The New Normal’s Challenges to Developing a Downtown Entertainment Niche Based on Formal Entertainments: Part 2 the audiences; revised 041214

Posted on March 28, 2014 by DANTH

Posted by N. David Milder

Introduction

This is the second part of the third in a series of articles about the “new normal” for our nation’s downtowns. It focuses on the challenges many downtowns — especially those that are not very large — now face when they decide to bolster their central social district functions by creating and/or strengthening their venues for the performing and visual arts, e.g., performing arts centers (PACs), theaters, cinemas, concert halls, museums, art galleries, etc. Part 1 dealt with a general introduction of the challenges, a discussion of who can afford formal entertainments and changes in the ways governments, corporations and foundations are funding arts projects. Part 3 will discuss a number of formal entertainment venues as examples and then dive into an update of DANTH’s analysis of what’s happening with movie theaters.

Here, in part 2, the discussion will turn to changes in the ways Americans attend performing arts events and visit visual arts venues. Secondary analyses of two kinds of data will be employed: representative sample surveys done for the National Endowment of the Arts (NEA) and other arts related organizations and reports of admissions to various types of arts venues/performances that were obtained from a number of arts sector organizations.

While both types of data can potentially shed light on consumer demand for attending various performing and visual arts events, they are quite different in nature, much as beans differ from broccoli, though both are vegetables. For example:

While the surveys ask individuals whether they attended various arts events over the prior year, the admissions data report the number of people who attended events put on by arts organizations or visited their venues. The surveys report on characteristics of individuals; the admissions data are characteristics of the organizations or venues
Translating directly between the two usually is difficult because of a number of issues. For example, the NEA survey may ask about attending classical music concerts, but the best relevant admissions data are only about attendance at concerts done by our largest symphony orchestras. The NEA survey data reports do not detail how often an individual may attend a particular type of arts event, e.g., once to a museum, three times to an opera, six times to a ballet, etc., while the Culture Track report does. The admissions data reports do not detail how many admissions were accounted for by people who had attended multiple times, e.g., subscription ticket holders
The survey data also tell us, at least by implication and sometimes overtly, about the percentages of people who did not attend each of the arts events/venues asked about. However, memories about attendance over a prior year can lead to an unknown degree of erroneous reporting. The admissions data are not informative about those who do not attend. They simply indicate an important fact for those operating arts organizations and venues: whether admissions have gone up or down – and usually with a good deal of reliability
Population growth is also an important factor. It is entirely possible that the number of people who are buying tickets for a type of arts events, e.g., chamber music, stays the same over 10 years, but, because of population growth, their proportion of the population would decline.

In this article the survey data will be treated as providing evidence about the proclivities of individuals in the USA to attend various arts events/venues and for explaining why they do so. Though their availability are quite limited, the admissions data will be treated as the best data about actual attendance and ticket sales and as the best indicators of how arts organizations and venues are doing. Obviously, the former should have some impact on the latter, but the paths of that influence are often difficult to accurately identify and detail. However, when both show a similar pattern, e.g., declining attendance and admissions, they can help validate each other’s findings.

The Surveys

The potential audiences for formal entertainment venues are composed of people who “consume” art by attending performing arts events (plays, operas, concerts) or visiting visual arts venues ,e.g., museums, art galleries, etc. The 2012 NEA survey shows that only 49% of its respondents reported engaging in such attendance behavior in the prior year (see the table immediately below). Movie-going, in comparison, had a 59% attendance rate.

Looking more closely at specific arts, the NEA survey showed that in 2012 only relatively small proportions of respondents attended them: classical music 8.8%; jazz 8.1%; dance other than ballet 5.6%; ballet 2.7% and opera 2.1% (see table immediately below). This suggests that the potential audiences for such arts events are comparatively small, though they will be higher where they are geographically clustered, e.g. affluent neighborhoods.

Moreover, when compared to the findings of a 2002 NEA survey, it appears that there has been a general decline in attendance: classical music -24%; jazz -25%; dance other than ballet -11%; ballet -31% and opera -34%. This would indicate that the audiences for these performing arts are not just relatively small, but they are also dwindling when looked at on a percentage basis.

The National Arts Index Report 2013 (NAI) uses survey data gathered from 210,000 individuals by Scarborough Research to demonstrate that attendance at art museums between 2006 and 2011 was below 2003 levels, down by about 8% in 2011 (1). Moreover during the 2003-2011 period, museum attendance never regained their 2003 level.

Some have argued that the decline in arts attendance revealed in the NEA’s 2008 survey was a result of the Great Recession. However, 2012 is three years after the recession’s official termination, yet the decline continued. The economy is undoubtedly a factor, but probably through economic forces that were in play prior to the recession’s onset and continue to have impacts today. This view will be supported below when the admissions data of arts venues are discussed.

One reason for this decline may be the growing consumption of performing and visual arts through electronic media. For example, the 2012 NEA survey found that 61% of the respondents used TV, radio or the Internet to access art or arts programming (see table above). A closer look shows that 57% consumed music of any kind via the electronic media; 14% accessed ballet, modern or contemporary dance or dance programs or shows; 7% theater productions and 4% opera. The numbers for dance and opera rival those who attended such performances in person in theaters or other physical venues.

In the near future, technological innovations may increase this diversion to e-attendance. For example, Mark Zuckerberg posted the following comment to explain Facebook’s purchase of the maker of the Oculus virtual reality headset: “When you put (the headset) on, you enter a completely immersive computer-generated environment, like a game or a movie scene or a place far away. The incredible thing about the technology is that you feel like you’re actually present in another place with other people” (2). The potential for using a virtual reality headset to attend sports events, plays, concerts, operas, etc. appears real; the degree to which it will be realized remains unknown. If not Oculus or some other virtual reality device, then some other technology may emerge to drive more e-attendance. This Pandora’s box has been opened. Also, it should be remembered that technological impacts on arts attendance are not a new phenomena: back in the 1950s TV viewing drastically decreased movie attendance and changed the way that industry works, but we still keep going to movie theaters.

Other factors are also very important in determining attendance at arts performances. As the Culture Track 2011 report noted: “Decisions about whether to participate in the arts are driven primarily by cost, programming, and convenience. This is true at all ages and income brackets” (3). This report was also based on a large national survey with 4,000+ respondents. The NEA surveys also show that age, education and ethnicity can be factors, but it notably neglects to discuss the impacts of income. Education is probably acting somewhat as a surrogate variable for income in the NEA analyses because of their high correlation. In today’s economy, one might reasonably argue that admission cost is a major determining factor for persons who are not wealthy and who do not have heaps of discretionary dollars to spend.

The Culture Track 2011 study did identify a number of high arts consumers: the young cultural omnivores — likely the young hipsters with lots of discretionary dollars to spend — and the older seasoned cultural omnivores, who appear to be older and affluent. As the word “omnivore” implies, both like to attend a variety of arts/cultural events. However, together, they represent only about 10% of the Culture Track survey’s respondents. Then there are three segments that specialize in the type of cultural events they prefer to attend: the museum mavens just like to visit museums, the devoted theater goers just like to go to the theater and the family centrics prefer to attend mostly child friendly events. The specialist consumers’ attendance rate is about half of that of the omnivores. The specialists account for 30% of the Culture Track survey’s respondents. Forty-eight percent of the survey’s respondents are non-attendees and infrequent attendees, and 12% are in the rural history segment that basically is lives in very rural areas, far from major cultural venues.

