Category Archives: retail chains

Helping Independent Downtown Merchants Engage Effectively In E-Marketing: Part 2

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Introduction

This is the second of a two part article. Part 1 can be found at http://tinyurl.com/bxhdx8a

Over the past year, DANTH Inc. has experimented with such social media as Facebook, LinkedIn, Twitter and Pinterest and revamped our website, blog  and email program. To support this effort we did a lot of research on what the various e-marketing tools do best and the challenges small firms like ours have in using them. In this two-part article I would like to share with the downtown revitalization community what we learned from our e-marketing overhaul, so that more independent downtown merchants (e.g., retailers and restaurateurs) might make an effective transition to e-commerce.

What we learned was the importance of an analytical process able to identify the e-marketing tools that will most effectively use an organization’s scarce resources to achieve critical marketing objectives. This process:

  • Starts off by looking at and prioritizing the organization’s marketing objectives
  • Then matches them with the e-marketing tools (e.g., website, emails, Twitter, Facebook, blog, etc.) that can best achieve each of those objectives. These two topics were covered in Part 1
  • And next selects those objective-matching tools that  can be implemented, because the organization has the required financial resources and either has or can acquire the needed skilled employees. This topic will be covered here in Part 2.

Selecting the objective-matching tools that  can be implemented, because the organization has or can hire the required resources

The types of resources required to use a particular e-marketing tool will vary by the package of objectives it is targeted to achieve and the amount and complexity of the usages that are required to achieve them. In my field observations, this is the second area where small merchants are likely to encounter problems — or have them made by consultants who just focus on the mechanics of using the e-marketing tools with which they are enthralled.

In Part 1, I argued that “being found” online is probably the e-marketing objective most independent downtown merchants should focus on first. The initial inclination of these merchants – or their formal or informal “consultants” – might be to create a complex website with many pages, a full catalog of its merchandise, a matching e-store purchasing capability and to fill the site with lots of short marketing movies. Nonetheless, many small firms plainly lack the resources for such a robust effort and, more importantly, they probably do not need it to accomplish their e-marketing objectives.

Here are three brief case studies DANTH encountered over the past few years to demonstrate this point

The High Effort E-Store For A Fast Food Shop. Last year, in a NYC neighborhood that had sustained impressive economic growth through the Great Recession, I interviewed a fast food operator in the 6-10 employees category, who was very interested in penetrating the rapidly growing nearby office worker and high rise residential markets. Though both market segments were strongly represented within a 5-minute walk of the eatery, neither accounted for many of the pedestrians passing by or entering its doors. The owner was interested in creating a website where office workers and residents could find and learn about the eatery and its menu, order from the menu and daily specials, have their orders charged to their credit cards, and have their food delivered to their workplaces or homes.

This small merchant was unaware of the intricacy and full costs of such an operation. He was expecting to pay consultants to set-up his website, merchandise basket and credit card charging. However, he did not foresee that he would also need:

  • Someone to update the “specials” daily on the website and to periodically keep the overall menu up to date. Updating and maintaining a website can easily eat up far more resources than creating it
  • Additional part-time employees to process the lunchtime orders
  • Additional part-time employees to deliver the ordered food
  • Someone to provide the copy for his website pages
  • Someone to provide the photos and other graphics for the website pages
  • To spend a lot more of his time and money  putting together the needed new team and then managing a complex new operation.

A year later, this small operator has no website, but has affiliated with a telephone-based service that takes orders and delivers food if customers know about the delivery service and call them. The eatery also does have a simple “name, rank and serial number” page on its BID’s website, a Facebook page with one like and no postings and is listed on a few special websites such as Foursquare. Right now, not much info is to be found on the web about this eatery. It still needs a much stronger “being found” on the web capability.

