Kohls.
Today,
the storefronts constitute a traditional solid line of commercial activity on
both sides of the street for about 0.6 miles. It has a nice scale. It is
walkable, though its relatively narrow sidewalks can quickly seem crowded on
weekends. It can be accessed via four subway lines, the LIRR and several bus
lines, with most shoppers walking or busing there. Parking there is tight both
on-street and off, and not cheap. Some
of its independent retailers have been there for decades. It has some attractive eateries and bars. The
whole package is very much like a successful, walkable suburban downtown and it
attracts some of the borough’s more affluent shoppers who appreciate a non-mall
experience. The core neighborhoods Austin Street serves – Forest Hills
Gardens, Forest Hills and Kew Gardens – were early planned suburbs of Manhattan
and today they maintain many suburban characteristics.
The Austin Street district’s zip code area has 68,733 residents, 61% of whom are white only. The average household income is $101,342, and the median is $76,467. About 38% of the households have annual incomes over $100,000 and they will likely account for a very disproportionate amount of local retail spending. Over 59% of its adult population have a BA degree or higher and 59% are engaged business, management, science and arts occupations. In other words, within walking distance of the retailers on Austin Street are a large bolus of creative people and lots of households with significant spending power.
Just about one mile to the west of the Austin Street district, at 63rd Drive, starts another commercial district that runs about 0.7 miles west along Queens Boulevard. See the above map. It straddles two neighborhoods, Rego Park and Elmhurst and its major retailing is a fragmented and dispersed set of shopping centers. Elmhurst is the most linguistically diverse neighborhood in the US. The character of this shopping district and its tenants are quite different from Austin street. It has the Queens Center, an enclosed mall that opened around 1980 and for several decades was one of the top grossing retail centers in the USA on a $/SF basis. It also has some power centers with tenants such as a full-size Target, Best Buy, Costco, Burlington, Marshall’s, Century 21, TJ Maxx, Aldi, and Trader Joe’s. This district is not pedestrian friendly, and its mass transit assets are a couple of second rate local subway stops. But, it’s very car oriented, abutting the very heavily trafficked Long island Expressway (LIE) and Queens Boulevard and it has loads of parking garage space. Regardless of what NYC’s planners and idealists may believe or want, most Queens residents who have cars use them frequently to go shopping at places that are beyond walking distance. This shopping district’s location allows it to tap the many shoppers with cars who live in Queens.
The
Queens Center Mall offerings are those of a middle market mall. For example, it
has Macy’s, JCPenny, Michael Kors, Gap, Victoria’s
Secret and an Apple store. It is in a zip code that has a population of 96,353
– making it equal to a fairly large city — with median and mean household
incomes of $49,098 and $65,321 respectively. About 20% of the households have
annual incomes over $100,000. This shopping district is located in a solidly
middle income residential area and its big box value retailers are aptly
positioned both in their locations and their offerings to tap that market. However,
its car orientation and location next to two highly trafficked roadways means
it also can draw many shoppers from well beyond its zip code.
This
district does not operate in any way that resembles what a well-designed and
well run downtown should be. If this is the model for today’s retail chains to
penetrate our urban areas, then there may well be strong reasons to question
the value of their entry. Over the past decade, for example, some big box operations have
entered Jamaica Center – Marshalls and Home Depot – but observers report that
their shoppers, who mostly arrive by auto,
do not spend much time walking around and shopping in other downtown
stores. it is hard to see how the insertion of power centers or even a mall as magnetic
as the inward-looking Queens Center, would do much to help other nearby downtown
retailers or make the district to appear more vibrant. For example, part of the
reason The Gallery in Center City Philadelphia failed is that it was not very
permeable to pedestrians on Market Street. Fashion District Philadelphia, the heavily
renovated mall that replaced it,
reportedly is far more permeable for pedestrians.
Underserved Inner City Districts. Now let’s look at the inner city downtown and neighborhood districts where large numbers of lower income, non-white populations shop. Over the years, I have done a lot of work in places such as Jamaica Center in Queens; Fordham Road, Norwood and Hunts Point in The Bronx; Downtown Brooklyn; and West New York and Elizabeth in NJ. Since the early 1980s, I’ve heard about these districts being underserved by retailers and on many occasions I, too, made that argument. There is absolutely nothing new in that argument. What I usually found was that:
Local leaders, landlords and a tranche of middle income trade area residents were dissatisfied with the retail offerings as well as the district’s appearance and fear of crime.
Yet, there were numerous shops, fairly normal vacancy rates, and the sidewalks filled with pedestrians during the daytime . After visiting a few of them, one former president of Bloomingdale’s called them “beehives of activity.”
Over time, the dissatisfaction increased as the retail shops stopped serving middle income shoppers and focused more on lower income, “ethnic,” and teenage shoppers.
In seeming validation of Michael E. Porter’s famous argument in “The Competitive Advantage of the Inner City,” that dense low income populations in aggregate offered strong market potentials, the inner city retailers who focused on lower income shoppers very often reported strong sales PSF that rivaled those reported for some of Manhattan’s posh shopping corridors (11). Indeed, some were doing so well that they created their own chains that opened stores in inner city downtowns and large commercial centers across the NY-NJ-CT metropolitan region and even in PA.
Trade area analyses of these downtown and large neighborhood shopping districts consistently showed that the number of solidly middle income households were either sizeable or even in the majority, and certainly accounted for most of the retail spending power. For example, the 1987 report I co-authored with Bill Shore on Jamaica Center found that the households in its trade area had a 10% higher average income than those in NYC as a whole (12). In 2002, DANTH looked at the trade area of the Jerome Avenue BID in The Bronx and found the median household income in 2019 dollars was about $76,234 and 22.8% of the households had incomes in 2019 dollars above $109,889. What Porter appears to have missed is the fact that while many and probably most of our inner city commercial districts may be drawing from areas that are indeed heavily “ethnic,” with many lower income people, they also can have large numbers of solidly middle income and even upper middle income households that have most of the spending power.
Nonetheless, the retailers in these inner city districts were targeting the trade areas’ lower income residents and less affluent district visitors. In many instances, the low income segment was targeted by the retailers because they lived in or near the downtown and were its most frequent users. The market research of too many of these retailers was limited to observing the types of people they saw walking by their shop or possible location. More importantly, the retailers very often were making very sizeable profits – Porter did see this possibility –and saw no reason to take the risk of trying to attract their market area’s more affluent shoppers.
Jamaica
Center.