The Culture Track survey also found that decreasing attendance was being influenced by the general economy and manifested in the reduced number of events culture consumers went to, not in a reduction of the number of people who are culture consumers.

These findings suggest that besides about half of all adults being hard or impossible to attract to cultural events, substantial portions of those who are culture consumers will opt out if a venue does not put on the particular type of cultural event/performance they prefer. They also show that the economy is having a negative impact on how often American cultural consumers attend cultural events.

It should be noted that the NEA’s 2012 survey did find art events that were attracting more people, e.g., 5.1% reported going to events where Latin, Spanish salsa music was played compared to 4.9% reported in its 2008 survey. The NAI report, again based on Scarborough Research survey data, shows that attendance at “live popular music,”– which includes country, R&B, rap, hip-hop and rock music performances — equaled or exceeded the 2003 level every year but one between 2004 and 2011. Indeed in 2011, attendance at live popular music events was 14% above the 2003 level (4). This reflects another pattern the surveys agree on: some arts forms are attracting stronger audiences. However, the “high brow” culture/arts forms, e.g., opera, ballet and classical music are not among them.

For those believing that the performing arts can be a silver bullet solution for downtown revival, the NEA and similar surveys indicate a changing and too often dwindling potential audience. They also suggest that the demographic characteristics of a market area and its prevailing lifestyle segments can have a big impact on potential attendance for each of the various types of performing and visual arts events. Formal entertainment venues are likely to be intensely challenged when they try to find and capture audiences for their programs and events. Consequently, the critical ticket and admissions sales portion of their revenues seem to have become more uncertain, just as have their government funding and grants from corporations and foundations.

REVISION 041214: Since the initial posting of this article DANTH has come across survey information released by the Broadway League, “The Audience for Touring Broadway: A Demographic Study 2011 -2012,” which had the following findings:

“Seventy percent of attendees were female.
The average age of the Touring Broadway theatregoer was 50.5 years.
Eighty nine percent of Touring Broadway theatre goers were Caucasian.
Seventy-eight percent of the audience held a college degree and 30% held a graduate degree.
Forty six percent of national theatre goers reported an annual household income of more than $100,000, compared to only 21% of Americans overall.
Thirty one percent of respondents were subscribers to the “Broadway Series” at their local venue.
On average, Touring Broadway attendees saw 4 shows per year.
Women continued to be more likely than men to make the decision to purchase tickets to the show.”

Performing and Visual Arts Admissions

To research annual levels of admissions at various types of performing and visual arts venues, DANTH reviewed relevant data posted online by such organizations as the League of American Orchestras, the Theatre Communications Group, the National Association of Theatre Owners (movie houses), The Broadway League, the American Alliance of Museums, Opera America, et al. Some of the reported data are not specific enough for the needs of the analysis in this article. For example, the Alliance of Museums surveys its museum members asking if attendance went up or down in the reporting year within specific percentage ranges. It does not collect anything like “counts.” Most of the other organizations survey their membership about admission counts and then on the basis of the reported data extrapolate out to the total number of organizations in their field. For example, the Theatre Communications Group, for its 2012 report, collected data from 178 theaters and then used those results to make an estimate of the annual admissions of 1,782 nonprofit theaters. Some of these organizations appear to have ceased publishing data about admissions.

The analysis below only covers five of the six types of performing arts for which we could find count-based admissions data: movie theaters; symphony orchestras; touring Broadway shows; opera, and nonprofit theaters . Although the desired data are available for Broadway shows staged in Manhattan’s theater district, they were not included because of their geographically confined relevancy.

One of the things to take away from the above table is the relative sizes of the absolute admissions numbers for each of the arts categories. Attendance at movie theaters, which is in the billion+/yr range, simply dwarfs the combined attendance of the other four arts categories. The opera admissions are far, far smaller than those for the symphony orchestras and nonprofit theaters. For downtown leaders who want performing arts to drive more traffic downtown, the implications seem obvious.

Attendance for symphony orchestras, opera and movies began their declines well before the onset of the Great Recession. This strongly suggests that other factors were influential. On the other hand, attendance for touring Broadway shows has certainly varied over the years, but usually has been strong. The non-profits theaters’ admissions did hit bottom during the recession, but they have since recovered and actually peaked in the most recent year for which there is data, 2012.

The above table helps to see historic trends more easily by indexing the attendance statistics for each category to the 2003 attendance:

Movies. Movie attendance had an average index score of .923 between 2000 and 2013. It topped out historically in 2002 at 1.03 and then followed a bumpy downward path to .84 in 2011. That is a percentage decline of about -18.4%. However, attendance bounced back with about a 6% increase in 2012 over 2011 and then ebbed slightly, 0.40%, in 2013 (5). That still left movie attendance about -14% below its 2002 high. As movie attendance has declined, research by Pew found that Americans watch five times as many movies at home than they do in movie theaters — and that study predated Netflix’s entry into the movie and TV show streaming business (6). To help stem the decline, Hollywood has increased its annual movie production by about 39%, from 478 in 2000 to 665 in 2012. Over this same period, the number of indoor movie theaters declined by 18.8%, the number of indoor movie screens increased by 9.4% and all distribution and projection functions went digital. Since movie house ticket sales only account for a fraction of movie studio revenues — under 15% — a growing number of movie moguls are pressing for new films to be released digitally at about the same dates as they are screened in traditional theaters
Touring Broadway Shows – Although this category shows about a -13% decline in 2013 from its peak year in terms of absolute attendance, the 2013 attendance is still 20% above the 2003 benchmark year, and it has the highest average indexed attendance score presented in the above table, 1.14. Its index scores exceeded the benchmark 1.0 in 12 of the 14 years for which we have data, peaking in 2010 at 1.39. The index scores were relatively high in the preceding 2006 and 2009 period, with scores of at 1.34 and 1.25 during the two recession years. Its index score has not been below 1.10 since 2004. Attendance is significantly impacted by the number of plays on the road and the lengths of their runs. For example, for Broadway shows there is a .69 correlation between the number of playing weeks in a year and attendance. That can statistically explain about 47% of the annual variation in attendance. From the data the Broadway League publishes about gross revenues of the touring shows, it appears that in 2013 the average revenue per admission was $64.01 (up 22% since 2003). If the average ticket price was around that figure, then a lot of folks probably cannot afford to attend touring Broadway shows. Not all downtown theaters can attract a touring Broadway play; they must have an ability to generate ticket revenues that are commensurate with the size of the production’s cast and costs.
NonProfit Professional Theaters. There were an estimated 1,782 of these theaters in the USA in 2012, and most were not very large– they averaged just 174 admissions per performance. For the 11 years that there is available data, the attendance index scores for this arts category are below 1.0 in nine of them. But, the most recent score was its highest, 1.07 for 2012, and it followed a 0.99 score in in 2011 that was a .09 improvement over 2010. These theaters get about 52% of their revenues from earned sources and 48% from contributions. Using the published expense data and dividing it by attendance indicates that there is about $54.11 in expenses associated with the average admission. The earned income, probably from ticket sales, would cover about $28.26 of the average admission cost, with contributions covering the remaining $25.85. Theater tickets in the $30 range are likely to be affordable to many more people than tickets costing $60+. But, needing this audience subvention certainly contributes to pushing about 50% of these theaters to operate in the red (7).
Opera. Between 2000 and 2011, opera attendance dropped off dramatically by about 40%. The decline has not been linear. Between 2000 and 2003, well before the recession’s onset, attendance fell by about 24%. It’s attendance index score then increases to 1.09 in 2004 and wobbles up to 1.14 in 2007. It then continues to decline down to 0.73 in 2011, the final year for which we could find data. The difference between the 2000 and 2011 index scores is a stunning 0.51. However, this decline was not linear: an important attendance decline occurred well before the recession, and another and stronger decline started when the pre-recession financial crisis began to emerge.
Symphony Orchestras. For the years the DANTH team was able to find relevant data, attendance at concerts of 187 symphony orchestras peaked in 2001 and 2002, with index scores of 1.14 and 1.07. It then dropped to 1.0 in 2003 and 2005, well before the Great Recession. Attendance actually rose to 1.04 in 2006 to 2008 as the financial crisis and the the recession set in, but then incurred a substantial drop in 2009 to its lowest index score, 0.89. Attendance recovered somewhat in 2010 and 2011 with index scores of 0.93 and 0.95, showing something of a recovery trend. But attendance in 2011 still was about 7% off the 2003 benchmark and about 17% below the 2001 peak. While the Great Recession probably had a significant impact on attendance, the drop in 2003 and 2005 suggest that other factors also might be at work. Within the field, there has been much heated debate about whether attendance has ebbed because the classical repertoire has become too limited, boring or inaccessible and whether substantial efforts are needed to expand its audience by attracting more people from a wider range of ethnic, income and age groups. However, a number of observers have argued that even if attendance may have fallen, the quality of the players and orchestral performances has been very high, and the popularity of classical music has grown in such places as college campuses (8). This raises the question: what, then, are the factors that have been pushing admissions at symphony orchestra concerts down, if it is not the quality of the performances and other than recessionary impacts?

