Let’s Get Real About: Self-Driving Cars. Social and Political Engineering Will Also Be Required

By N. David Milder

Revised September 7, 2017.

Introduction

These days there is a lot of hype, puff, and unrealistic expectations associated with the coming transition to self-driving cars in our nation. For example, in September of 2016, Lyft’s president and co-founder, John Zimmer, made the astonishing claim that the coming “driverless car revolution” will “all-but end” car ownership in our cities by 2025 (1). Zimmer had not even a glimmer of the massive scale and complexity of the “car revolution” he was both advocating for and predicting its success. It is one thing to have driverless cars that work, another for them to be manufactured, bought and used by the public on a massive scale.

A Waymo experimental driverless car. Photo Seattle Times.

Unrealistic expectations about driverless cars are often also infusing more everyday discussions. For example, a few weeks ago, I participated in a LinkedIn discussion thread that was initiated by a post about how dense residential development in a neighborhood had created a big on-street parking problem. I was somewhat taken aback when someone, who seemed to be a planner, suggested driverless cars could solve the problem. Are driverless cars really that well developed that they can be recommended as viable corrections for today’s problems? Or even tomorrow’s? Can they be implemented now or even soon enough to be relevant to current project, program or policy decisions? Or do we wait to solve many important problems until the transition to driverless cars is completed?

Now, I am not a Luddite. I fully expect that if I am still around in 2037, or maybe 2047, some variant of driverless cars will dominate our urban transportation scene. Still, I have rather uncertain expectations about how that transportation scene will evolve over the intervening years. However, three things are undeniable right now:

  • There’s a lot of advocacy going on and that means marketing and PR puff up the wazoo. Discussion about self-driving cars is certainly good for both the public and policy-makers, but its value declines with puffery and inaccurate statements. Let the discussion be passionate and visionary, but also reasoned and factual.
  • The change over to driverless cars will be a huge techno-socio-economic phenomenon, so large that its intended and unintended consequences – both positive and negative – are really hard to foresee with great reliability. Yes, discerning potential consequences is possible, but that is quite different from knowing with great confidence what the consequences will be. Prudence consequently directs that we should expect the unexpected.
  • There are three – not just one – interrelated revolutions unfolding around our use of automobiles:
    1. “Electrification: a shift from internal combustion engine (ICE) vehicles to electric vehicles (EVs).” (2) Electrification will probably account for most of any reductions in CO2.
    2. “Automation: a shift from human-piloted vehicles to automated vehicles (AVs) that drive themselves” (3). Automation will probably account for most safety improvements.
    3. “Ride-sharing: a shift from privately owned, often single-occupant vehicles to fleets of shared cars, vans, and small and large buses.” (4) Ride-sharing is the revolution that is needed to really reduce the number of cars in our city areas and to reap the benefits of greater walkability and less space used for the storage of vehicles. Moreover, ride-sharing probably means the use of vans with 12 to 18 passengers, not simply the ride hailing services of Uber or Lyft.

At this point in time, the aspect of the “car revolution” that I feel most certain about is that it will involve a fairly long and very complicated transition period – perhaps 20 to 30 years – that has the potentials for being both very beneficial and very harmfully disruptive. That is what I will focus on in the discussion that follows.

The Emergence of the Automobile as Our Dominant Transportation Mode Took Decades to Happen.

The past is neither determinant nor predictive, but we still can learn much from it. Looking at the transition to gasoline powered vehicles is a case in point.

Horses were the early autos’ prime initial competition as a transportation mode. They were not a very large or strong force to contend with. In 1900, there were about 13 million horses in the US. That equine population grew to a peak of about 25 million in 1920, partly due to increased demand generated by the armies in WWI (5). The vast majority of the horses, however, were used for non-transportation purposes, mainly in agriculture. Their numbers declined significantly after 1920 as the war-generated demand disappeared and the use of tractors on farms soared.

As Dave Feehan has pointed out to me, one of the major reasons that the public went for cars was public health: horse manure and dead carcasses had reached levels endangering public health on city streets. (6) The emissions, especially CO2, of our gasoline engine auto fleet also pose a strong public health risk, but the electrification of the fleet’s engines could help resolve that issue and that would not require a complete transition to the most automated driverless cars.