NYC has several outer borough downtowns. Jamaica Center is one of the three in
Queens. It is old, dating back to the colonial days. In 1947, when Macy’s
opened its second branch store in NYC, it was in Jamaica Center. It was long a true, multifunctional downtown. However, by the late 1960s, it
faced a steep decline with white residential and retail flight. In the late 1990s, and especially after
Porter’s article received wide national attention, some of the more sought
after national chains started to look more closely at dense inner city downtowns,
and Jamaica Center was one of them. By 2002, for example, One Jamaica Center, a
450,000SF a mixed-use complex was opened with tenants such as Old Navy, Gap, Bally
Total Fitness, Walgreens, Subway, Dunkin’ Donuts, a 15-screen multiplex theater.
Marshalls, Home Depot,, Footlocker, Petland also have located there. Just
opened are H&M and Burlington Coat Factory. Among those that have come and
gone are Payless, Toys R Us, Kids R Us, The Athlete’s Store – retailers
troubled at the corporate level. Gap is now in another location and using a
factory store format. Jamaica also still has lots of the chains that have long
felt comfortable being in inner city commercials districts such as Fabco, CH
Martin, Conway, Danice, Rainbow, Shoppers World, Young World, GNC, Game Stop,
Jimmy Jazz, Dr Jay’s, and Vim. Target is reportedly may locate in a new mixed
use project and it will be very interesting to see if it is a small store or
one of its larger formats. The smaller Target stores I’ve seen in urban
locations are not in inner city ethnic districts — my experience may be
limited – but in very solid upper-middle-income, non-CBD commercial areas such
as Austin Street or on East Illinois near the lake in Chicago.
The
emergence in Jamaica Center of a cluster of well-known national retailers who
appeal to middle income shoppers looking for value in their purchases is a
process that started many years ago and continues on today. There has not been
any sudden huge gush of retail interest, but a long-term series of stops and
starts that is building a herd of retail sheep that hopefully will reach the
critical size needed to attract more
retail sheep. Notably, this meeting of middle income retail demand is being
done by retailers with value formats – even the specialty apparel retailer, Gap,
is using one. There was normal churn, but no new large influx of retailers
targeting poorer shoppers – those retailers were long there.
Jamaica
Center had several existing large commercial spaces that could be converted for
use by these big box value operations. Among them were old department stores,
an old newspaper building and large former furniture stores. When will the
supply of those large spaces run out? What, if anything, will be done then to create new ones?
Very
importantly, for the first time since the early 1960s, a very substantial
number of new housing units are appearing in Jamaica Center. One might suspect
they will intensify retail chain interest. If so, that points to the strong
possibility that if other inner city downtowns are now enjoying first time or
greatly increased retail chain interest, it may be because they have improved
in important ways that made them more attractive to retailers — and less
because the retailers have suddenly seen the light and are newly interested in
inner cities. Greater interest in downtown Detroit, for example, by retail
chains that are now doing well, would not be surprising given the significant
revitalization that has occurred there in the recent past.
Lessons to learn From the Retail Growth in The Bronx. There are perhaps no better examples of poor ethnic inner city neighborhoods than those found in The Bronx, NY. It has 1.5 million residents, a population density of 32,903/SqMile, the lowest per capita income among NY’s 62 counties, and only about 10% of its population is white only. For decades, the fact that the entire borough was badly understored was widely acknowledged, and largely ignored by retailers and developers. However, in a slow, start and stop manner, retail has been growing in the borough since the opening of the powerful Bay Plaza Shopping Center in the mid 1987, with another burst in the early 2000s and considerable growth since the Great Recession. The table below lists the major shopping centers in the borough and provides some demographic information about them. Since around 2000, well over 3 million SF of new retail space has opened in The Bronx, with over 2 million SF since 2009.
Fordham
Road and The Hub are the two shopping districts with the physical
characteristics most like those of a downtown. They are also in the zip codes
with the greatest population densities and the lowest and third lowest
household incomes. Both have strong subway assets and Fordham Road has an
increasingly used Metro North station next to a large bus transfer point. Both
have comparatively little off street parking and are not that close to a major
highway. However, these two downtown-like districts have attracted a relatively
small portion of the new retail. The Hub
has seen little to no real growth. The 300+ store Fordham Road district has
done better. It remains a beehive of activity well after two major department
stores closed: Alexander’s and Sears. It has attracted a significant number of
national chains: American Eagle Outlet, Best Buy, Claire’s, Footlocker, GameStop,
Gap Outlet, Macy’s Backstage, Marshall’s, Nine West Outlet, Payless, Rainbow,
Sleepy’s, Staples, Starbucks, The Children’s Place, TJ Maxx, Walgreens and
Zale’s. Many of the larger chain tenants – Marshalls, TJ Maxx, Best Buy, and Macy’s
Backstage have gone into the buildings vacated by the department stores. Here,
as in Jamaica Center, large value and outlet retailers are important. There are few if any large retail prone
spaces of say 25,000+ SF available and that is probably constraining the
district’s ability to attract more major retailers.
Most
of the new comparison retail in the borough has gone into the other shopping
centers listed in the table. The characteristic they all share is that they are
car oriented: they sit next to major highways and have lots of off-street
parking.
They plainly are targeting shoppers who are located well beyond the
neighborhoods they are located in. For example, Target is an anchor tenant in three
of them and claims addressable trade area populations of 400,000+. The retailers entering into this paradigmatic
inner city county are showing by their stores how much they nevertheless still
favor self-contained car-oriented shopping centers over downtown-like
locations. To some degree, this may be because of the lack of appropriate
spaces in The Hub and along Fordham Road.
The
Bronx Terminal Market (BTM) is a 913,000 SF retail complex that opened in 2009,
despite the Great Recession, is perhaps the strongest example of the retailers
continued preference for strong highway access locations. It is owned and
operated by the Related Companies, one of the largest real estate
developers/owners in the USA. Its presence in the Bronx more than 10 years
ago certainly demonstrates that the interest of important retail developers and
retail chains in The Bronx is not new. The new Yankee Stadium also opened
in 2009. With the new stadium, political leaders and the Yankee organization
wanted the surrounding area improved. Metro-North put in a new station,
existing subway stations were improved and the BTM was built. Its tenant list
included: Babies R Us, Bed, Bath & Beyond, Best Buy, BJ’s, Burlington, GameStop,
Home Depot, Marshalls, Michael’s, Raymour & Flannigan, and Target. That’s
one powerful retail line up! Those retailers need to draw from a very wide and
densely populated trade area, one that probably goes well beyond the South
Bronx. The BTM’s location right next to I-87 allows such market penetration. Aside
from that asset, the BTM’s location is not a particularly desirable one for
retailers. It is located in a relatively
low-income zip code that has a population density that is far from the highest.
Its strong car orientation indicates
that while it certainly might draw some close by lower income shoppers, its
primary customer base will be middle income shoppers located along the I-87
driveshed.
