Category Archives: Trends

The Apparel Niche and the Home & Hearth Niche: The Growing Importance of Independent Operators

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Introduction

The apparel niche and the home & hearth niche may seem unrelated, but they share several commonalities:

  • They are both particularly important to downtowns
  • They are both facing challenges, and
  • They will both be relying on the success of independent operators for their future well-being and growth.

Apparel

First, let’s consider apparel. This niche is important to downtowns because women are our most prominent and powerful shoppers (making 80% of the purchases for the home and family). And clothing, shoes and accessories purchases for themselves and their children are an important part of women’s purchases. As we’ve reported in previous blasts, time-pressured mothers are willing to accept higher prices from downtown vendors if they can shop quickly and easily close to home. In addition, a successful apparel niche adds diversity to the downtown mix and stimulates interest in strolling and window shopping.

But apparel has been an at-risk niche for the past two decades. While the industry has grown, it has grown at a pace much slower than other retail sectors. Additionally, major retailers like Ann Taylor, the Gap and Chico’s – the kind of trophy apparel shop that many downtowns have targeted as their dream tenants – are not opening new stores as they suffer reduced sales in a difficult economic climate.

What to do? We all know of downtowns where there is more than sufficient unmet demand for apparel within a ten-minute drive shed to support a new store with $300,000 to $400,000 in annual sales. Such revenue may be too low for a national chain, but very adequate for an independent operator.

These new merchants will need a great deal of support from the downtown organization in finding affordable space, negotiating leases and perhaps even “sourcing” their merchandise. To succeed it will help that these merchants:

  • Be a local resident – for instance, a local mother – with a network of friends and colleagues in the community
  • Represent and market to a specific and strongly populated ethnic group in the community
  • Be opening a very high-end shop that provides an exceptional level of pampering and customer service
  • Be able to solve the problem of sourcing attractive merchandise

In many instances, an independent operation apparel niche is not going to be recognized or realized without the proactive intervention of a downtown organization. Your organization can help foster such a niche by:

  • Having market research performed to identify opportunities
  • Indentifying and cultivating possible entrepreneurs
  • Helping the entrepreneurs form a viable business plan, find appropriate affordable space, find loans or investors, etc.

Home & Hearth

For decades, revitalization advocates have searched for a type of retailing that can thrive in downtown locations despite the presence of nearby malls and big box discount retailers. DANTH has found that home and hearth niches are very often the answer.

Home and hearth niches are groups of shops that feature goods and services that enable shoppers to make their homes more comfortable, more entertaining and more beautiful. They include retail establishments selling furniture, carpets, antiques, table top goods, window treatments, hardware, electronics, art works, picture frames, tiles, appliances, kitchen and bathroom equipment, plumbing supplies, telephones, and gardening equipment. This niche can also include architects, plumbers, carpenters, contractors and service firms that deal with lawns and septic tanks.

Usually, the firms in this niche are overwhelmingly independent operators or small regional chains. They usually don’t need vanilla box spaces.

The home and hearth niche is very dependent on the housing market and the niche’s current economic woes have traced the decline in home values. But DANTH believes that demand for this niche’s products and services soon will begin to grow as consumers start to put more money and attention into fixing up their current homes instead of buying new ones. Home Depot and Lowe’s have already pivoted their marketing in this direction. Economic conditions have also sent Americans into more “cocooning” in their homes which is leading to strong sales of flat screen TVs and other home theater accoutrements.

Plus, the long-term trend for this niche is very good, showing that businesses in the home and hearth sector have grown at a pace greater than GAFO in eight of the last ten years for which data are available. DANTH expects that as the current housing crisis is resolved and household formation again rises, sales in home and hearth stores will follow suit. Now, as the market is bottoming out, is a good time for downtown organizations to strengthen or build their home and hearth niches.

Another positive for this sector is that downtown organizations will need to do less work in attracting and building this niche than with an apparel niche – since less home and hearth business owners are “newbie’s” to the industry. The downtown organization can take on a more traditional business recruitment effort without having to provide the large amount of business development assistance that independent apparel operators will require.

This posting was condensed from my longer report by Mary Mann. To read the full report on Apparel and Home & Hearth Niches, visit www.ndavidmilder.com.

RETHINKING DOWNTOWN ENTERTAINMENT NICHES: Non-Formal Entertainment and Work-as-Entertainment

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Thesis: In a contracting economy populated by time-pressured consumers, downtowns need to rethink their entertainment niches to include and foster informal entertainments that are low-cost and convenient.