Still, depending on how you look at it, going from horses to autos took either about 20 years, if you just look at the cars, or well over 50 years if you also take into consideration the road system needed to make car use flourish. Here are some major milestones:

  • As far back s the 1880s, Europeans were developing horseless carriages.
  • In 1901, Mercedes produced the first really modern automobile, designed by Wilhelm Maybach.
  • In 1908, Ford introduces its Model T and General Motors is formed.
  • In 1913-1914, Ford introduces the revolutionary moving assembly line.
  • 1915, Ford built its one millionth car and had 25 assembly plants (7).
  • By 1929, 80% of auto production was accounted for by the Big Three – Ford, GM, and Chrysler (8).
  • The Dwight D. Eisenhower National System of Interstate and Defense Highways System were initiated by the Federal Aid Highway Act of 1956.
  • The US population was 76 million in 1900, 106 million in 1920 and 152 million in 1950.

There Are Strong Reasons to Believe That the Transition to Self-Driving Vehicles Will Be Neither Short Nor Easy.

While driven cars only had probably fewer than 10 million horses to replace, driverless vehicles must replace hundreds of millions of existing units. For example, in 2015, about 263 million passenger cars, motorcycles, trucks, buses, and other vehicles were registered in the USA. (9). The highest rate of annual vehicle sales reported monthly over the past two decades was 22.1 million units/yr in October of 2001. At that rate, it would take 11.9 years for the driverless cars to completely replace the non-autonomous inventory (10). A more recent annual vehicle sales rate is about 17.9 million. That would convert into 14.7 years for the inventory turnover to be completed. Of course, the implicit assumptions behind these calculations are that everyone will want the driverless cars and manufacturers will be all tooled up to produce desirable products. Negatives on either of those points would mean a much longer transition period.

There’s Now Over One Trillion Dollars Invested in People Driven Cars

There not only are lots and lots of cars on the road today, they are also worth one hell of a lot of money. Not all cars are associated with a loan, but the total value of car loans in 2016 was $1.2 trillion, with the average amount financed about $28,000 (11). Many of the vehicles not associated with car loans will also be worth thousands of dollars each, so the $1.2 trillion loan total is a minimum of the total dollar value of the USA vehicle inventory.

QUESTION: If Americans change over to driverless cars, then how will they get back some of the dollars their non-autonomous cars were worth? How would they react if they couldn’t do it because the resale market is being been killed off? Talk about the potential for brutal politics.

It will be impossible if they opt for participating in the pay-by-the-ride option a la Uber or Lyft. Will GM or Ford or Tesla take trade-ins? If so, how the hell will the auto manufacturers recoup those trade-in dollars besides selling the vehicles for scrap, because they are killing the resale market? This will be a huge problem for car manufacturers.

In 2014, the average household in the USA had 2.09 vehicles (12). That means that the dollar value extraction from existing vehicles will be a very salient problem for a huge portion of the potential addressable market for driverless cars. It will make building a wave of individual conversions really tough to achieve, except among those who are not current car owners.

Of course, with safer, fewer and electrified cars, there also will be many companies that will be forced out of business, e.g., body shops, gas stations.

Prying the Steering Wheels From Our Cold, Dead Hands

Then there’s what I call the “cold dead hands” problem. Americans’ love of guns is well known. So is our love of our cars. An NRA slogan made famous by the actor Charlton Heston is: “I’ll give you my gun when you pry (or take) it from my cold, dead hands.” Will Americans feel the same way about their cars and steering wheels? My bet is that many Americans would appreciate having the cars they drive made considerably safer through the addition of computerized car safety features, but they will strongly oppose giving up their steering wheels.

Inside a Mercedes-Benz concept driverless car. No steering wheel. Photo Mercedes-Benz USA

Certainly, today, Americans are against banning human driven cars, even if the completely automated self-driving versions were shown to be safer. For example, a survey done for Vox in 2016 found that only 30% of the population would support a legal ban on human drivers, while 54% would oppose such a ban. However, the respondent’s ages made a significant difference: for those under 30, 43% would favor a ban and 42% would oppose it. In sharp contrast, among those 65+, 58% opposed such a ban and only 22% supported the idea (13). Even if one assumes that opposition to a ban on human driven cars will “age out,” such a process will likely take quite a bit of time.