The
Kingsbridge Broadway Corridor in Zip Code 10463 has attracted three shopping
centers that together total 530,000 SF. The first opened in 20004 and the other
two in 2014 and 2015. They too sit very near an I-87 exit. Their zip code’s
residents are solidly middle oncome and 24% of the households have annual
incomes of $100,000. This corridor is very interesting because retailers there
can tap the close-in Kingsbridge, Riverdale and Inwood neighborhoods. The three
shopping centers have definitely increased the retail choices of local
residents. The distances between these three shopping centers are certainly
walkable, but the way they are built and the setting along Broadway are not
conducive to making such walks. They are not downtown-like and have done little
to stimulate the creation of a walkable shopping district along this section of
Broadway.
The
300,000 SF Throggs Neck Shopping Center that opened in 2014 is in a similar
type of location. It is next to an exit on I-95 and the residents on its zip
code are solidly middle income, with about 23% of the households having annual
incomes of $100,000. The Targets in this and the River Plaza shopping center
both have their main sales areas underground, as does the Costco in Rego Park.
This was done to bypass the zoning aimed by city fathers at deterring the
opening of large big box stores.
The
New Horizons Shopping Center is a supermarket anchored center in a low-income
neighborhood. It was created through the hard work of a terrific neighborhood
organization, the Mid-Bronx Desperados (MBD), that worked with LISC. Today, it
has a Stop & Shop, Auto Zone, TJ Maxx, Footlocker, Petland, Game Stop,
Subway, IHOP and Taco Bell. This is a traditional suburban type, car oriented
shopping center, with shops located in a
sea of parking spaces. It is also very close to the Cross Bronx Expressway. It
is not an urban shopping project with a solid wall of shops on the ground floors of
buildings that abut and open to sidewalks. On the once infamous Charlotte
Street, MBD had previously built ranch style single family residential units.
Their occupants have well-tended backyards, some boats sitting in driveways and
some above-ground swimming pools. Given their MBD origins, both the housing and
the shopping center certainly reflected local aspirations and needs. Residents
in many other dense, low-income, ethnic urban areas may also aspire to more
suburban type retail projects. Because people are less affluent does not
necessarily mean they like downtown or other urban retail environments.
That may prove to be another challenge to inner city downtown retail growth.
The
Bay Plaza Shopping Center and Mall is an example of a large and growing
suburban mall, but one located in the middle one of the most densely populated,
highly “minority” and poor counties in the nation. It is isolated in the geographic arm
fold of two major highways, I-95 and the Hutchinson River Parkway, and only
accessible by car or, with some difficulty, bus. It plainly is targeting middle
income shoppers not only in The Bronx, but also in lower Westchester County. Opened
in 1987, it has grown to over 2 million SF, adding 780,000 SF in 2014. Its tenants
range from traditional department stores (e.g., Macy’s) and specialty retail
chains (e.g., Victoria’s Secret) to the value pricing department stores
(Marshall’s and Saks Off 5th) and retail chains (DSW). Also included
are several regional chains such as Easy Pickins and Jimmy Jazz. Importantly,
they have also attracted retailers who are big hits with teens and young
adults, such as H&M, Forever 21, and Hot Topic. The array of national
retailers in this mall far outshines what The Bronx’s closest approximation to
a downtown, Fordham Road, has to offer.
Back in 2016, I compiled a list of 85 national chains and researched how many had locations in The Bronx (13). See the table above. While the list certainly was not exhaustive, the results are hopefully still informative. I found 75 of the identified chains had Bronx locations and together they had a total of 290 stores.
As
might be expected, The Bronx still has not attracted. the likes of Gucci,
Prada, Valentino, Tiffany, Duxiana, Ralph Lauren, etc. They are far, far too
ritzy and more appropriate for Rodeo Drive in Beverly Hills, Midtown Manhattan
or the Americana Shopping Center in Manhasset, NY. Nor is The Bronx attracting,
perhaps thankfully, those like Talbots, Chico’s, Ann Taylor or Banana Republic
– many of these apparel chains still are fighting for survival. Trader Joe’s
and Whole Foods still have stayed away. So have Walmart and its sibling Sam’s
Club – due more to strong political opposition in NYC to Walmart than the
chain’s lack of interest in NYC locations.
The
retail chains that now seem to like the inner city Bronx’s markets the most are those:
Aiming at the lower income and
ethic shoppers: e.g., Family Dollar, Dollar Tree, Dr Jays, Jimmy Jazz, Rainbow
Shops, Vim and City Jeans. Many of them have been around for decades.
With a neighborhood level store
location strategy: e.g., GNC, Walgreens, Payless, GameStop, AutoZone and CVS.
These types of retailers have been locating in ethnic inner city districts
since the mid 1980s.
Targeting middle-income shoppers in either big box, off-price, or factory
outlet formats. Includes Home Depot,
BJs, Best Buy, Target, Burlington Coat, Marshall’s, TJ Maxx, DSW, Gap Outlet,
American Eagle Outlet, Macy’s Backstage, Nine West Outlet, Aldi, Saks Off 5th. These are more likely to have arrived after
2002, but some go back to 1987.
The retailers honed in on the middle class now operate in ways
that recognize its huge number of deliberate consumers who are:
Much more value conscious.
Cautious spenders.
Expect big price discounts from retailers.
SOME
TAKE AWAYS
1.
What national retail chains may do is largely irrelevant for a very large
number of our downtowns that are small. They either never had any chains or
only had a few non-GAFO chains. Their trade areas often are far too sparsely
populated – e.g., probably under 15,000 people –to support small GAFO retailers.
In these small downtowns, the abilities
of local merchants will be a more critical factor than the behaviors of
national retail chains.
2.
Most needed in these small towns are better merchants, through either
recruitment or re-training.
3.
That our inner cities are underserved by retailers has been recognized at least
since the early 1980s. This is not a new situation, nor is the awareness of it.
4.
National retail chains, probably since their inception, have been interested in
prime urban locations where lots of wealthy people lived and played, and they
have been prepared to pay a lot for them. Their locating today near to large new
market rate housing projects, especially if they are expensive, or in a walkable or TOD neighborhood, absolutely
comes as no surprise. What would be a surprise, is if they behaved otherwise.
5. For over 20 years, national retailers have been locating in highly ethnic inner city districts and downtowns, but the levels of their interest have been uneven over time and across places. The questions sparked by the Public Square article are: a) will retailers now locate in our inner cities at a higher rate than before, even though their demand for new retail space has significantly decreased, and b) will those stores be located in our inner city downtowns?
6.
The retail demand of low income shoppers in these inner city districts were
long met by local retailers, who often had lucrative businesses and created
chains targeted to low-income shoppers in similar districts.
7.
