Category Archives: Trends

Office Development — We now have all the office space we need

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For several years now, I have been arguing that a New Normal has emerged for our downtowns and that the business operators, landlords, developers and district leaders who do not recognize that they must adapt to that fact are likely to face severe economic losses. My recently reported research on multichannel retailing (see my last blog posting below) combined with some some recent news items about movie attendance, housing and office development have strongly confirmed my argument.  This posting will focus on office development.

For much of the 1970s and 1980s office development was seen as the economic engine that would drive downtown revitalization in such major cities as Richmond VA, Charlotte NC, Cleveland OH, Philadelphia PA, Seattle WA. Los Angeles CA, etc. Office development primed revitalization efforts were also mounted in smaller cities such as  New Brunswick NJ,  (population 55,181) and White Plains NY  (population 56,853) and in suburban communities such as Morristown NJ (population 18,457), and Garden City NY (population 22,371). 

Many of these office driven revitalization efforts failed to achieve their goals and the downtowns had to add residential, retail and entertainment components to their revitalization strategies. Nevertheless, office development has remained a critical revitalization asset for many downtowns.

A recent article in  CoStar’s e-newsletter reported on the major findings of a symposium of office development experts convened by BOMA. A summary of their findings should put downtown leaders on notice:

“We already have all the office space we likely will need…. But to remain competitive, the existing stock of commercial real estate must be reconfigured to keep pace with an increasingly mobile, Internet-connected workforce; ongoing changes in technology, and to support the way companies are structuring their staffs to foster more collaboration and efficiency, while also addressing the values and attitudes of new generations of workers.”


 Increased telecommuting, flexible work schedules, the untethering of workers from desks to enhance collaboration and increase face-a-face client contacts have combined to increase employee density in major office buildings and reduce the demand for office space. For today’s office worker, according to one of these experts, the ideal situation may be:

(W)here you go into the office two or three days per week and work remotely the other days, which reduces our carbon footprint by 20% – 40% and has a huge impact on improved quality of life.”


 The potential negative impacts of the New Normal’s static demand for office space are:

    • Fewer new downtown office buildings will be built

 

  • Existing downtown office buildings that are not configured to meet the new work habits of office workers will have languishing leasing efforts. A lot of existing downtown office buildings may have to be renovated if they are to be competitive
  • Downtown retailers and eateries will have a significantly reduced office worker market because the telecommuters and flex-timers will spend much less time in the district.

 

 

Of course, downtowns also too often suffer from the fact that major office tenants provide incentives (cafeterias, subsidized meals and concierge services) and work pressures to keep their employees from leaving the building at lunchtime. Furthermore, the retailing many downtowns is often too weak to motivate substantial office worker patronage.

 But, there is a potential upside for downtowns that can provide a dynamic, experience-rich environment. As the CoStar article notes:
 

“The lesson for companies (and the investors and building owners who want to have them as tenants) is that younger workers prefer to work in a more dynamic, experience-rich environment, such as an urban- type setting offering different entertainment, cultural and transportation options.”


 Dynamic downtowns will consequently continue to have a distinct advantage in a highly competitive office market, while listless downtowns will probably be weaker competitors than ever.

The CoStar article can be found at:http://www.costar.com/News/Article/Will-We-Need-Any-More-Office-Space-/134483?ref=100&iid=261&cid=DC6077B43E67ACADB224FF6D0AF89AB6

N. David Milder 011312

Downtown Multichannel Retailing

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


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

N. David Milder

TOUGH TIMES FOR THE MOVIE INDUSTRY — HOW IS YOUR DOWNTOWN CINEMA DOING?

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Some Background
As a result of DANTH’s 2008-2013 downtown trend assessment work, we became very concerned about the future of movie theaters in a lot of medium-sized downtowns,so we keep our eyes out for news about the movie industry. In my February 24, 2008 posting, “DOWNTOWN MOVIE THEATERS WILL BE INCREASINGLY IN PERIL”  I noted that according to a PEW survey:“By a five-to-one ratio Americans view films more at home than they do in movie theaters. Move theaters account for only about 12% of the movie industry’s revenues”

And, according to that same PEW survey, this trend toward watching movies at home was growing. The implicit danger posed by this trend for downtown cinemas, that often are just scrapping by, is a relentless deterioration in attendance and revenues.