What Will the Self-Driving Car Product Really Be?

Many of the companies, e.g., Waymo (the Google offshoot) and Apple, that are developing the electronic systems that will operate our autonomous cars, have decided that the driver must be taken out of the equation if the desired high levels of safety are to be attained. Others, that also manufacture the cars, e.g., Tesla, have a vested interest in keeping a potential for humans, especially car owners, to drive their vehicles when they want to.

At this point in time, it is difficult to determine what the world of self-driving cars will look like at either the vehicle level or at the aggregate system level. At the vehicle level, units could be privately owned, have the traditional range of passenger capacity, and have an operating system that either takes complete control of the vehicle’s operations or allows a human to drive with computerized features that enormously increase vehicle and passenger safety.

On the other hand, humans could be banned from driving vehicles, legislation could incentivize the production of the van-type vehicles needed for ride sharing while discouraging the type of individual ownership we have today.

There also might be some mix of these two scenarios. I’m sure other scenarios are possible. The main points here are that:

  • The type of self-driving cars that will win out and the transportation system they will operate in are products that are yet to be defined along many important dimensions.
  • Most importantly, the definers of those products will be less and less the minds and hands of technologists in the labs of Waymo, Apple, Tesla, GM, Ford, etc., and more and more in the decisions and behaviors of consumers and their politicians.
  • To date, in my opinion, the companies working on driverless cars have shown themselves to be gizmo smart, consumer stupid and politically naïve.

The Absolutely Critical importance of Human Behaviors and Preferences: Ride-sharing.

Computer simulations have shown that very high levels of ride-sharing will be needed if the number of cars on the road is to be significantly reduced and associated societal benefits achieved. (14) Instead of one or two people traveling in a car, 12-18 might have to be carried in a mini-bus/van-like vehicle.

Uber and Lyft: Ride-Hailing, Vehicle-Sharing or Ride-Sharing Services? Before proceeding, let’s try to clarify how these auto service companies fit into the scheme of things. They certainly are trying to establish themselves as aiming to use driverless cars to provide pay-by ride services for the public. They prefer the truly driverless model of automated vehicles since it significantly reduces their need for workers and their associated labor costs. They definitely are ride-hailing firms – you can use their apps to get them to pick you up and tell them where you want to go. They can even be called vehicle –sharing services, since over the course of the day, much like traditional taxis, multiple parties of 1 or more people will ride in their vehicles with each party paying separately and each able to have different pickup points and destinations. However, they also have often been referred to as ride-sharing companies/services. That, unless they significantly change their operating model, is probably a misnomer. Ride-sharing, conventionally, has been associated with multiple parties (of one or more people) sharing the use of a vehicle. Though Uber and Lyft now provide economy services that involve carrying more than one party at the same time, those ride-sharing services do not account for significant portions of their activities or revenues. Moreover, their current vehicles’ passenger capacities are not large enough to bring about the desired reduction in the number of cars on the road and its associated other benefits. One might also ask if Uber’s and Lyft’s services will retain their current allure when their vehicles are larger, carry many passengers you do not know and may have numerous pickup and drop off stops. Sounds more like a good bus system, than a hoity-toity, high tech car service for which you pay premium prices.

Some Current Indicators of the Potential for Substantial Growth in Ride-Sharing.

I doubt that those whose steering wheels will have to be pried from their cold dead hands are good prospects for ride-sharing, though they might occasionally do so.