Middle income shoppers were the most underserved and complaining inner city
market segment. They were often surprisingly numerous and accounted for a large
proportion of an inner city area’s residential retail expenditure potentials.
8.
National chains that usually targeted middle income shoppers have over the past
20 years increasingly entered inner city districts, targeting, as might be
expected, local middle income shoppers. It is their presence and not the
density of the low-income shoppers that attracts these retailers.
9. The retailers best positioned to capture
middle income shoppers these days are those that feature strong value pricing in either big box,
off-price or factory outlet formats. These are precisely the types of retailers
that are entering densely populated inner city areas.
10.
Many of them require relatively large spaces and are accustomed to being in
very car oriented retail centers. They often are hard to fit into a downtown,
especially if it lacks large retail prone spaces and parking capacity. Consequently,
these retailers may prefer to locate in non-downtown inner city locations, and
downtowns might not benefit so much from any increased retail chain interest in
inner city locations.
11.
The use of smaller formats theoretically could enable more of these chains to
locate in downtowns, but their viability is still being tested and their placement
in ethnic inner city districts now is still uncertain.
12.
Most importantly, the retail industry remains in the midst of a process of
creative destruction that does not promise to end any time soon. As a result, how
much retail space will be needed in the future remains unknown, though it now
looks like it will be considerably less than it was even a few years ago. Also,
still to be clarified, are the uses the retail spaces will be put to, and how that will impact the amount of space needed,
their best locations and costs. These factors all have strong possible
implications for any downtown retail rebound.
13.
Many other factors, besides the interest of the retail chains will determine
how a downtown’s retail will rebound. Among them are: the abilities and
behaviors of retail chains’ managers and local landlords; political, urban
design and environmental issues, the availability of appropriate retail-prone
spaces and ample parking, and, most importantly, where and how local consumers
like to shop.
14.
There are some other interesting types of downtowns that appear to have their own
retail development scenarios these days: downtown creative districts; the lifestyle
mall suburban downtown; the urbanized suburban downtown; the rural regional
commercial center downtowns, and the small rural downtown gems. Unfortunately,
I cannot cover them in this already long article, but I want to acknowledge
their existence.
In my retail recruitment experience, I’ve found that there
are types of retail stores that clients need and those that they want. The need
category generally includes groceries, specialty food shops, pharmacies, etc.,
while the want category overwhelmingly includes GAFO operations — i.e., general merchandise, clothing and footwear,
home furnishings, electronics and appliances, sporting goods, book and music
stores, and office supply stores. The shops that respond to needs did relatively
well through and after the Great Recession, while the GAFO stores have been in
consistent decline or weakness since about 2009. Recent research indicates that
e-GAFO retailers are now eating the lunch of brick and mortar GAFO merchants.
An Enormous 45% Hit on B&M Retail Sales Potentials!. One of the most significant trends that has helped define the new normals for retailing and our downtowns is the increasingly significant share of the sales of the merchandise sold in GAFO stores that are being captured by online operations. Obviously, the more sales dollars the e-stores win, the less there are for brick and mortar shops (B&Ms) to capture.
A while back, in another blog posting, I presented the above
table, taken from a provocative study by
Hortacsu and Syverson, that showed e-store market penetration for a range of
retail categories in 2013 along with
estimates of the years in which they each would reach 25%, 50%, 75% and 90% market
shares.
A more recent 2019 report by Morgan Stanley suggests that
the Hortacsu and Syverson study was pretty sound. It found that while “…e-commerce
penetration reached 11% of total retail sales at the end of 2018” that “e-commerce penetration in the GAFO
segment” was now over 45%.(1) That makes
it so much harder for B&M GAFO retailers to survive, much less thrive,
unless they are executing or part of an omni-channel marketing strategy.
The Morgan Stanley report also found that “the shift to
e-commerce has hit the home-furnishings segment the hardest,” while clothing,
linens and other “soft” goods have experienced a significant “e-commerce
disintermediation” with a 22% e-commerce penetration expected in 2019. (2) It was long thought that these two retail
segments would be resistant to e-store penetration because one offers large and
heavy merchandise and the other offers merchandise that consumers would want to
touch, feel and try on. One weakness of such thinking was the failure to
recognize that so many of the soft goods we buy are like commodities and we
don’t need to touch them, feel them or try them on. For example, lots of people
have long bought shirts, trousers, shoes, dresses, swimsuits, parkas from
catalogs. They often are buying more garments like the ones they already have –
e.g., I have countless blue, button down collar shirts — or replacements for
them. Then, too, lots of home furnishings products are not furniture suites or otherwise
prohibitively large, while others have been re-imagined – e.g., Casper
Mattresses – so they can be shipped “small.”
How Are the Leakage Analysis Data Providers Dealing With This? Frankly, I do not know the answer to this, but I think the data providers owe their customers a clear explanation of how they are handling this situation. One technique they might be using for estimating consumer demand is to take the sales of retail stores by NAICS code within a certain fairly large geographic area and then divide the sales by the number of households in that study area. That defines demand solely in terms of B&M store sales, ignoring the huge Internet sales and demand. If, instead, they are using extrapolations from BLS consumer expenditure surveys to determine demand, then they must have whopping “leakages” in each of the NAICS codes analyzed unless they also are using data on e-store sales by NAICS code.
The leakages to the Internet for GAFO store merchandise now
are probably several magnitudes larger than traditionally defined leakages to
B&M shops located beyond the trade area’s boundaries.
Of course, an increasing number of downtown merchants now
have both a B&M shop and an e-store. Most of their e-store revenues often
come from distant customers and represent “e-surplus” sales. How are these
e-sales revenues included in the leakage analysis? How do leakage analysts know
which e-sales come from within the B&M store’s traditional trade area from
those that come from beyond it?
A growing number of retail sales are “click and collect” transactions
that involve ordering online via a retailer’s server that probably is located
hundreds of miles away and then picking up
the merchandise at the retailer’s local store. Are those transactions to
be deemed leaked or “unleaked” sales? The local store’s involvement may be key
to the sales transaction, though it may not logically be part of the monetary
transaction. Would the sale have occurred if the local store were not there? If
the answer is no, then somehow the role of the local shop has to be recognized
in the analysis.
Vacancies, Store Closings and Openings, Changing
Functions
A Word or Two About Vacancies. I fear that I’m very much an outlier, a contrarian, when it comes to downtown vacancies. While I don’t like vacant storefronts, my jockeys don’t always get in an uproar when I see them. Too often, they are not viewed from the proper perspective. Rule 1 for looking at vacancies should be to ask: where is the downtown on its revitalization arc? If it’s in the initial very troubled stages, then the prospects for recruiting really good retail tenants are not great, especially with today’s upheavals in the retail industry. Moreover, recruiting crappy tenants would be worse for the downtown’s revitalization effort than the empty shops. Also, at these early points in the revitalization process, an EDO’s scarce resources are probably better spent on working for improving the infrastructure and housing and reducing quality life issues such as the fear of crime, than paying for very problematic efforts to recruit good retail tenants.