This could be accomplished by a modest website, without the e-store. It would successfully provide name and contact information as well as information about the menu and reasons to patronize this eatery. Such a website would provide an affordable and acceptably better, if not optimal, penetration of the office worker market. Website visitors, for example, could see the full menu and be invited to visit or phone the eatery to learn about and order the daily specials. An even simpler solution would be a substantial improvement of the information provided on the eatery’s BID web site page, combined with a campaign to get it listed on more special web pages.

The prime take aways from this case study are that:

  • Small merchants should be wary of complex uses of e-marketing tools that are beyond their resources
  • More modest deployments of these tools are often more viable and ultimately more effective
  • BID/SID web pages can be very useful for a small merchant if they do more than just provide the store’s name, contact information and business category. They need to also provide space for information about the shop’s merchandise and to tell the merchant’s story. This is the prime way that BIDs can help their merchant members gain a viable e-commerce presence.

The Low Effort Ice Cream Parlor. In Part 1 of this article, I mentioned a very popular ice cream parlor in a New York City neighborhood. It is a unique and highly regarded operation that has been around for over 50 years and, for decades before that, it was an ice cream parlor under a different owner and name. Today, it is “a functioning antique,” with an old soda fountain, tin ceiling and marble small tile floor. It makes its own ice cream and is famous for its fresh home-made whipped cream.

When I spoke to the owner about his e-marketing activities, he smiled, reporting that he knew nothing about such things, but his workers, most of whom are high school or college students, had created a Facebook page that gathered 8,000+ likes. He felt Facebook definitely had helped generate some additional sales. The shop occasionally offers special flavors only to its Facebook page visitors, with the young workers doing the postings, and they are always quickly sold out. The owner said, with another smile and shrug of his shoulders, that he would like to do more with Facebook, but…. My guess is that the shop was doing well enough that there was no great need now to do more online marketing.

Googling the shop’s name showed that this ice cream parlor had a lot more going for it than just its Facebook page.. The search showed that its authentic, old time story and favorable customer reviews and contact information were available on a whole slew of specialty web sites such as: google.com, plus.google.com, www.yelp.com, www.facebook.com, patch.com, newyork.seriouseats.com, www.zagat.com, www.urbanspoon.com, newyork.citysearch.com, untappedcities.com, www.tripadvisor.com, www.delivery.com, www.menupages.com, www.bridgeandtunnelclub.com, events.nydailynews.com, newyork.grubstreet.com, www.scooponcones.com, chowhound.chow.com, www.flickr.com. That these positive reviews were coming from customers and not the parlor’s ownership enhances their credibility and power.  Aside from the Facebook page, all the other listings, came about organically without any effort by the ice cream parlor owners or employees.

The net result is that this ice cream parlor, with little effort on its part, can be very easily found on the Internet and its story is certainly being told. The very nature of its limited menu means that people do not really need to know much about all the flavors to be convinced they should visit the shop. Consequently, it probably can do fairly well without its own website. On the other hand, given its ability to easily attract a significant number of Facebook likes, it also might easily garner many Twitter followers and  also use Tweets to inform followers of special flavors or coupons. It might then also use its Facebook and Twitter capabilities to further cultivate its existing store apostles –frequent customers who advocate a shop within their social networks– and garner new ones.

This ice cream parlor had very substantial name recognition and a bevy of store apostles well before or separate from any of its e-marketing activities. The strength of this non-electronic customer network substantially eased the challenge and costs of collecting 8,000 Facebook likes. A new ice cream parlor would need to expend a lot of resources to get enough Facebook likes to make its use worthwhile. The same is true of using Twitter. Indeed, one might ask if the use of these social media is cost effective for small merchants with say 30 transactions or less a day. Might they achieve the relationship building and customer service functions much more effectively and efficiently by focusing on face-to-face interactions? However, they still would need to be found online.

One thing the ice cream parlor owner probably should do is to have his young, Internet capable,  employees check their listings on the special web pages to make sure they are accurate and up to date. Research has shown that this is where most small businesses are apt to  fall down (1). Another thing he certainly needs to do is to keep hiring young employees who know how to use Facebook.