Some Recent Observations in the NY Times

A recent article in the May 29, 2011 edition of New York Times had a title that grabbed my attention: “3-D Starts to Fizzle, and Hollywood Frets,” The reporters, Brooks Barnes and Michael Cieply, state  that: “The box-office performance in the first six months of 2011 was soft — revenue fell about 9 percent compared with last year, while attendance was down 10 percent.” That’s off of a 5.25% attendance decine reported by boxoffice.com for 2010. To give those delines some perspective, remember that a mere six percent drop in attendance back in 2000-2001 pushed most of the theater chains into bankruptcy.  The current drop in attendance and revenues might be explained by our stalled economy and/or rocketing gasoline prices, neither of which promise to soon disappear.

Many Hollywood big wigs, such as James Cameron and Jeffrey Katzenberg, have argued that 3-D movies would save the industry by bolstering audiences and revenues. But Barnes and Cieply also report that now “there is strong consumer resistance to high 3-D ticket prices” and “the novelty of putting on the funny glasses is wearing off.” While the best 3-D feature films still are doing well at the box office, 3-D films of more ho-hum quality are taking a box office beating in the USA.

Barnes and Cieply also reported that rentals in video stores during the first part of the year fell 36 percent. This fact would be consistent with the crumbling of the Blockbuster chain and a substantial growth in the streaming and downloading of films to home TV and computer screens through Internet services such as Netflix, Amazon and iTunes. The latter was a possibility DANTH’s trends assessment feared would be all too likely.

My Take-Aways

With retail gasping for breath in most downtown and Main Streets commercial areas, their entertainment niches have taken on an even greater importance than they have had in the past. Downtown movie theaters are often the cornerstones of these niches and the recent decline in attendance suggests they may be facing substantially increased financial stress.

Strengthening downtown entertainment niches in small and medium-sized communities will probably follow two strategic paths:

  • Buttressing the magnetism of the movie theaters through a package of improvements that includes: 3-D and IMAX screening capabilities; tie-ins with adjacent or in-house restaurants, bars, brew-pubs, ice cream parlors, etc.;  clean theaters, with comfortable seating and audiences displaying civil behavior
  • Developing non-formal entertainments, most importantly in well-activated public spaces and restaurants.

What’s Happening in Your Downtown?

Please let me know what is happening in your downtown or Main Street district. If thereare sufficient responses, I will report on them in special posting to this blog.

N. David Milder

GETTING THEIR STORIES TOLD — WHAT PETITE BUSINESSES NEED FROM E-MARKETING

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Morristown’s Treasured Businesses
  
France Delle Donne, the director of development at the Morristown Partnership (in NJ), recently sent me a link to a new posting to their website called Morristown’s Treasured Businesses.  I took a look and thought it was just terrific! One of the best things I have seen on any downtown organization’s website in a long time. It’s so different from the dull, static, list-based or e-business directory like structures that I typically see on the webpages of these organizations that deal with merchants. It got me thinking about what I liked so much about it and why. I concluded that, though it had many attractive aspects, it was its ability to provide a narrative for each of these business operators that was most important. Storytelling is a critical factor in successfully marketing a downtown and its businesses, though too often overlooked. Branding is a more widely accepted marketing concept, yet the strongest brands gain their power from denoting some kind of story, even a short one. 
 
The High School’s Involvement Was Critical 

Morristown High School’s Broadcasting and Journalism departments approached the Morristown Partnership about doing a project on Morristown.  After an initial meeting and assessment of resources , the Partnership brought them a proposal for   “Morristown’s Treasured Businesses.”  With significant development taking place in Morristown’s business district over the past five years and an influx of new businesses moving in, the Partnership felt it timely to focus on independently-owned businesses that have been in operation for 25 to over 100 years and weathered a variety of economic cycles. According to the Partnership: 

“We wanted to use this opportunity to connect established businesses with the younger constituency in our community. The hope was to raise a cross-generational awareness and appreciation about treasures in Morristown, including businesses and the human connections associated with them. It had all the components to tell a great story. The High School embraced this idea.”