Rule 2 is don’t be snooty — look at pamper niche tenant
prospects such as hair and nail salons, yoga and martial arts studios, etc.,
especially early in the revitalization process when their relatively low
revenue needs and desire for low cost spaces can put them among the downtown’s
best tenant prospects.
I take vacancies more seriously when the downtown is much
further along on its revitalization arc. In these situations, Rule 3 is the
locations of the vacancies are far more important than their number. Those that
are in strategic locations such as on or near the district’s “100% corner” or near
other strong assets will certainly need attention. A cluster of them is also
significant and probably indicates the existence of an important underlying
problem.
Rule 4 is that the downtown EDO should identify and address
such underlying problems, otherwise any “fill the vacancies” recruitment
program undertaken either by it or local commercial brokers will most likely
yield paltry results.
In the mid-arc downtowns, Rule 5 is to determine if new
downtown projects have raised landlord expectations about:
Their ability to attract national chains, even
though they are looking for fewer and smaller spaces and have become much more
finicky about their new locations.
Potential rental incomes to the point that their
spaces are too pricey for their most likely tenant prospects, small independent
merchants.
If either of the above is the case, then there’s a landlord
problem, not a tenant prospect problem. This leads into Rule 6: as downtowns
revitalize, erroneous landlord estimates of viable rent increases can result in
more vacant spaces than diminished consumer retail demand or its associated
reduced retailer demand for store spaces.
In the past, I argued that a vacancy rate of about 5% was
the sweet spot for mid-arc downtowns. Some vacancies are necessary to allow for
the tenant churn that can bring in new merchant blood and help keep the
district vital. That still strikes me as an ideal goal. Many years ago, my real
estate mentors taught me that vacancy rates above 10% indicated the existence
of serious downtown problems that needed immediate identification and
remediation. Well, these days, under the New Normal, it seems that a 10%
vacancy rate is about average for retail spaces (3). Of course, I am not clear
whether that statistic refers to all the spaces in shopping centers and malls
or just to those allocated for retail tenants. Given that so many malls and
shopping centers have saved themselves by bringing in non-retail tenants, I
would say it probably is the former. One disturbing implication for downtowns
is that, these days, a 10% storefront vacancy rate may not be all that bad,
comparatively speaking. Even more unsettling for me have been the reports I’ve
seen of downtown vacancy rates in the 10% to 20% range in some of our small and
medium sized communities, Another
implication is that downtowns must look more to nonretail tenant prospects to
fill their vacancies, but ones that are able to stimulate and reinforce
pedestrian traffic on nearby sidewalks.
Because of Omni-Channel Marketing, B&M Retail is Not Going Away. One might expect that if the addressable retail markets for B&M chain stores have shrunk substantially, that lots of the stores would be closed. In fact, there have been a huge number that were closed –e.g., 7,000 just in 2017. However, new shops are also opening and an accelerating number of them are by Internet-birthed retailers (4). For example, so far in 2019, there have been 1,674 retail chain store losings, but 1,380 store openings (5).
Today, successful retailers do not see B&M store
customers as a different set from their e-store shoppers. Instead, they just
see customers who they can individually reach through several channels, e.g.,
B&M shops, websites, social media, traditional media, etc. They know that
while most consumers may still prefer shopping in B&M stores over e-stores:
(6)
Convenience is an important driver of which
shopping channel the consumer will select
Unless the B&M store provides an attractive
shopping experience, it will not attract as many customers as its management
might want.
B&M retail shops, under an omni-channel marketing
strategy can play a number of functions, besides being a place where sales
transactions occur, that can justify their existence:
SONY and Samsung, for example, have had
important store locations that are nothing more than showrooms. Many other
retailers use their shops as places where customers can experience the use of
their merchandise. You can, for example, book a nap at a Casper Mattress Sleep
Shop.
More and more large retailers are offering
“click and collect” purchasing, e.g., Best Buy, Walmart, Amazon.
Some retailers are developing special store
formats, e.g., Nordstrom Local, where they can provide extremely high levels of
customer service to shoppers with a proven record of spending large sums in
their stores.
Almost universally, the B&M store is seen as
the venue where the retailer can best provide experiences that will strengthen
their relationships with customers.
B&M stores also can generate website
traffic. For retail chains, a new B&M store in a market area sparks “a 37 percent
increase in overall traffic to that retailer’s website” by area residents. (7) “For
emerging brands, new store openings drive an average 45 percent increase in web
traffic following a store opening, according to ICSC research” (8). Of course, web traffic does not mean web sales
(see below).
Very importantly, B&M stores outperform e-stores in
several very critical ways:
They have a much higher sales conversion rates (visitors who turn into actual buyers), averaging about 22.5% across all retail sectors, than the less that 3% for e-stores (9).
Merchandise return rates for e-stores are three to four times higher than for B&M stores, probably because e-shoppers cannot touch, feel, try on or otherwise experience the merchandise. Returns have become an enormous ball and chain on e-retailer profitability, while bad returns experiences are really ticking off e-shoppers (10).
Bottom
Line: B&M retail stores are not going away, but there will be far fewer
of them, they will occupy smaller spaces, and perform many new functions that
justify their existence besides making sales transactions. How is your downtown planning
on dealing with such a scenario?
Across the nation over the past decade or so, the idea of
using the arts as an engine for downtown and Main Street economic growth has
attracted a growing number of adherents. One outcome of this advocacy is that arts
districts, a.k.a. creative districts, are appearing across the nation.
Colorado, for example has at least 26 of them, all formed under a state
statute. These districts either cover a designated part of a downtown district
or all of it.
However, very often, arts event venues and/or artisan work
spaces in a small town or big city are mostly dispersed beyond the downtown’s
borders. The town’s arts/creative assets then are much like an archipelago where
the arts islands may have some smaller clusters, but overall there is a good
deal of separation among them — as well as from the downtown’s businesses.
Some of these arts assets can be 3+ miles from the downtown. In these
communities, the downtown district only occupies a portion of the islands in
the complete arts archipelago.
The notion of a geographically bounded arts district that
only includes the downtown, or just a portion of it, consequently may not
appear to make much sense in communities with arts archipelagoes. The objectives
of this article are to:1) provide examples of such archipelagoes and 2) try to
stretch the arts district concept to fit arts archipelago situations. The keys
to achieving the needed conceptual stretch will be the presence of mutual
interests and complementary assets among downtown arts and business
stakeholders and the arts venues in the rest of the archipelago.