The table immediately above takes the absolute admissions data from the table “Attendance in Five Performing Arts for Which There Are Admissions Data” and indexes/standardizes it to the national population in each of the years covered. It is, mathematically, something akin to turning them into percentages. The results are per capita admissions by year of each of the arts categories in the table. Some things to note:

Opera and a classical music subset, symphony orchestras, display strong reductions in attendance in the most recent years for which there is data from their peak years, -46.3% and -24.3 % respectively
These are significantly higher declines than those revealed by the analysis of the absolute attendance data, -40.7% and -17.2%
While the touring Broadway shows also show from this perspective a stronger decline, the per capita attendance is still well above the benchmark year
Movie attendance also shows a greater decline than the absolute attendance numbers, -21.7& compared to -13.9%; its most recent per capita attendance is well below that of the benchmark year
Non-profit theaters had their highest admissions ever in 2012, but the per capita admissions in 2003 were just barely higher, 0.1182 to 0.1169.

Take Aways

This analysis has looked from several perspectives at the issue of what has been happening to the attendance levels for various types of performing and visual arts venues over the past decade or so.
The contention that attendance patterns are changing significantly seems hard to refute.
The contention that forms of “high brow” culture such as opera, classical music and ballet have suffered attendance declines also appears to be supported by the numbers
Art forms associated more with popular culture, e.g., live popular music performances, are those that seem to be doing best. However, movie attendance is not what it has been, despite huge efforts to buttress attendance by by providing more movies per year on more movie screens and using 3-D and IMAX projection systems to substantially enhance the viewing experience
The impact of technology to provide new ways of e-attending performing arts events or visiting museum art collections (MoMA, the Met, the Louvre, the Smithsonian, the Whitney, etc. all have them) is undeniable, but the extent and pattern of that impact is still uncharted. However, what the movie attendance shows — remember we watch 5 times as many movies at home or on our e-devices than in cinemas — is that to a substantial degree we still want to watch/see arts events in person with other people. That does not mean that there will not be adverse impacts — just think of all the closed movie theaters, about 10% of them, some say, due just to the conversion to digital projection and distribution
Whether or not these audience churns and declines reflect a cultural dumbing down of our population or whether performing arts repertoires have become stale or their performance levels waned are irrelevant issues for downtown leaders who want to enhance their central social district functions by building a stronger entertainment niche
What is important are the changes in arts audience behaviors. They increase the uncertainty of existing arts organizations’ earned incomes and definitely will be affecting the economic feasibility of projects to create new formal entertainment venues. Creating such formal arts venues is seldom associated with cheap capital costs
Regarding the new projects, given the probable capital expense, the uncertainties associated with earned income and the inherent tendency to best serve an audience that has a significant amount of discretionary dollars to spend, some downtown leaders might do well by considering other types of projects to enhance their entertainment niches. These projects might take the form of new vibrant public spaces that are: open to all; where plays and movies can be shown, but focused mainly on maximizing informal entertainment opportunities; either free or low-cost; designed to capitalize on people watching; where participants are both the performers and the audience.

Endnotes

1. Americans for the Arts. National Arts Index: 2013 Report, pp.149, p.67

2. Ibid., p.64

3 See: http://www.businessinsider.com/zuckerberg-why-facebook-bought-oculus-2014-3#ixzz2x1lgtLVO

4.LaPlaca Cohen/AMS Planning & Research Corp, Culture Track 2011 Market Research Report, pp.87, p.7

5. http://www.boxofficemojo.com/yearly/

6. Pew study cited in:https://www.ndavidmilder.com/wp-content/uploads/2012/05/trends_p1_films_08.pdf

7. The data in this section are drawn from Theatre Facts. It has been published annually by The Theatre Communications Group since 2000. See the 2012issue at:http://www.tcg.org/pdfs/tools/TCG_TheatreFacts_2012.pdf

8. See for example: http://classicalvoiceamerica.org/2014/03/07/campus-concerts-rebuff-notion-of-classical-decline/ and http://www.city-journal.org/2010/20_3_urb-classical-music.html . Thanks to Andy Menshel for bringing them to my attention.

The New Normal’s Challenges to Developing a Downtown Entertainment Niche Based on Formal Entertainments: Part 1

Posted on March 9, 2014 by DANTH

Posted by N. David Milder

Introduction

This is the first part of the third in a series of articles about the “new normal” for our nation’s downtowns. It focuses on the challenges many downtowns — especially those that are not very large — now face when they decide to bolster their central social district functions by creating and/or strengthening their venues for the performing and visual arts, e.g., performing arts centers (PACs), theaters, cinemas, museums, concert halls, museums, art galleries, etc. Part 1 deals with a general introduction of the challenges, a discussion of who can afford formal entertainments, and changes in the ways governments, corporations and foundations are funding arts projects. Part 2 will turn to changes in the ways Americans attend performing arts events and visit visual arts venues. Part 3 will survey a number of formal entertainment venues.