The prime take aways from this case study are that:

  • Strong small businesses that have been around for a while probably will have strong assets that can make their entry into e-marketing a lot easier than start-ups  or weaker operations
  • A robust easy-to-be –found on the Internet capability does not always require a complex website if the merchant has sufficient positive listings and reviews on the special website pages and a narrow range of products are offered
  • These special website pages are too often overlooked, especially by the food related operations that they so frequently cover and that account for such a high proportion of downtown businesses
  • Young, internet savvy, employees can often be a source of the internet related skills a small merchant lacks, but needs.

A Well-Calibrated Retail Website. A toy retailer has two brick and mortar stores in the Chicago suburbs and a very interesting website. The retailer quickly appears at the top of searches for toy stores in its two towns. Its website does not present a catalog of all of its toys, but has a page that shows all the toymaker brands it sells with their logos. It does not have an e-store that sells scads of different toy products online. Its e-store is limited to selling just one new toy a week. Customers can sign up to get the “new toy” newsletter each week via email. The website has short movies, one to two minutes long, for each of the new toys. The website shows that the “new toys” are sold out every week. That they are sold out so often strongly suggests that the retailer is building up a core of repeat purchasers. Repeat customers are the makings of a band of store apostles, a solid revenue stream and a strong word of mouth network.

The website reportedly was put together and is maintained by a relative of the store’s owner who is skilled in developing websites.

It also has a Facebook page that has garnered 604 likes. People in the 35-44 year old age group are its most frequent visitors and they are most likely parents.

I do not know what this merchant’s e-marketing objectives are, but I hope to connect with him in April, when I am again in the Chicago area. I am particularly eager to find out about their website’s impact on their brick and mortar store’s customer traffic and sales.

The important take aways from this case study are:

  • The one new toy a week strategy is a great example of how calibrating a small firm’s deployment of an e-marketing tool to its level of available resources can help assure its successful use
  • The site appears to be meeting all of the “being found” challenges, while also building a core of store apostles and making significant online sales
  • Family members can often be a source of the internet related skills a small merchant lacks, but needs.

How Can Downtown Organizations Help?

The transition to e-marketing calls upon small merchants to innovate, something most of them feel very uncomfortable doing. DANTH’s experience with trying to get them to improve their facades suggests that many more – but not most – would innovate, if innovating can be made easier for them  to do (4). This means providing them with needed information in easy to digest terminology and helping to bring the costs of their innovation down to affordable levels.

Some questions to which they may need answers are:

  • What can they do and accomplish with e-marketing, what are the benefits and how much will it cost?
  • Are there local merchants who have made this transition who they can talk to?
  • Which types of skilled people will they need help from to get into e-marketing? Where can they find them? Or who can do a whole package for them?
  • How can they afford to create and maintain the e-marketing effort?

Here are some actions downtown organizations and other EDOs might take:

  • Post a 20-minute webinar or podcast on the organization’s website — that the merchants can access at their discretion, when they have sufficient time —  focused on what small merchants can do with e-marketing, its benefits and costs
  • A tie-in to SCORE or other free or low cost consulting assistance to help clarify the connections between the e-marketing tools and the frm’s overall marketing objectives
  • A mentoring program that connects e-marketing “newbies” to local merchants who have successfully made the transition
  • Provide a vetted list of technical assistance providers
  • Most importantly, offer each merchant who lacks a website a web page on the organization’s website that can provide name, contact information, information about products or services sold and the firm’s story.
  • Perhaps the downtown organization can charge a fee for an “enhanced page”, i.e., updating, writing copy, supplying graphics, creating movies, etc., that would be meaningfully lower than what the merchants would have to pay if they did it by themselves
  • Provide website consultants to merchants at a lower than market rate cost, because the downtown organization can aggregate member demand and “buy in in bulk”
  • Provide an expert, on a reduced fee basis, who can help merchants get listed on special web pages. This is something different than search engine optimization
  • Use a downtown organization’s strong Facebook and Twitter presences to help the merchants get sufficient likes and followers to be able to effectively use them. It is getting followers, not setting up and using the Facebook or Twitter page that now impedes most small merchants from effectively using these e-marketing tools
  • Set up an “e-department store” where merchants, like the toy store described above, would only sell a few items. A dedicated and limited e-department store may be a good way to strengthen a downtown niche.