One good benchmark for the current attractiveness of ride-sharing is the use of public transit systems such as buses, subways, and commuter rail systems. In some areas private vans and formal ride-share programs are also present. The number of personal trips that involve the use of a private vehicle vastly outnumber those that utilize public transit: in 2009, for example, about 327,118,000,000 person trips were done by private vehicles compared to just 7,520,000,000 using transit. (15)

Obviously, the presence and size of public transit systems will affect use levels. However, even here in NYC, where we have the largest public transit system in the USA and the most riders, auto use remains significant. For instance, 44% of the households in both the Bronx and Brooklyn have cars, while 64% do in Queens. Even in Manhattan, where garage spaces can cost $700+/mo and in several of its zip codes over 40% of the residents walk to work, 23% of the households own cars (16). The car-owning residents in Brooklyn, the Bronx and Queens tend to be tri-modal from a transportation perspective. They walk a lot to local destinations – perhaps longer and more frequently than anywhere else in the US – and use subways, buses and even commuter rail to get to work. But they are very, very likely to use their cars to travel to any other types of destinations. Uber, Lyft and a myriad of private car services are present for trips to these other destinations, but car owners don’t use them unless their vehicles are inoperable.

Where we live, in Kew Gardens, we have two subway lines and a commuter rail station within a half-mile of our building, four subways lines within a mile, and numerous express buses to Manhattan. Nevertheless, almost everyone in our building has a car, and our garage has a very long waiting list.

The data on the current use of transit modes strongly suggests that significantly growing the ride-share customer base will be a real challenge. However, those data cannot address the possibility that if ride-share vehicles were more accessible and/or more attractive, they then would attract more users.

Opinion surveys are another indicator of ride-sharing’s current attractiveness to American consumers and they can provide some insight on this issue. Here are some recent relevant findings:

  • A 2016 survey for Vox found that 61% of its respondents reported they were unlikely to use an Uber-style self-driving car service if it becomes available in their area (17). That’s a lot of folks who don’t want to use the largest wannabe self-driving car ride-share service.
  • A survey done for the AAA in 2017 found that: ”Three-quarters of U.S. drivers would be afraid to ride in a self-driving vehicle, while 19 percent would trust the vehicle and 4 percent are unsure.” Baby Boomers were more afraid (85%) than Millennials (73%), but the latter’s percentage is still very high (18.) If people are afraid to ride in self-driving vehicles, then they surely will not be ride-sharing in them.

Ride-sharing, if it is to grow to the level needed to have substantial environmental benefits, will have to be many, many times more attractive than it is today. To my mind, what I have seen talked about is not all that much better than what we have today, except for scenarios that involve the highest level of automation and the most centrally controlled area system. That scenario probably would meet with much public opposition.

Huge Technological Issues Remain to Be Solved

The technological aspects of the transition to driverless cars probably will be the easiest to achieve. According to Bran Ferren, the co-founder of Applied Minds, the transition to driverless cars will take these “five miracles,” some of which have already been achieved:

  • “You need to be able to know exactly where you are and exactly what time it is. (Thanks GPS.)
  • You need to know where all roads are and what the rules of driving on them are. (Check, in-car navigation systems.)
  • You need near-continuous communications with other vehicles nearby. (Ferren says that current wireless technology, with modifications, could get us there.)
  • You need restricted roadways that people agree are safe to use. (We could start with HOV lanes.)
  • And you need the ability for machines to recognize people, signs, and symbols. (For this a car might need to wake up to ask its passenger a question, the answer to which it could then share with all other vehicles.)” (19)

To get a down and dirty look at what has been achieved and how rigorous the work can be, see this terrific article: Alexis C. Madrigal, “Inside Waymo’s Secret World for Training Self- Driving Cars” (20). I was struck, in particular, by Madrigal’s description of how the Waymo autonomous car could handle entering a one-lane roundabout, but it was absolutely flummoxed about entering a roundabout having two lanes. For me, that was an important tell indicating that the programming for the cars still has a lot of work to do. On the other hand, Madrigal’s article demonstrated that a lot of very impressive technological progress already had been accomplished.

Huge Non-Technological Issues, Besides Ride-Sharing, Still Need Resolution

Regulations. For me, the private companies involved in developing self-driving cars seem to be acting like politically spoiled brat teenagers when it comes to government regulation. They have already been complaining a lot and we can expect tons more in the future. Their complaints sound like expressions of creative entitlement: look at this marvel we are creating; you should be licking our… boots, not constraining what we want to do. They may be technical geniuses, but politically they act like naïfs. The whole business community suffers from over-regulation, so why on earth should the new kids on the block be an immediate exception? Do they want, on their way to developing a driverless car society, to revolutionize our regulatory system, too? Good luck with that and its potential for sidetracking the primary venture, the transition to autonomous vehicles.