Reasons for the
Dispersion
Since about 2010, our field observations in many smaller
communities revealed that the dispersion of their economic and arts assets into
numerous commercial nodes and individual locations started when they were even
smaller and much younger. Consequently, it should not have been surprising that
when we started working on a project in some of these archipelago communities, we
found a high degree of long standing dispersion
of economic and arts assets. In many
small towns, for example, the former homes of illustrious people that were
located in the residential part of town have been turned into museums. Many art and entertainment venues, such as
museums, concert halls, PACs, casinos, stadiums, arenas, etc. did not locate in
downtowns because they were so large and required so much parking that they did
not easily fit into available downtown development sites. Downtown sites were
also often much more expensive to develop
because of land acquisition and demolition costs. Sometimes, too, community
leaders wanted their prestige arts venues placed in park-like settings that
could only be provided away from the downtown.
Individual creatives often find that downtown rents for
residential and work spaces are too expensive or soon became so after they have
pioneered improvements in the district. As a result, they frequently take
cheaper places beyond the district, and in smaller towns, even in rural
settings. Often, too, these creatives simply prefer working and living in a
rustic rural setting.
Some Examples of Arts
Archipelagoes
1. Manhattan, in NYC. Downtowns are one contiguous area, without any separations. For example, the Midtown CBD in Manhattan runs east -west from the East River to the Hudson River, and north south from about 30th Street to 59th Street. In contrast, Manhattan’s arts, cultural and entertainment institutions are more like an archipelago running from the Battery at the southern tip of Manhattan to the Cloisters near its northern edge. Yes, Midtown has the theater district, MoMA, the Morgan Museum, Radio City Music Hall, City Center, Town Hall and lots of movie theaters. But:
The large and powerful Lincoln Center is just
north of the Midtown CBD
The Museum Mile – the Met, Guggenheim, Neue,
Jewish Museum, Museum of the City of NY, Cooper Hewitt, and El Museo Del Barrio
— runs along Fifth Avenue from about 82nd street to 104th
street. The Breuer annex of the Met is on Madison at 75th St.
Chelsea to the south of the Midtown CBD has tons
of art galleries, the Joyce Theater (a favored venue for dance companies), the
DIA Museum and the Rubin Museum.
Further south are the new Whitney Museum, the
New Museum of Contemporary Art, the Museum of Jewish Heritage, the National
Museum of the American Indian. There are several smaller museums in this area,
too.
There reportedly are a total of 32 Museums in
Manhattan and vying counts of 83 and 100 for all five boroughs.
Many, if not most, of Manhattan’s strongest and most
important arts and cultural venues are not located in either the Midtown CBD or
the Downtown Financial District CBD. Some of them are in clusters that might
merit the term arts district being used to describe them (like the theater
district).
2. . Cleveland, OH. Downtown Cleveland has some venerable and wonderful cultural institutions. Save for The Rock and Roll Hall of Fame, the most important ones are in two clusters about one-mile from the downtown core (Playhouse Square) and about three miles away (Severance Hall. the Cleveland Museum of Art, and the Cleveland Arboretum) near University Circle.
3. Auburn, NY (population around 26,704). This town in Central New York has an impressive number of arts-cultural-entertainment venues. The table above shows their annual attendance. They are sorted into three groups. At the bottom are those located in the downtown: the 16 restaurants and bars that have live music, the Auburn Public Theater, the new NYS Equal Rights Heritage Center and the Seward House Museum. Together, they have an estimate annual audience of 110,484. Above it is a cluster of venues that are about 0.5 miles from the downtown, containing the Schweinfurth Arts Center, The Pitch Theater and the Cayuga Museum. It has a total annual attendance of around 23,688.
At the top are three venues that are farther away from the
downtown. The Harriet Tubman National Historic Park is about 1.3 miles away. On
a different road, the Merry-Go-Round Playhouse and the nearby Ward O’Hara
Museum are about 3 miles from the downtown. These three venues account for
about 47% of the arts-cultural-entrainment audience in Auburn. It’s downtown
business operators, especially those in the hospitality and entertainment
industries, would be foolish to not try to capture the expenditures of the
audiences of those three “distant” arts-cultural venues.
4. Cortland, NY (population 18,698). In Cortland, a relatively small college town, a very interesting, if complicated situation exists. First, the downtown lacks a strong formal arts/cultural/entertainments venue as can be seen in the above table. The Cortland Repertory Theater has a branch there, but only attracts 2,000 to 4,000 patrons annually, mainly in non-summer months. Its main theater is in Preble, a 17 minute drive away, and it attracts 18,000 to 20,000 annually. The venues that draw the largest audience are the cluster of six restaurants/bars that have live music, though the Courthouse Park with events there run through the Youth Bureau may have an unreported significant audience. Other downtown arts entertainment venues report annual attendances of 3,500 or less.
The town’s movie theater has the largest audience and it’s a
5 minute drive from the downtown. The other venues with relatively large
audiences are not even in the city – they are in nearby Homer, a 7 minute
drive, or a more distant Preble, a 17
minute drive.
The Importance of
Nearby Areas
It is critical to recognize that the downtown arts district
concept ignores the fact that the people
and firms who are most likely to visit and use the downtown and companies who
are likely to have business transactions with downtown firms are usually
located not only in the downtown, but also nearby. They are the real core of
the downtown’s traditional trade area.
How Near is Near? In dense urban areas, “near” usually
means within about one mile of a downtown. But in less urbanized areas, where
walking is less important, and autos are a necessity, the area within about a
five-minute drive can be considered “near” – but what is considered an easy
drive varies considerably geographically. In parts of Wyoming and Montana, for
example, residents will drive for two hours to get to a major retail center.
Create an Organized
Arts/Entertainment Community Instead of a Downtown Arts District
Basically, it is an
arts district with flexible geographic boundaries
that are defined by local economic, and sometimes political, realities. It is
focused on and around a downtown
district and combines in a formal organization:
The downtown’s EDO
Major downtown non-arts/entertainment
stakeholders.
Representation from the local government.
Major arts/entertainment venues within an area
that includes the downtown, but extends beyond it, much as the downtown’s
residential trade area does (but the two will not be congruent). That extended territory might be called the
Area of Mutual Interest (AMI). The extent of the AMI will vary by community and
be determined by the existing and/or potential relationships between the
downtown and the arts venues in the AMI. The AMI in most instances probably
will extend one to two miles from the downtown, but in other, rarer, instances
it could extend five miles, or even more.
Broadly defined creative micro and small
businesses within the AMI: e.g., visual
artists, crafters, tattoo artists, entertainers, chefs, brewers, makers, etc.