As noted in an earlier article on the new normal for downtown, successful formal entertainment venues undoubtedly can be strong assets for the downtowns in which they are located. However, the success of such venues has long been uncertain and challenged because, from their get-goes, they are the equivalents of loss leaders for their districts. Most are nonprofit operations that sell tickets to events/performances or charge visitors admissions fees that seldom cover their full costs. For example, among performing arts centers,, be they large or small, only about 40% of their operating costs usually are covered by performance revenues (1). To survive financially,they must be able to tap a number of “charitable” revenue streams, e.g., grants, bequests and other donations from government agencies, corporations, charitable foundations and individuals. This financial dependence makes them vulnerable. Evidence suggests that recent trends have made their financial success significantly more difficult to achieve. Funding for the arts took a big hit during the Great Recession, with its full recovery still in doubt, while research studies have consistently shown attendance at performing and visual arts venues has been changing, in some instances declining significantly for over a decade.

In the performing arts, the fees of performers — be they individuals or groups — are related to their popularity. The ability of a venue to attract them will depend on its seating capacity and the ticket prices it can command. Consequently, as more communities with comparatively limited market area populations and wealth try to develop such venues, they often find that their smaller potential audience base, seating capacity and financial resources require adjustments of their aspirations and a fine-tuning of their programs. In other instances, formal entertainment facilities have been built that just have too much capacity for their market areas or are weakened by new competing formal entertainment centers within their market areas

The arts as an engine of economic growth and downtown revitalization too often seems to have achieved the exaggerated status of a religious credo among downtown advocates or the unrealistic expectation among some of them of being the “silver bullet” solution path to economic rebirth. While the arts undoubtedly can contribute to economic growth, their ability to do so will depend on arts venues and programs being planned and designed in a manner congruent with local needs, behaviors and resources. This challenge is now made more complicated by the fact that these local needs, behaviors and resources may be subject to substantial change.

Consumer Expenditures for Entertainment Admissions and Fees.

Tickets admission fees are an important revenue source for the organizations that operate formal entertainment venues. The less revenues they realize from tickets and admission fees, the more they must rely on obtaining outside funds from government agencies, corporations, foundations, and individual donors. The fees can vary. For example, the Cincinnati Museum of Art has free admission; the Columbus Museum of Art charges $12; the Museum of Modern Art in NYC has a $25 fee; the ticket prices for Broadway shows and tickets for concerts by major attractions can reach well over $100 in prime venues. Obviously, the affordability of these

admissions is a function of both their prices and the incomes of those who would purchase them.

Formal entertainment venues that charge relatively high prices are in a sense targeting more affluent households and a downtown entertainment niche based on a cluster of such venues is likely to be a feature that helps draw affluent households or young people with a lot of discretionary spending power to want to live in or very near to the district. During the 1960s, 70s and 80s attracting such residents was just a long-term goal of many downtowns leaders. Today, in a growing number of downtowns, that goal has been achieved and they are stronger for it. Sophisticated formal entertainment venues that feature major attractions that have substantial admission fees are probably well suited for such downtowns. But, a lot of downtown users, be they current or potential, are being priced out of using these formal entertainment venues.

The table above shows that nationally, in 2012, 56% of the expenditures for entertainment fees and admissions came from those in the top 20% of the households sorted by annual incomes. The mean annual household income in this quintile was about $167,000. Those in the top two household income quintiles, with average annual incomes over $75,900, accounted for 77% (56% +21%) of all entertainment fees and admissions.

The general thrust of these findings is not new: the more affluent have long spent more on entertainment, especially the arts. What is new are:

The emergence of deliberate consumers in middle income households who have reduced discretionary incomes and for whom discretionary entertainment expenditures now are a lower priority than in years past (2)
The income stagnation and general economic decline of middle income households, a trend that preceded the Great Recession, but recently has become a hot political issue.

The implications for many downtowns are:

More than ever, ventures to establish new formal entertainment venues must be calibrated in their ambitions, designs and costs to the financial resources of local residents that might be tapped through admissions, fees and donations
Such ventures are more likely to succeed in communities that have greater residential wealth, especially if capital investments in new buildings, busy event/performance schedules and pricey admissions fees are involved
In smaller and less affluent communities such ventures are very likely to need strong long-term government subventions and grants from corporations, foundations and community organizations. Most downtowns are likely to fall in this category. In these communities, the presence or absence of very broad support among local residents, the business community and elected officials can be the deciding factor in whether this critical external financial support will be obtained. Often such strong support is mobilized around something or someone that is a source of considerable community pride or identity, such as the artist Grant Wood in the Cedar Rapids (IA) Museum of Art and life on the plains and the Oregon Trail in the Legacy of the Plains Museum in Gering NE.
Many of the downtowns with weaker financial resources to tap might do well to consider that many Americans see art exhibitions and attend performing arts events not only in museums, theaters and concert halls, but also in parks or other open air facilities, restaurants, bars, nightclubs, community centers, places of worship, college campuses, etc. (See table above).

Grants for Arts Nonprofits

Since the onset of the Great Recession, it has become more difficult for arts nonprofits to get the grants they need from public sector agencies, corporations and foundations. An unanswered question is whether this funding trend will turn around as the nation’s economy improves. Downtown leaders considering the development or expansion of formal entertainment venues might benefit from understanding the topography of these new financial support patterns for the arts.

Public Sector Funding. It is important to understand the magnitude of the public sector’s financial support for the arts. It now only accounts for about 7% of the revenues of arts nonprofits nationally and, adjusted for inflation, between 1992 and 2013 public funding declined by about 30%. FY2013 was the first fiscal year since FY2008 that aggregate public sector funding for the arts has increased, but it is still far below former high years (3). The National Endowment for the Arts (NEA) only accounts for about 12% of the public sector funding. Its expenditures are not expected to increase significantly anytime soon.

County and municipal governments account for 63% of the public funding for the arts and they recently have shown signs of increasing their funding levels as their economies improve and the impacts of natural catastrophes (e.g., Hurricane Sandy) abate. However, local governments in more densely populated areas often face a large number of requests for arts funding and that usually results in many relatively small grants.

Corporate Support. Unfortunately, data are unavailable for small and medium-sized corporations, but the major findings of a recent report by CECP and The Conference Board on giving in 2012 by large corporations are still illuminating (4): though large corporation giving increased by 42% from 2007 to 2012, funding for the arts decreased by about 40% during that period (5)!

On the hopeful side for a resurgence in corporate arts funding is the fact that giving to the arts remains popular among the corporations; it is the size of their contributions to the arts that have decreased. But, changes in corporate behaviors and preferences suggest that such a resurgence is not likely to happen any time soon:

Education and economic development have become much more important funding priorities
More corporations want to make in-kind donations and arts organization may find it difficult to benefit from bulk product donations
Corporations are increasingly seeing giving as part of their corporate strategy and less as charity
Corporations are increasingly reviewing their giving from a return on investment (ROI) perspective and nonprofits often do not know how to provide the needed metrics (6)

Foundations. Since about 81% of America’s larger corporations have foundations and they account for about 35% of their corporations’ total giving, there is some overlap between corporate and foundation funding (7).

In 2011, the last year for which there appears to be available data, there was a familiar pattern: while there was a 25.3% increase over 2010 in overall giving by 419 foundations, the increase for the arts was a marginal 0.5%. Here again, the arts’ share of the number of grants remained unchanged (8). However, a “larger share of arts grant dollars provided operating support than most other fields” (9).