Uber and Airbnb provide an invaluable lesson. Both have encountered significant amounts of regulatory conflict on the municipal level. These overwhelmingly occurred after they made a significant entry into a market area. One might argue that, similarly, the full brunt of the pressures to regulate driverless cars will not be felt until they, too, gain a significant amount of market penetration – when the public will be more aware of driverless cars and what they can and cannot do, and people will be more likely to start demanding regulation. A few multi-car, multi-injury accidents could unleash strong vocal public concerns and demands for more regulation. Tesla’s recent experience shows that the possibility of such incidents should not be ignored until the technology advances quite a bit more.

Also, we know that state and local regulatory environments vary considerably with geography. The highly urban, densely populated areas where driverless cars will supposedly have the largest positive societal impacts are also those with political cultures most favorable to government regulation.

Furthermore, if Waymo, Apple, and other driverless car companies want fully automated, no steering wheel cars to be dominant, then they might only succeed if local or national regulations make that a legal requirement. These companies may actually solicit such regulation.

Possible Disruptions. Many may be hard to discern at this point in the development and adoption of driverless cars. However, here are some of the disruptions that are already being discussed:

  • Taxi, Uber and Lyft drivers losing jobs.
  • Truck and Bus industry revenue and job losses. The public is already concerned about these potential losses. For example, a 2016 survey found that “53% of respondents predict that self-driving cars will take away jobs from professional taxi and truck drivers, compared to just 29 percent of Americans who say that won’t happen” (21).
  • Lower public rail transit ridership use and devalued infrastructure investments.
  • Reduced parking structure use, incomes, and investments. The need to repurpose many existing parking facilities. The way we design real estate projects, districts and communities could be significantly altered.

The Types of Cautious Decisions That Might Be Needed Now. Until the transition to self-driving cars is much closer to completion, most of us ordinary consumers and citizens, as well as landlords and developers and policy-makers at all levels of government, will be acting in an uncertain situation. We will have to guard against making wrong decisions even more than usual, especially about how we invest our money, time and political capital

A good example of this is provided by AvalonBay Communities Inc., a big real estate developer. It “is designing a downtown residential complex for a future time when ride-sharing services and driverless cars whittle down car ownership and parking places become ‘expendable’”(22).) The project’s garage, for example, will not have the traditional inclined floor, and its level floors could be converted to other uses such as retail, a gym or a theater. Numerous electric car charging stations and ride-sharing drop-off points will be key amenities of the apartment complex (23).

See also Dave Feehan’s advice about building conventional parking structures today. (24)

Some Final Comments

Holly White made an enormous contribution to the way we revitalize our downtowns. In my opinion, the foundational idea behind his approach was that improvements will only succeed if they do not clash with the preferences and behavior patterns of potential users. That idea can also be rephrased to stand as a basic axiom for the marketing of any new product – such as self-driving cars. Whether you are creating a great new public space or developing a revolutionary new car, one thing you certainly don’t want to do is to design a product that requires potential customers to change strongly ingrained preferences or behavior patterns in order to accept the product. Such personal changes are likely to require a lot of time and resources to induce. When a product needs social engineering for acceptance it is unlikely to succeed.

What is flabbergasting to me, is that for all the attention companies such as Waymo and Apple have given to developing the many technologies required for self-driving cars to work, how little attention they have paid to preferences and behavior patterns of potential consumers. As a result, it looks as if they are developing products that will require substantial changes in the attitudes and mindsets of their potential users.

Nor had they begun to investigate the probable regulatory gauntlets they would face until rather recently. Many assumed, because they were Silicon Valley moguls, regulators would just bat their eyes, praise them to the sky and approve these amazing new gizmos. Some, like Uber, even saw themselves as Howard Roarks, and above the law.

Far too many urbanists have had their heads in the clouds about driverless cars. They eagerly accepted and then advocated for driverless cars because of all their supposed environmental, safety and urban design benefits. However, in so doing, they have failed to look at any of the many non-technological issues at the individual and political levels that might impede adoption of a range of possible driverless car features. Nor have many of them realized that some of these benefits can be realized without going to completely automated, no-steering wheel vehicles.