The objectives of the Organized
Arts Entertainment Community are:
For the arts and downtown business communities,
aware of how each can help the well-being of the other, the prime directive is to
formally work together in planned endeavors for their mutual benefits. These
benefits for the downtown might include: more downtown residents; more people
employed downtown; more people visiting the downtown; higher property values
and rents, and higher sales revenues for downtown businesses. For the arts
organizations the benefits may be: better marketing; increased revenues, higher
attendance; greater availability of technical assistance, and stronger
cooperative advocacy programs.
For the creatives, the Community would aim to
help increase their incomes by facilitating the more effective marketing of
their products and helping their business operation become more productive. It
would help these businesses grow to the level of the owners aspirations. The
downtown would provide for the creatives physical places where their wares can
be marketed or where they can perform, as well as places for social interaction
like a White Horse Tavern or Cedar Tavern. It also would be the place where
they are connected to technical and financial assistance providers. It also can
be the place where their creative supplies are purchased, and their wares are
fabricated.
What such an Organized Arts Entertainment Community might do:
Create a very place-centered marketing campaign focused
on attracting more visitors to the AMI. It would feature multi-faceted
opportunities to have rewarding and entertaining experiences not only in arts
and entertainment establishments, but also in dining, drinking and pampering establishments.
For arts organizations, it would, for
example, also provide:
A marketing campaign that “tells the stories” of
the arts at the overall AMI area level as well as at the level of the
individual art organizations.
Links for arts organizations to funders and assistance
to improve grant proposal development
Information about best practices, especially re
marketing and how to increase earned incomes.
For the creatives, it would, for example, also develop
and maintain a downtown entrepreneurial environment that will:
Enable them to have their products more
effectively marketed
Help their business operations become more
efficiently executed
Provide social spaces that can stimulate social
and business networking.
Why Members
of an Arts Archipelago May Want to Work
Together
Shared Common Interests. All benefit from:
Attracting more people to live and work in the
AMI.
Attracting more people to visit the AMI,
including trade area residents, day trippers, and overnight tourists.
Complementary Assets.
Working together they become stronger attractions:
Every downtown and non-downtown organization
that can offer enjoyable experiences adds to making the area of mutual concern
more magnetic to residents, workers and visitors.
Non-downtown arts venues often lack nearby
hospitality establishments for their audiences who travel significant
distances, while the downtown may have a relatively large cluster of
hospitality venues. Conversely, the
non-downtown arts venues might bring in large audiences from distant places
that the downtown hospitality venues could not by themselves attract.
The Downtown Benefits as It Meets
Arts Community Needs. By doing the things that downtowns have long done,
but with notable focus on the arts, downtown businesses can become more
prosperous:
Assets of the community’s entrepreneurial environment that are located in the downtown
Social meeting places for artists and artisans – e.g., bars, restaurants, libraries, co-working spaces. This can create magnets drawing non-artists.
Offices and meeting rooms for arts organizations
Technical assistance providers officed in downtown
Financial services and assistance providers officed in downtown
Affordable workspaces for artists and artisans – studios, rehearsal spaces
Affordable downtown living spaces for artist and artisans
Retail channels for artists and artisans; retailers have unique ,local products to sell, some new arts businesses may be started.
Incubation spaces for arts related start-ups and micro businesses.
Marketing and promotional opportunities
Arts presented/exhibited in public spaces such as parks and gov’t office buildings; this helps activate those spaces.
Arts presented/exhibited in private sector spaces such as restaurants, retail shops, office building lobbies; this makes them more physically attractive with more magnetic pull on potential users.
Arts presented /exhibited at arts shows, crafts shows, festivals; this increases their magnetism
As my years spent in the downtown revitalization field increased, I gradually realized that I unconsciously had been working with the view that bigger and better defined a successful downtown. With time, I also realized –perhaps in an embarrassingly late fashion — that making a downtown better was much more important than making it bigger. Indeed, for many communities, a bigger downtown would essentially change the whole character of the town.
As I came to realize that better was more important than bigger, I also began to think more critically about tourism. Downtowns large and small are often lured into economic growth strategies with large tourist attraction components. NYC’s mayors and economic development agencies, for example, for decades have targeted tourist growth and lauded how many millions are attracted annually, how much money they spend, and how many jobs they generate. Smaller communities, especially those in rural areas, often see tourism as a major way to overcome the small populations and low consumer spending power in their market areas. It is often seen as a way to strengthen a Main Street’s retail shops. Well regarded organizations that work to support Main Street and downtown revitalization often suggest increasing tourism as a viable component of an economic growth strategy – as do many economic development consultants. Unfortunately, tourism can be a two edged strategic sword, a boon or a bane – or even a boon and a bane. In my experience, too may downtown andMain Street leaders leap at a tourist growth strategy without properly thinking through its possible drawbacks as well as its advantages
Some Boons and Banes
The Character of the Community. Over the past year, several articles have appeared that indicate that I am far from the only one who is concerned about what is, for me, the worst possible drawback about tourism: that too many tourists can change the character of a downtown and/or the community in which it is located. For example, the November 18, 2018 edition of the Washington Post had an article headlined:
“DETOURING. Top world destinations
are overrun. Take our suggestions for roads not taken.”
Earlier in the year, the German newspaper Der Spiegel noted that European tourism officials were reporting frequent problems of “overtourism,”where too many tourists and/or unacceptable tourist behavior threaten to severely diminish the very attractions that lure the tourists. In response, local officials:
“…want to redirect the streams of
tourists, as officials in Rome are trying to do, or even to limit them, as
Dubrovnik is doing. Barcelona is no longer approving new hotels, Paris has
strictly regulated Airbnb and other apartment?rental platforms….(1)
Nicole Gelinas, in a very thoughtful article in the City
Journal, has argued that:
“While much of this change ( increased global travel) is positive in economic terms, the ongoing invasion of global cities by people who stay for a few days or a few weeks can fundamentally transform the character of places whose unique charms are what attracted tourists in the first place.” (2)
Gelinas goes on to argue that in the West’s central cities,
tourist pedestrian behavior has changed their character:
“Central city sidewalks designed decades or centuries ago can’t handle today’s foot traffic, particularly when people don’t walk like the local commuters and residents of decades ago did.Today’s pedestrians walk slowly, several abreast, stop frequently to take photos or look at maps on their ever available phones, and wheel bulky luggage behind them, ensuring that fast walkers can’t pass. Tourists to a large extent have become the central cities.” (3)
Unhappily, Yogi Berra’s quip that “nobody goes there anymore, it’s too crowded” is increasingly applicable to many of our most attractive city centers, public spaces and arts venues. Can you really appreciate the Mona Lisa at the Louvre if you are standing 50 feet away in a dense crowd (while few are looking at the marvelous Raphael’s and Titians nearby?) Or appreciate an exhibition at NYC’s MoMA in rooms packed like a sardine can, but with people and no olive oil? Most visitors to both museums are tourists – 75% at MoMA, 70% at the Louvre.