Endnotes

1. Harac Consulting, “Evaluation of SOPAC.” October 2011, p.3. http://southorange.org/SOPAC-finalPDF.pdf

2. See: https://www.ndavidmilder.com/downtown-revitalization/the-deliberate-consumer

3. Ryan Stubbs “Public Funding for the Arts: 2013 Update,” GIA Reader, Vol 24, No 3 (Fall 2013): http://www.giarts.org/article/public-funding-arts-2013-update

4. CECP and The Conference Board, “Giving in Numbers: 2013 Edition.”

5. Ibid, page 20.

6. See:ARTSblog » Blog Archive » Michael Stroik. “Corporate Funding Came Back After the Recession, But Did it Leave the Arts Behind”_ (from The pARTnership Movement, an initiative of Americans for the Arts) posted Oct 4, 2013 and ARTSblog>> Judy Belk, “As Corporate Giving Bounces Back, Six Things Nonprofits Need to Know,” posted December 13, 2013.

7. See endnote 4, page 5.

8. Steven Lawrence and Reina Mukai, “Foundation Grants to Arts and Culture, 2011 A One-year Snapshot,” Foundation Center, GIA Reader, Vol 24, No 3 (Fall 2013), http://www.giarts.org/article/foundation-grants-arts-and-culture-2011

9. Ibid.

Some Key Aspects of the New Normal for Downtowns: the “good news” ©

Posted on December 1, 2013 by DANTH

Article 1

N. David Milder

Author’s Note for Downtown Curmudgeon Blog and Newsletter Readers

A number of readers of the Downtown Curmudgeon blog have asked me to write an article on the new normal for downtowns that I have referred to in many of my blog postings in recent years. In response, I have planned a series of articles that will be posted over the coming six to eight months.

This is the first in that series and focuses on providing a description of the critical characteristics of the new normal and some of the emerging challenges downtown organizations now may face under it. Proper treatment of this subject requires sufficient space and cannot be done within the usual short take format of most blog posts and email blasts. While I have tried to be economical in my use of words, this article is almost 12,000 words long, even when I have skimped on examples and skipped using data tables and other illustrations. I have divided it into two parts. Each part will be posted to my blog and emailed separately.

Later articles in this series will cover such topics as the arc of downtown revitalization, the potential implications of the new normal for downtown development projects and BID programs.

Part 1 – What’s Now Normal for Downtowns: The Good News

1. The Expectation and Ability of Downtowns to Prosper. When I first became involved in downtown revitalization issues back in the mid 1970s, downtowns across the nation were weakening and often visibly decayed because of the impacts of business and residential flight, suburban residential growth, suburban sprawl, the rise of shopping malls, the creation of suburban office clusters, the fear of downtown crime, business flight, reduced investment, etc. (1). Civic and business leaders often despaired that their downtowns were literally going to hell, with few prospects of salvation in sight.

While these declines were most easily noted in cities after the urban riots of the late 1960s, the decay soon also was being found in many non-rioting big cities as well as in many of our older and well-established suburbs, large and small.

Early downtown revitalization efforts that used urban renewal, office growth or physical improvement (“beautification”) strategies were almost complete and disheartening failures. In too many instances they created sterile fortress dominated environments that were antithetical to pedestrian activity and multi-purpose downtown trips – and very hard to rectify – or “decorated coffins,” prettier, but still devoid of activity and growth.

However, about 15 to 20 years ago, our downtowns started to tell a far different story, one that has grown stronger and stronger with each passing year. More downtowns appeared to have bottomed out and then established an upward thrust on their revitalization arcs. Today, the increased flows of pedestrian traffic, the after five o’clock activity levels, the new or rehabilitated buildings, the shops and entertainment venues, the influx of businesses and jobs, and the growing numbers of downtown residents all signal that many of our downtowns have advanced quite far on their revitalization arcs and are doing quite well. Still other downtowns, often inspired by and following the best practices of their more successful brethren, are rapidly improving.

These prospering downtowns are large (e.g., Midtown Manhattan, Center City Philadelphia, downtown Chicago), suburban (e.g., Wellesley MA, Old Pasadena CA, Englewood NJ) and even relatively small (e.g., Cedarburg WI, Galena IL, Durango CO, Brattleboro, VT).

The new prosperity of our downtowns is powerfully described by Paul Levy and Lauren Gilchrist in a recent publication they prepared for the International Downtown Association:

“Downtowns across the United States are thriving. From Boston to San Diego, Seattle to Miami, cities are diversifying their economies and land use, restoring and enlivening public spaces. During the last three decades, city centers have been adding arts, culture, dining, education, medical, and research institutions, along with hospitality, leisure, and sports venues. Simultaneously, there has been a dramatic and sustained increase in residents, living both within business districts and adjacent neighborhoods.

Places once shunned as empty and unsafe at night are being redeveloped at higher density and are thriving after dark. They have become preferred places for work, entertainment, and living. Patrons of downtown regional destinations mingle with office workers, resident young professionals, empty-nesters, and, in many cities, an expanding number of families with children. The trends of diversification, animation, and residential revival are occurring as well on and around urban colleges, universities, medical centers, research parks, and other urban commercial zones” (2).

This trend of resurgence has been accompanied by the appearance of a capable cadre of downtown leaders, managers and professionals. If all the answers to our downtown problems are not yet known, today’s downtown leaders seem confident they can develop viable solutions to them as they emerge in their districts. The 1,000+ BIDs and numerous local Main Street operations provide these leaders with the needed organizational vehicles.

We certainly have come a long way, and it is important that the progress that has been made be amply recognized and celebrated. However, there is still a way for our downtowns to go. While downtowns overall have been strengthening, the pattern is understandably uneven. Downtowns started their revitalization arcs in different places, with some facing many more serious problems than others. Furthermore, downtowns also differed in the types and levels of redevelopment assets and financial resources they could mobilize. Finally, if a downtown’s revitalization is to really take hold and last it must be viewed as a perpetual process.

Bottom line: in the new normal for downtowns, they prosper!

2. Significantly Reduced Fear of Crime. For several years I have been writing about the apparent significant reduction in the fear of crime or its effects on our downtowns. However, the “crime problem” still exists in some districts, usually those where nighttime activities are not well established or that have problems associated with gangs or the use and sale of methamphetamine.

I came to this conclusion not on the basis of any series of systematic research or solid opinion surveys, since I could not find any to analyze, but because my visits to many downtowns indicated that consumers, investors and businesses no longer seem to be engaging in the downtown injurious behavior patterns that the fear of crime previously caused. The thriving downtowns with vibrant after dark activities noted by Levy and Gilchrist above are consistent with this conclusion.

The crime problem did not cause the post WWII decline of our downtowns. That was the result of greater auto use, the move to the suburbs by residents and shoppers, followed by the move of retailers and office based businesses and the consequent downtown disinvestments. However, for about three decades, crime did make downtown revitalization extremely difficult. Crime became one of the most important factors corporations looked at when considering new locations for offices, retail stores, restaurants and entertainment facilities, and all too often downtowns were deemed too dangerous and undesirable. The fact that Levy and Gilchrist can state that downtowns “have become preferred places for work, entertainment, and living” means that the avoidance behaviors of shoppers, residents and businesses are no longer occurring, making the crime problem moot.