N. David Milder

Acknowledgement: Thanks to Mark Waterhouse of Garnet Consulting Services for his input and editorial assistance.

Endnotes

  1. MarketingCharts staff, “1 in 2 Small Businesses Fail to Update Their Online Listings, Find Inaccuracies”  February 6, 2013,  http://tinyurl.com/atexhky
  2. Mitch Lipka, “These Big Companies Are Abandoning Twitter And Facebook For Customer Service” Business Insider 1/18/13   http://read.bi/11EbziS
  3. Findings of a survey of small businesses conducted for the Center for the New West as summarized in an email by the center’s former CEO, Phil Burgess
  4. N David Milder, “BEING A DOWNTOWN CHANGE AGENT: Facilitating Change for Downtown Business Operators” June 3, 2007, https://www.ndavidmilder.com/category/formats-facades-signs

Invitation: Please join me at Session S681: Integrated Small Town Planning at  APA’s 2013 National Planning Conference in Chicago, April 17, 2013, at 10:30 a.m. I will be presenting along with Andrew Dane of SEH.

Right Fit Your Downtown Retail: Adapting to the new normal for downtown retail

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There’s a New Normal for Downtown Retail
Today, it is essential for downtown developers, landlords, economic development organizations and local elected officials to recognize and adapt to the new normal that has emerged for downtown retailing. Consumer behavior has changed significantly – they are buying less, more deliberately and increasingly online.

The demand for downtown retail space has changed accordingly. Chains are looking for fewer and smaller spaces, while developing smaller formats for entry into new market areas. The strategic importance of small merchants has increased, but their success is still tied to finding affordable rents and adequate financing. Many downtowns now have significantly more retail space than they can fill.

Downtown Leaders and Investors Need to Adapt
More than ever it is essential for downtown leaders and investors to respond effectively to the questions of how much and which types of retail can be attracted to fill vacant storefronts or the street-level spaces of new mixed-use projects.

To be of value and use, it is critical that these answers be informed not only by traditional retail market research techniques, but also by relevant experience and a full understanding of retailing’s new normal.

DANTH, Inc. Is Uniquely Positioned to Help
DANTH, Inc is uniquely positioned to provide its clients with a downtown retail strategy and action plan that is consistent with the market trends of the new normal.

For municipalities, DANTH’s analysis will provide market information that will enable better overall mixed use redevelopment planning, identify the retail that is most sustainable, and establish a plan of action for recruiting viable downtown retail and experienced downtown developers.

For developers, DANTH’s analysis will right size the retail for their new downtown redevelopment projects which will help eliminate overbuilt retail space. In addition, DANTH will provide a list of viable tenant prospects that are right for their development. With years of experience, DANTH will provide the crucial support necessary to ease the local redevelopment approval process.

Our Right Fit Team
DANTH, Inc. is proud to announce that Michael Fabrizio has joined our Right Fit team. Michael has many years of downtown redevelopment and revitalization experience. As Executive Director of the Morristown Partnership, he worked with real estate development companies to generate interest and investment in redevelopment projects in Morristown. He worked with the Town of Morristown to establish and implement multiple redevelopment projects throughout the central business district worth nearly $600 million. He has served as a Commissioner on the Morristown Redevelopment Agency and is a licensed New Jersey Real Estate agent.