The above failures in what might be termed social and political engineering will contribute significantly to a probable drawn out transition period for driverless cars. It will be akin to a multi-decade long inflection point for our nation’s quality of life.

Increasingly, though, it will be the decisions of ordinary citizens, as consumers and voters, as well as our politicians – not our technological wizards nor our industrial moguls – that will determine the directions of those paths.

Given that the coming self-driving car transition will be a long and arduous process, ardent urbanists and enthusiastic technologists should guard against suggesting a system of highly automated cars as an immediate solution to our current problems, or even those arising over the next decade or so.

Endnotes

1) See: http://www.businessinsider.com/lyft-president-car-ownership-will-all-but-end-in-cities-by-2025-2016-9

2) David Roberts. “Unless we share them, self-driving vehicles will just make traffic worse. A carbon-free, autonomous car is still a car; it still takes up space.” Vox, July 24, 2017. Hereafter referred to as Roberts. https://www.vox.com/energy-and-environment/2017/5/18/15604744/self-driving-cars-cities

3) Ibid.

4) Ibid.

5) See: Equine Heritage Institute. “Horse Facts.” http://www.equineheritageinstitute.org/learning-center/horse-facts/

6) David Feehan in an email.

7) See: http://www.history.com/this-day-in-history/ford-builds-its-1-millionth-car

8) See: http://www.history.com/topics/automobiles/print

9)See: https://www.statista.com/statistics/183505/number-of-vehicles-in-the-united-states-since-1990/

10) Bureau of Economic Analysis, Total Vehicle Sales [TOTALSA], retrieved from FRED, https://fred.stlouisfed.org).

11) See: https://qz.com/913093/car-loans-in-the-us-have-hit-record-levels-and-delinquencies-are-rising-fast-too/

12) See: https://www.statista.com/statistics/551403/number-of-vehicles-per-household-in-the-united-states/

13) Timothy B. Lee. “We polled Americans about self-driving cars. Here’s what they told us.” VOX, August 29, 2016. https://www.vox.com/2016/8/29/12647854/uber-self-driving-poll

14) See: Roberts above and http://www.govtech.com/fs/perspectives/How-Autonomous-Cars-Buses-Will-Change-Urban-Planning-Industry-Perspective.html

15) Bureau of Transportation Statistics, US Department of Transportation. “Passenger Travel Facts and Figures 2015,” P.11. https://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/PTFF_Complete.pdf

16) NYCEDC. StatsBee Blog. New Yorkers and Cars. April 5, 2012.   https://www.nycedc.com/blog-entry/new-yorkers-and-cars

17) See Lee above #13.

18) AAA Fact Sheet: Vehicle technology Survey – Phase II. 2017.   http://newsroom.aaa.com/2017/03/americans-feel-unsafe-sharing-road-fully-self-driving-cars/

19) All bullets from: Tim Bajarin. “Why Bran Ferren’s TED Talk Is Required Viewing for All Techies. Pcmag.com. March 31, 2014. https://www.pcmag.com/article2/0,2817,2455647,00.asp

20) Downloaded from: https://www.theatlantic.com/technology/archive/2017/08/inside-waymos-secret-testing-and-simulation-facilities/537648/

21) See Lee above #13.

22) http://www.govtech.com/fs/perspectives/Driverless-Cars-and-the-Disruptions-They-Will-Bring.html

23) Ibid.

24) David Feehan. “Suddenly it’s 1900 again)”. Parking Today. July 2013. http://www.parkingtoday.com/articledetails.php?id=1463

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

Posted by N. David Milder

Introduction

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

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

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

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

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

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

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

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

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

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

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

Putting Young Professionals in Perspective as Economic Growth Assets  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 Some Suggested Take Aways

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

Disclosure

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

ENDNOTES

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

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

3. Personal interviews with developers from 2003 through 2007

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

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

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

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

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

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

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

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

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

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

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

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

16. See Tom Egan above

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

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

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

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

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

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

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

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

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.