It is important to understand why the downtown crime problem has diminished so substantially, because it can shed light on the effectiveness of the policies and programs of our municipalities and downtown organizations and the processes by which they were formulated and implemented. Nationally, since about 1993 or 1994, FBI statistics have famously shown a continuing decline in the number of criminal acts normalized by population, i.e. the crime rate. Its abeyance in our large cities has received much media attention because it has been so significant, though it also has been uneven, with our poorer cities showing fewer declines. Statistics on the number of crimes occurring in and around our downtowns, when available, reflect that trend. However, our downtown crime problem was less a result of the number of crimes perpetrated in a district or its crime rate, but more about downtown users’ fears of becoming victims of criminal acts while in the district. For example, in the 1970’s, 80s and most of the 90’s, the leaders in many of the large downtowns I visited reported their frustration that the fear of crime was a very damaging problem, although their crime rates were average or even low compared to other parts of their communities.

Academic research findings supported this disconnect: statistically the fear of becoming a crime victim in the downtown is not strongly associated with how many criminal acts occur within the district:

“Evidence provided by many studies suggests that the relationship between the fear of crime and actual crime rates is very loose and indirect. One study, for example, found that although the likelihood of being robbed was actually 20 times greater in Washington, D.C. than in Milwaukee, the residents of Milwaukee only felt slightly safer than did the residents of Washington. Another study concluded: ‘the patterning of fear across areas does not match the patterning of crime levels. Although some studies do find that actual victims of crime are more fearful than non-victims, it is not the case that areas with higher crime or victimization rates have residents who are more fearful.’ There is a weak correlation between fear levels and crime rates” (3).

The fear of crime hurt downtowns by causing the residential, worker and visitor avoidance behaviors and lack of investment described above that strangled the economic and social life out of these commercial districts — even when crime rates were low. For example, a study I did of three outer borough downtowns in NYC showed that how safe trade area residents felt in their downtown during the day had a stronger impact on their visitation rates than how they felt about the merchandise they could buy there, the physical attractiveness of the downtown or the ease of getting there (4). The fear of crime also impacted on those who did visit their downtowns by influencing where and when they would walk and how many destinations they would visit. That diminished a key competitive advantage of downtowns: multifunctional multi-destination visitor trips.

The programs needed to reduce the number of crimes can be quite different from those that can effectively reduce fear. Our downtowns most needed programs that could reduce fear and such programs were not easy to fund, design or implement.

In a later article in this series, I will present an analysis of the causal factors I think best explain the reduced fear of crime problem in our downtowns. Because of limitations on the existence or availability of needed data, this analysis will not claim to be definitive, but it hopefully will be received as thoughtful and provoke discussions and research on this topic within the downtown revitalization community. At this time, as “teasers,” here are some of the points I will expand upon in the upcoming article:

— What the cities and BIDs did definitely had strong impacts on reducing the fear of crime, but some programs were probably not as important as many might think, while other effective actions may have gone unnoticed or under appreciated

–Jane Jacobs was very probably correct when she argued that more pedestrians on the streets would help reduce the fear of crime and that, in effect, successful urban revitalizations self-heal their fear of crime problems. But, how were the crime problem’s impacts overcome in the initial revitalization stages before the pedestrian flows were sufficiently strong to heal the fear of crime problem?
— Much anecdotal evidence suggests a destination’s magnetism can offset fear of being a crime victim in a downtown user’s decision-making calculations. With revitalization, a downtown gains numerous destinations with stronger magnetism, so the impacts of fear may be meaningfully offset by them
— In 1970s and 1980s, a lot of the fear of becoming a victim of a downtown crime among the downtown’s trade area residents was generated and/or validated by downtown residents, workers, merchants, etc. or those who had fled their downtowns, who sent negative messages through their personal social networks. By now, they have either died off, shut up, or been drowned out by the new downtown users who instead are sending very positive messages through their personal social networks
— Today’s downtown users are often wealthier, better educated and younger than those in the 1970s and 1980s. These characteristics tend to make people feel more empowered and less likely to be fearful.

Bottom line: in the new normal, in downtowns well along on their revitalization arcs, during daytime or after dark, downtown users do not frequently engage in avoidance behaviors associated with the fear of becoming crime victims.

3. The Emergence of Downtowns As Their Communities’ Central Social District. For decades, the terms Central Business District, CBD and downtown were used almost interchangeably because, functionally, downtowns were dominated by retail stores, office based businesses, professionals and government agencies, along with some hotels and maybe entertainment venues. Early downtown revitalization efforts were able to attract office tenants and –aside from the impacts of fluctuations in our economy — downtowns have continued to grow office-based activities. Retailing was far more difficult. By the late 1970s and through the 1980s, national retailers might locate in enclosed downtown shopping centers or off-street networks, though these centers seldom met expectations and did little to liven downtown sidewalks. By the late 1980s major retail chains began to again consider downtown street level storefronts, and this interest picked up considerably over the 1990s.

Levy and Gilchrist have argued convincingly about the importance of people working downtown wanting to live in or near the downtown. However, to my mind, equally important to the resurgence of downtowns has been the emergence of a group of interrelated functions focused around the downtown being the community’s Central Social District (CSD): housing, restaurants and watering holes, vibrant public spaces and other locations for informal entertainments, and formal cultural and entertainment venues (5). These CSD functions establish a downtown as a place to relate to and play with significant others and makes living and playing variables as important as working, selling and buying in any viable formula for downtown success. The interrelatedness, the “dynamics,” among the CSD functions is important. For example, living downtown would be far less attractive without these other CSD functions being present. Conversely, without the downtown residents many of these CSD functions would have far fewer customers and less pedestrian traffic after dark to help reduce the fear of crime.

Underlying all of these CSD functions is the ability to spend quality time with loved ones and significant others. For example, a recent report on participation in cultural events found that: “The level of enjoyment and the opportunity to spend time with loved ones play the most influential roles in deciding whether to attend a cultural event (6).

Below are a few comments on some of these CSD functions that I believe are most important.

Housing. Without a doubt, housing in and very near to downtowns has had a huge beneficial impact. Its importance has been noted by countless others in recent years. The strength of downtown housing was amply demonstrated by how well it did, comparatively, during the Great Recession.

As Eugenie Birch noted in her seminal study, in the 1970s and 1980s, downtown residential populations declined in America’s larger cities. But, in the 1990s, downtown populations grew by 10 percent, a marked resurgence. Furthermore, in these downtowns homeownership rates more than doubled during the thirty-year period, reaching 22 percent by 2000 (7). Since then this growth has continued.

Overall, these new downtown residents contain higher percentages of young adults (Millennials), empty nesters, and the college-educated than other communities in their regions (8). They often have created subcultures characterized by creativity, hipness, tolerance and a sense of being empowered in downtowns and nearby neighborhoods.

The growth of downtown housing is not restricted to large cities. In New Jersey, for example, significant downtown housing projects have been constructed in such communities as Cranford, Englewood, Hoboken, Livingston, Morristown, New Brunswick, Rahway, Somerville and South Orange. Much of this also has been stimulated by a work connection: the downtown housing’s proximity to a commuter rail station.