Michael joins David Milder, DANTH’s president and founder, on our Right Fit team. David has developed effective niche-based downtown retail revitalization strategies, business recruitment campaigns and redevelopment programs for downtowns across the nation. He is nationally recognized for his leading edge research and writings on the new normal for downtown retail. In New Jersey, his clients have included SIDS/BIDS in Bayonne, Cranford, Elizabeth, Englewood, Morristown, and Washington Borough. Elsewhere they include: the 34th Street Partnership, the Greater Jamaica Development Corporation, and the City of White Plains in NY: the City of Charlotte, NC; the City of Peoria, AZ, the Rutland Partnership (VT); the Greater Meredith Program (NH), and the Village of Sherwood (WI).

For a Free Initial Consultation on How Our Right Fit Program Can Help Your Community Contact:
Michael Fabrizio at (973) 727-8635, [email protected]
or
David Milder at (718) 805-9507, [email protected]

Downtown Multichannel Retailing

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


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

N. David Milder

The Arc of a Niche: The Bowery’s Home Lighting Niche

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The key intersection for The Bowery’s home lighting niche, which is about 50 years old.


The Bowery Mission, a remnant of a famed, if unsavory, past


Some home lighting shops on The Bowery 1 


Some home lighting shops on The Bowery 2


Some home lighting shops on The Bowery 3 



My initial thinking about retail niches was greatly influenced by my experiences shopping for antiques in Waynesville, OH and for lamps in shops along The Bowery in Lower Manhattan. It has been almost 50 years since I made my initial visits to these places. Their antiques and home lighting niches still exist, though they have changed over the years. 

 
Waynesville is about 600 miles away, so I have not been there in many years. But, a few years ago, I did some telephone interviews. Though the antiques niche there reportedly remains strong, it has changed because the industry as a whole has changed. Two significant changes are: 1) a lot of merchandise is sold on consignment in large antique malls, where the dealers do not have to be personally on site and 2) internet sales.
 
The Bowery is much closer to home, about an hour away via public transportation.  When I first visited the area, back in the 1950s, it was best known for its run down bars with cheap drinks, poor alcoholics down on their luck and a collection of flop houses. When I next returned to the area in the 1960s it was to look for lamps in a cluster of home lighting stores. By the late1980s,  this home lighting niche had grown enormously, with most shops between Houston Street and Canal St seeming to sell home lighting merchandise. On a visit in the 1990s I estimated there were between 75 and 100 ships in this niche. My wife and I felt that too many them appeared to be indistinguishable from each other in size and merchandise and that consequently the whole niche seemed less attractive.
 
Since then the neighborhood has changed significantly. Property values have increased and so have the commercial rents. The Bowery is showing signs of gentrification. The cheap bars and SROs are long gone. Chinatown has expanded enormously. 
 
The merchants have also changed. The number of home lighting shops is now back down to about 20 and they are clustered on a two block stretch going south from Delancey Street. A restaurant kitchen equipment niche has emerged.
 
The largest and best known home lighting shops are among those that remain. Though much reduced in numbers, the niche is still relatively strong. A 50 year run is not bad for a retail niche and it certainly is not yet over. The niche remains a regional draw for shoppers looking for home lighting.
 
I hypothesize that the contraction of this niche was due to a collection of factors:
  • Rents became unaffordable for most of the small, marginal shops. Given the huge increases in Manhattan’s retail rents it is doubtful that the borough will ever again see a retail niche of the size this home lighting niche reached.
  • Some shops just aged out — the owners retired and their businesses ended with their departures
  • Too many of the shops could not differentiate themselves except on price — and many could not afford to compete in this manner
  • A new niche was competing for the available retail spaces.

It is also fair to say that this niche has helped revitalize a badly decayed, disreputable area.

 
 

AFFORDABLE DOWNTOWN RETAIL RENTS

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

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

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

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

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

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

The table above depicts information about:

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

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

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

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

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

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

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

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

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