Many NYC residents stay away from Times Square because it is too crowded, filled overwhelmingly with tourists and passé attractions – we no longer feel it is one of “our” places. It is this ability of overtourism to make local residents feel dispossessed that is most troubling.
Sadly, too, problems being caused by tourism are not confined to large central cities. In smaller towns, it is tourism’s insidious ability to make local residents feel dispossessed that is perhaps even more troubling, because a strong sense of community is what so many residents cherish about living in them. I have run into small town residents who feel that way in a number of communities such as Montauk, NY, Chatham, MA, and Lambertville, NJ. Montauk used to be known as the Hampton’s blue collar community, a great, affordable place that middle income folks could go for terrific fishing, attractive beaches, and some good, if funky, eateries. Today, it is the pricey summer recreational town for affluent hipsters. The whole tone of the town has changed.
In a very useful article, Tomoko Tsundoda and Samuel
Mendlinger looked at the economic and social impacts of tourism on the small and
very attractive town of Peterborough, NH( 4). They showed that there long has
been an awareness of a number of wide ranging impacts, both good and bad,
that tourism can have. On the positive side are:
Increased jobs
More business opportunities
More interesting shops and entertainments
Heightened demand for local housing and commercial properties
More tax revenues
On the negative side are:
Loss of the community’s character
Higher retail and restaurant prices
Higher housing prices
Businesses favoring tourist patrons over local resident patrons
Low-paying or unsustainable new jobs
Increased traffic and poorer air quality
More quality of life crimes
One of their most concerning findings was that wealthy families and working families may view the benefits of tourism quite differently.
Much can be said about each of the above impacts, but that would take a far longer article than this one. My key point here is that downtown leaders who are thinking about avidly pursing a tourist growth strategy should carefully assess these potential impacts on their communities.
Tourism as a Strategy to Improve a Downtown’s
Retail
I do want to do a bit of a deep dive here because in recent years I have so often heard this argument offered by downtown leaders to explain why a tourist growth strategy should be developed.
I would say that, in my experience, almost invariably when clients and client prospects have suggested pursing tourist growth, their primary reason for doing so is to improve the downtown’s retail. To put the potential benefits in some perspective, it is useful to look at how much of tourist spending goes to retail, see the table above. It shows that, for example, tourists in NY spent about $64 billion in 2016, but only about 9.9% of this hefty amount went for retail. Expenditures for recreation and entertainment were slightly larger 10.0%,while expenditures for food and beverages was much higher, 23.7%. All of these expenditures can help the types of merchants that downtown can attract – if there are those types of shops already present or if the tourist spending potential is large enough to spark their development. In many instances, these types of operations do not exist, and the tourist spending potential is not sufficient to stimulate their creation. Retail in MS accounts for a seemingly impressive 26% of tourist expenditures, but this is partially due mathematically to the extremely low expenditures for recreation and entertainment. In NC, on the other hand, tourist spending for retail rivals, in absolute dollars, those expenditures in NY, and surpasses it on a percentage basis, 20.2% to 9.9%. In NC, the percentages of tourist spending that go for both recreation-entertainment and food and beverages are relatively low, but the level of absolute dollars spent does suggest that retail merchants in that state are rather good at capturing tourist dollars.
The above table shows the percentages of tourist spending that went for food services, retail and recreation in 11 multi-county regions in PA in 2016.Retail accounted for a lower percentage of tourist spending than food services or recreation. The highest percentage for retail expenditures among the 11 regions was 18% and the lowest was 12%.
My observations over many years suggests that towns with strong tourist sales all have strong retail offerings: outlet centers (e.g., Manchester, VT), major urban retail streets like Fifth Ave, Rodeo Drive, Michigan Ave, or ritzy tourist havens where lots of rich people have 2nd, 3rd or 4th homes (e.g.,East Hampton, Bal Harbor, Palm Beach).
Unique offerings in the other towns can indeed sell, but I hear more about how they can sell than I see merchants actually doing it.
In the towns most downtown leaders would want to emulate, quality merchandise is offered to tourists in attractive and often charming shops. Unfortunately, there are also towns that are tourist nightmares. I shall refrain from mentioning any of them, but they are usually busy, gaudy, and filled with a lot of shlock merchandise. As with obscenities, you know them when you see them.
Suggested Take Aways
The
above leads me to make the following observations:
Most downtowns should not expect tourism to be the savior of their retailing. Retail expenditures will probably typically account for only 10% to 20% of local tourist spending. Tourism can provide local retailers with the equivalent of the whipped cream and cherry on top of a sundae, but not the two scoops of its ice cream.
Attractive local hotels and restaurants are likely to capture most local tourist expenditure dollars. Is a tourism growth effort worth it if those types of enterprises are by far the primary beneficiaries?
Crappy retail shops selling crappy merchandise will usually not capture many tourist dollars.But the real danger is that, if there is a lot of such shops, they just will attract a lot of crappy tourists. This can create town – tourist problems.
The major retail needs in many smaller communities are grocery stores, pharmacies, a hardware store, etc., the types of neighborhood retail that tourist expenditures are unlikely to support. If tourist focused retail is dominant, and these needs are not met, then some hairy town –retailer/tourist problems can emerge.
To attract lots of tourists, your town needs to be well-located and accessible. If you do not have significant levels of auto traffic now, or strong nearby scenic magnets, assume that you probably cannot quickly build a base of local tourist attractions that will significantly increase the flow of tourist customers.
To succeed you probably need enough local attractions to keep tourists in your downtown for four times the length of time it took them to travel there. Your downtown needs some real there, there.
If there are significant tourist flows nearby and your downtown is not capturing significant traffic from them, correcting that should be the first order of business of any tourism development program.
Tourism that endangers the community’s character is never worth it. Why kill the goose that’s laying golden eggs?
Yet, tourism certainly can be beneficial for a downtown. Programs to attract more tourists should be thoughtfully designed, with an eye on possible emerging problems, not just a look at potential financial gains for local businesses and residents.
2.
Nicole Gelinas. “Planet Travel. Globalization has created a tourist boom in
world cities—but masses of tourists create new challenges.” City Journal. August 31, 2018. https://www.city-journal.org/html/global-tourism-16143.html
3.Ibid.
4.Tomoko
Tsundoda and Samuel Mendlinger, “Economic and Social Impact of Tourism on a
Small Town: Peterborough New Hampshire.”
J. Service Science & Management, 2009, 2: 61-70 Published Online June 2009 in SciRes (www.SciRP.org/journal/jssm)