While the demand for downtown residential units is substantial, and downtown living has its ardent fans, not everyone wants to live in a big city downtown. For example, a national survey done for the National Association of Realtors found that only 8% of the respondents preferred a city downtown residential location, while 11% preferred living in city residential areas. Another survey found that Millennials preferred living in a suburb (43%) to living in a city (17%) by almost a three to one margin (9). Creative Millennials, however, may well have a greater preference for urban living than their non-creative brethren. Whatever the situation, there plainly are a sufficient number of them living in and near our downtowns to have an undeniably positive impact on housing and other functions. The same point is true looking at the overall demand for downtown housing: most people may not want to live in a downtown, but the demand has sufficient numerical strength and emotional depth to continue to be a very viable engine for downtown economic growth. Indeed, the demand is strong enough that in many downtowns only those who are fairly well off or able to share rents can now afford downtown residences.

Restaurants. Restaurants not only provide food, but also entertainment in the forms of people watching and observing restaurant operations as well as providing felicitous opportunities for social interactions. If clustered, they also can help bring downtown streets to life after dark. Furthermore, they bring in a lot of customers that retailers can benefit from if they are open for business and sufficiently proximate.

Developing restaurant niches has become an essential, if too often underappreciated, ingredient in the revitalization strategies of most downtowns, especially those that are of comparatively small or medium size. They can be especially important in suburban downtowns, e.g., Cranford, Englewood, Hoboken, Morristown, Ridgewood and Teaneck in NJ, where niches of 20 to 35 restaurants are not uncommon. There is usually strong demand in suburbs with affluent, time-stressed residents. They also often play important roles in small rural or metro fringe communities, e.g., Sherwood, WI. One reason is that it is often possible for some type of downtown eatery or watering hole to be economically viable in communities with populations in the 1,000 to 5,000 range, where a GAFO retail operation would likely have far less viability (10). Restaurants also are often urban pioneers. Drawn by lower rents, they may succeed because, as research has shown, “a poor (restaurant) location can be overcome by a great product and operation” (11). Restaurant niches can also be large and extremely important assets in downtowns where retail is not very strong, e.g. downtown Austin, TX and downtown Morristown, NJ.

Downtown merchants can benefit from lunchtime restaurant customer traffic, but from the eateries’ dinner traffic only if they are open after 6:00 p.m. The stores of retail chains are more likely to be open in the evenings than the small merchants.

Vibrant Public Spaces and Informal Entertainments. Formal entertainment venues such as museums, theaters, movie houses, concert halls have long been located in or very near their downtowns. Our national downtown resurgence has witnessed countless successful projects that have created or strengthened formal entertainment venues, such as:

The refurbishment of grand old theaters, e.g., the Pantages and El Capitan in Hollywood; the Paramount in Rutland, VT; the Ohio Theater in Columbus, OH;
The revitalization of theater districts, e.g., Cleveland OH, Houstoun TX, New Brunswick NJ
The creation of performing arts centers, e.g., Newark NJ; Raleigh NC; Englewood NJ; White Plains NY; Carmel IN; Greenville SC;
New or expanded art museums, e.g., Berkeley CA; Los Angeles CA; Chicago IL; New York, NY; Roanoke VA; Seattle WA; San Antonio TX;
The revival of small town movie theaters, e.g. Crosby ND; Bucksport ME; Clayton NM; Old Forge NY.

While the contributions of such projects to their downtowns’ economic health is undeniable, it strikes me that the emergence and strength of what I have come to call “informal entertainments” is of equal and possibly greater importance.

During the decades of our downtown “troubles,” countless pedestrian malls were built and closed, and many of the public plazas built by office developers in exchange for greater building densities turned into playgrounds for drug dealers and sleeping places for the homeless. Other plazas were so badly designed or located that absolutely no one used them. Also, during the “troubles,” many of our parks were vandalized and/or badly maintained.

Today, our downtowns increasingly have attractive, well-activated public spaces, be they parks, public squares, building plazas and even some pedestrian malls. Here are some examples of the places I have recently visited that quickly come to mind: Bryant Park, Central Park, The Highline, Paley Park, Herald Square, Times Square and Madison Square in Manhattan; Millennium Park in Chicago; Discovery Green in Houston; Rittenhouse Square in Philadelphia; Mitchell Park in Greenport, NY; Brooklyn Bridge Park, Brooklyn; Division Street in Somerville, NJ.

A lot of this is due to the influence of William H. Whyte and his numerous apostles (12). The emergence of organizations such as the Central Park Conservancy and the BIDs and municipal agencies that placed a high value on the creation and/or maintenance of vibrant public spaces also stoked this movement.

Great public spaces are not just attractive; they also broaden and strengthen a downtown’s entertainment niche (13). They do so by providing opportunities for people to engage in activities that they enjoy and that also interest and amuse nearby people-watchers. Think of the ice skaters drawing the ever-present crowds above the rink in Manhattan’s Rockefeller Center. Similarly, in Manhattan’s Bryant Park, you’ll find young men and women seated and watching each other and chess players, who always attract an audience. Greenport, NY, a much smaller community, has used a carousel and waterfront location to create a wonderful public space where people can watch and be watched by other people. Other downtowns have fostered entertainment with facilities such as:

A model boat pond
A children’s pony ride
Tables where people can play chess, checkers, or dominoes
A Wi-Fi hotspot to access and cruise the Internet on a laptop
A place to catch the sun — a favorite pastime for office workers and young tourists in the spring and summer
Places to buy food and eat lunch alfresco
Outdoor cafes for sipping coffee and eating snacks
Slot car racing for kids
An interactive surface that passersby can not resist looking at to see their reflections – and how people next to them react when they see their own.

Visitors will “perform,” if the opportunities are there. To sail a model boat, a suitable pond or pool is required. To sit in the sun and people watch requires an attractive place with benches and chairs to sit on.

Sometimes an informal entertainment requires special personnel. For example, in Meredith, NH, local residents, hotel guests and second homeowners are really into bird watching; birding tours for them of the Meredith area might require a knowledgeable and experienced “birder” to guide them.

Nationally, households in the top income quintile account for about 50% of consumer entertainment expenditures, while long term forces have been reducing the ability of middle-income households to afford formal entertainments. In contrast, Informal entertainments are usually public and priced right – either free or, when there are fees (e.g., to ride a carousel), affordable. They are also “sticky” activities. Retailers can feed off of the traffic the informal entertainments bring in, as demonstrated by the busy pedestrian traffic on the street next to Mitchell park in Greenport, NY and the hotel that was built next to it. Informal entertainments are also liable to be open when the public would want to use them as opposed to theaters, concert halls etc. Most often they are children friendly – and therefore mommy friendly, too.

The Creatives Connection. Richard Florida has made the “Creative Class” and its association with dense urban environments so well known and widely accepted that there is no need to expand upon it in this article. However, it is mentioned here because the interrelated CSD functions are what draws creatives so strongly to downtowns and their nearby neighborhoods. Of course, a downtown’s density and compactness also facilitate the social networking, interactions and collaborations that have become so essential in the innovation process.

Bottom line: in the new normal, downtowns are great places to live and to play as well as work.