 
Fifteen of the 55 businesses that fit the selection criteria were then interviewed and filmed by the students. A total of 48  students were involved in all phases of completing these merchant “documentaries.” The finished films were then posted on the Partnership’s website for the public to view and vote for their favorites.

 
Downtown organizations seldom have the resources to do everything they want, so having other organizations, such as the local high school, get involved is a really good idea. In Morristown, the high school faculty and students not only got involved, they did so for a novel, needed and effective program.
 
Additionally, as the Partnership recognized, high school students are an important retail market segment in Morristown — and in many other downtowns — so relationship building with the high school and its students is a good idea for the Partnership as well as many other BIDs and SIDs. 
 
Coping With the Longing for Trophy Retailers Syndrome 
  
Another reason I liked Treasured Businesses so much is that it addresses a critical problem faced not only by the Partnership, but by many other downtown organizations as well: local residents focus on the trophy retail chains that are not in their downtown, but do not acknowledge or appreciate the good small merchants who are there. 
  
Another is its use of the dynamic short movies to enable the local business operators themselves to talk about their shops and their histories in the community. As they tell their stories , these merchants become alive to the viewer, allowing the latter to develop some involvement in the stories and some attachment to the merchants.
 
The Decline of Storytelling About Local Businesses That Has Accompanied Downtown E-Marketing

For many years, from roughly the mid 1980s until fairly recently, many downtown organizations found that doing newspaper inserts and special magazines were strong marketing tools. They gave these organizations the  capability to send strong editorial content, that they created and controlled, to both potential consumers and commercial tenant prospects. At the heart of these publications, their most effective components, were stories that convincingly conveyed to the reader that the businesses or the downtown characteristic covered by that story were interesting, unique and/or — most importantly — a discovery. But, the times are “a-changin.”  Downtown organizations are quickly shifting their attention to e-marketing and their websites, e-newsletters and Facebook pages. My visits to many of these websites suggest that this shift from print to electronic marketing has been accompanied by a steep decline in the story-telling their marketing utilizes.

One reason for this trend may be that the easiest, cheapest and quickest ways to present information about local businesses on websites are in list/directory formats that primarily focus on category descriptors of business functions combined with basic contact information. In a few instances a short descriptive paragraph or two, perhaps even a photograph is provided. But, even fewer if any of these formats produce real stories about the local businesses. It’s more like name, rank and serial number, slam, bam, thank you mam. Also, using text to tell a story usually takes more words and time to read than most “webmeisters” advise for a webpage. 
 
The short movies provide an e-commerce, non-text technique for effective short storytelling. It has a strong personal component to it and thus can evoke viewer feelings and involvement.

Storytelling May Be How E-Marketing Can Best Help Really Small Merchants  
 
Since my work on the ‘deliberate consumer” I have been concerned about how the small business operators , say those “petite” firms with annual sales under $300,000/yr
   

  • Can be stimulated to make the management and operational changes they must implement if they are to survive
  • And how downtown and Main Street organizations can help them to make these changes. 

As I have written in some recent postings to this blog, having an effective e-commerce presence is probably one of these necessary innovations, but:
 

  • A full-fledged e-store is probably too complex and resource demanding to be a viable option for these merchants 
  • The directory type formats on either the business’ or a downtown organization’s website, even when blown up into full webpage formats, do not have sufficient impact to warrant the time and effort needed to create and maintain them.

 
I would argue that the best thing that their website or a page on their downtown organization’s website can do for one of these “petite” businesses, is to tell their story. That is what Morristown’s Treasured Businesses does for these businesses. It provides a model for other downtown organizations to emulate, even if some tailoring to their situations probably will be needed. 
 
Again, the teachers and students at Morristown High School are to be strongly commended for their participation in this program and for doing such a good job on it!
  
N. David Milder

Some Interesting Research About E-Commerce

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The Online Articles

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


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

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


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

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

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

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

N. David Milder