4. There Are Behavioral and Attitudinal Trends That Now Support Strong Downtowns. Besides the increasing numbers of downtown residents, the growing pedestrian counts and popularity of downtown venues, etc., here are just some of the societal level behaviors and preferences that are making more people increasingly eager to live, work and play in our downtowns:

Americans are very time pressured and this has heightened their appreciation of such things as: short and easy commutes and living close to their work places; having lots of shops, restaurants, parks and entertainment venues within a reasonable walk of their abodes and being close to mass transit (14)
Most households in the US do not have children. Such households are much more likely to prefer urban living than households with children as demonstrated by the numbers of singles and empty nesters who now live in downtowns or nearby neighborhoods. However, if cities cannot improve their educational systems, then the outflow of young parents to the suburbs will likely continue (15). Their perceived alternative choices are unpalatable: either paying $20,000 to $30,000 in after tax dollars a year per child for a private school or risking their children being badly educated in a public school
America’s infatuation with the auto, which helped fuel the post WWII population flight to the suburbs and suburban sprawl, appears to be on the decline. Recently the U.S. Pirg reported that, after 60 years of annual increases in driving, in the middle of the 2000s, the number of miles Americans drove began to drop. Part of this is caused by retiring Baby Boomers who are no longer commuting, but more influential are the Millennials who “aren’t driving cars” and soon will be our largest age cohort. Moreover, another study at the Transportation Research Institute at the University of Michigan found that these young people are getting driver’s licenses in smaller numbers than previous generations (16).
Conversely, a 2013 study done by APTA found that:
- “Millennials are multimodal, they choose the best transportation mode (driving, transit, bike, or walk) based on the trip they are planning to take.
- Communities that attract Millennials have a multitude of transportation choices, as proven by Millennial hotspots, popular zip codes where residents have self-selected into a multi-modal lifestyle” (17).
The end of suburban sprawl? Our cities are now growing faster than our suburbs. Furthermore, John K. McIlwain, an ULI senior resident fellow, has argued that the Great Recession just may have triggered the demise of sprawl: “Suburban sprawl, that seemingly inexorable, inevitable spreading of the population to the outer edges of metropolitan areas, may well be over in the United States.” The major thrust of his argument is that: 1) there is no large demographic group to drive suburban housing demand; 2) there is a large supply of available suburban housing, and 3) consequently, these factors were more causally responsible for was the recent low rate of single-family home production than the recession’s housing crash (18). While the end of sprawl may be debated – some argue that the pivotal behavior of the Millennials will alter as they age, nest and procreate – it seems safe to conclude that, minimally, it probably has been substantially weakened.

Bottom Line: In the new normal there now are strong behavioral and preference patterns within our population that support successful downtowns.

Endnotes

1. Small rural downtowns also went into decline, but because of other economic factors.
2. Paul R. Levy and Lauren M. Gilchrist , DOWNTOWN REBIRTH: DOCUMENTING The LIVE-WORK DYNAMIC IN 21ST CENTURY U.S. CITIES. Prepared for the International Downtown Association By the Philadelphia Center City District. October 2013 – pp. 57, p.8
3. N. David Milder, “Crime and Downtown Revitalization,” Urban Land, Sept. 1987, pp. 16-19 https://www.ndavidmilder.com/wp-content/uploads/2012/05/dt_crime_article.pdf
4. N. David Milder, et al. Downtown Safety Security and Economic Development. New York: Downtown Research and Development Center. 1985 – pp. 141, pp.38-39.
5. I first came across the term Central Social District in a paper by Richard Rosan some years ago. Unfortunately, I cannot find it either in my files or on the Internet, so I cannot say that my use here concurs with his. Borrowing from factor analysis in statistics, I see the central social district as the underlying dimension or factor and housing, restaurants, public spaces, etc., as the constituent strongly inter-related and measurable variables
6. LaPlaca Cohen /AMS Planning & Research Corp, Culture Track 2011 Market Research Report, pp.87, p.7. Italic emphasis added in quote.
7. Eugenie L. Birch, Who Lives Downtown, November 2005, Washington, DC, The Brookings Institution, Living Cities Census Series. pp. 20
8. See Birch above and Richard Florida, http://www.theatlantic.com/magazine/archive/2013/10/the-boom-towns-and- ghost-towns-of-the-new-economy/309460/
9. Belden Russonello & Stewart LLC, “The 2011 Community Preference Survey: What Americans are looking for when deciding where to live”, Analysis of a survey of 2,071 American adults nationally conducted for the National Association of Realtors. March 2011, p. 16; Morley Winograd and Michael D. Hais, “The Millennial Metropolis” 04/19/2010 http://www.newgeography.com/content/001511-the-millennial-metropolis .
10. Bill Ryan, Beverly Stencel, and Jangik Jin, “Retail and Service Business Mix Analysis of Wisconsin’s Downtowns,” Center for Community & Economic Development, University of Wisconsin – Extension Staff Paper, Sept. 1, 2010.
11. H. G. Parsa, John T. Self, David Njite and Tiffany King, *Why Restaurants Fail,” Cornell Hotel and Restaurant Quarterly, August 2005.
12. William H. Whyte, “The Social Life of Small Urban Spaces”. Conservation Foundation. 1980.
13. This section on informal entertainments is taken from: N. David Milder, “Rethinking Downtown Entertainment Niches,” Downtown Trends 2008: Part II https://www.ndavidmilder.com/wp-content/uploads/2012/05/rethinking_downtown_entertainment_niches.pdf
14. N. David Milder, “The Nexus of Time Pressure, Downtown Proximity, Convenience And Customer Service: downtown retailing’s best friend,” Downtown Trends 2008: Part II https://www.ndavidmilder.com/wp-content/uploads/2012/05/time_pressure.pdf
15. See: Morley Winograd and Michael D. Hais, “The Millennial Metropolis” 04/19/2010 http://www.newgeography.com/content/001511-the-millennial-metropolis and William Sander and William A. Testa, “Children And Cities,” 08/23/2013 http://www.newgeography.com/content/003889-children-and-cities
16. John Schwartz, “Young Americans Lead Trend to Less Driving,” New York Times, May 13, 2013 ww.nytimes.com/2013/05/14/us/report-finds-americans-are-driving-less-led-by-youth.html?pagewanted=2&_r=0&hp&pagewanted=print
17. APTA, Millennials & Mobility: Understanding the Millenial Mindset, 2013 –pp.47 http://www.apta.com/resources/reportsandpublications/Documents/APTA-Millennials-and-Mobility.pdf
18. John K. McIlwain, “The Great Recession: A Slayer of Sprawl,” Urban Land, April 5, 2012, http://urbanland.uli.org/Articles/2012/April/McIlwainSprawl?utm_source=uli&utm_medium=eblast&utm_campaign=040912

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

Posted on May 29, 2013 by DANTH

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

Posted on March 1, 2013 by DANTH

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

MarketingCharts staff, “1 in 2 Small Businesses Fail to Update Their Online Listings, Find Inaccuracies” February 6, 2013, http://tinyurl.com/atexhky
Mitch Lipka, “These Big Companies Are Abandoning Twitter And Facebook For Customer Service” Business Insider 1/18/13 http://read.bi/11EbziS
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
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.

N. David Milder at DANTH, Inc.

Downtown Revitalization Specialist

Category Archives: Trends

The New Normal’s Challenges to Developing a Downtown Entertainment Niche Based on Formal Entertainments: Part 2 the audiences; revised 041214

Introduction

The Surveys

Performing and Visual Arts Admissions

Take Aways

Endnotes

The New Normal’s Challenges to Developing a Downtown Entertainment Niche Based on Formal Entertainments: Part 1

Introduction

Consumer Expenditures for Entertainment Admissions and Fees.

Grants for Arts Nonprofits

Some Key Aspects of the New Normal for Downtowns: the “good news” ©

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

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