Most economic development experts have come to agree that entertainment niches are good fits with the assets of many downtowns and such niches have indeed flourished across the nation.

While “formal” entertainment facilities such as concert halls, legitimate theaters, rehabilitated movie theaters, sports stadiums and arenas can generate subsidiary economic benefits and make towns more attractive to residents, visitors and workers, they are often expensive to build and many small and medium downtowns do not have the means or the capacity to develop such large-scale formal entertainments.

In addition, data from the Bureau of Labor Statistics indicate that most American households began reducing their expenditures for formal entertainments even before the current economic downturn. With the vise closing on the discretionary income of most American households, it is reasonable to assume that entertainment expenditures may be among the first to be reduced. When you factor in the time pressures experienced by the modern household (and detailed in previous reports), formal entertainments seem likely to get further squeezed. In addition, as DANTH noted in our assessment of the future of downtown movie theaters, watching films at home and other home entertainments are eroding the downtown movie theater audience.

The good news? Downtowns of all sizes can develop vibrant niches based on informal entertainments to capture the potential lost audience for these formal entertainments. In a contracting economy populated by time-pressured consumers (research indicates that time –pressed families are increasingly looking for entertainment opportunities that last about 45 minutes rather than the two to four hours usually demanded by formal entertainments), downtowns can compete for time and dollars by providing low- or no-cost entertainments that are close by and do not require long car trips and expensive amounts of gasoline. This entails “rebranding” entertainment as something other than – or in addition to – theaters, arenas and the like. In this scenario, entertainment is “anything that amuses observers.” Reinforcing such informal entertainments can help to bolster the economic health of downtown – its housing, retail, office, and, yes, its formal entertainments.

Public Spaces

Great public spaces provide 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 Rockefeller Center. Similarly, in Manhattan’s Bryant Park, lounging patrons watch chess players – as well as each other. In Greenport, NY, a much smaller community, a carousel and waterfront location create a wonderful public space where people can watch and be watched by other people. Other downtowns have fostered entertainment with facilities such as:

  • model boat ponds
  • children’s pony rides
  • tables where people can play chess, checkers, or dominoes
  • Wi-Fi hotspot to access and cruise the Internet on laptops
  • places 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
  • interactive art installations that capture and play with people’s images, make music or move


Visitors will “perform” if the opportunities are there. Informal entertainments are usually public and usually 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. 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 child-friendly – and therefore mommy-friendly, too.

Work-as-Entertainment

Often overlooked is the delight and amusement people can derive from simply watching other people do their jobs. In particular, people have shown a great interest in watching craftsman and artists at work. Historical villages such as Williamsburg (VA), Sturbridge (MA) and Old Town (San Diego, CA) have long had many “demonstrations” by blacksmiths, glass blowers, bakers, weavers, etc. The Miami Ballet rehearses in a ground floor studio with a storefront window, which always attracts crowds of passersby and helps build the company’s audience. At the Torpedo Factory in Alexandria, VA – one of the most successful and innovative downtown retail projects in the nation – each artist and craft studio has windows and often open doors, so the public can watch the artists and craftsman as they create. At the Simon Pearce retail store at The Mill in Quechee, VT, visitors to this converted mill/retail location can watch glass being blown, ceramics being thrown and decorated and fabrics being woven, and then enjoy a meal with views of a waterfall.

This posting was condensed from my longer report by Mary Mann. To read the full report and find the complete sources for “Rethinking Downtown Entertainment Niches,” visit www.ndavidmilder.com.

In addition, DANTH has created photo albums relevant to informal entertainments and work-as-entertainment that can be downloaded now, free of charge, from the Internet:

For the album on informal entertainments, visit:
Article

For work as entertainment, visit:
Article

For photos of the Torpedo Factory, visit:
Article

The Mommy Niche

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Cultivating the Mommy Niche
In the last few postings, we have detailed the trends negatively impacting downtowns as the economy constricts, but we have also discussed strategies for overcoming those negative trends.

One such strategy for downtowns is building and/or strengthening the “Mommy Niche.”

The reason is simple: Women are our nation’s shoppers. Though they comprise little more than half the population, women make over 80% of the consumer purchasing decisions. Mothers with children make up about a third of all households and they are spending a lot of money.

Why will mothers be attracted to downtowns instead of regional malls or big box retailers? Mothers employed outside the home are the most time-pressured group and the one most likely to give convenience a heavy weight within their purchasing decisions. These mothers are looking for shorter shopping trips and are more inclined to “satisfice” (compromise between price and convenience) with merchandise available in their downtown shops. They are also looking to spend “quality time” with their children as conveniently as possible, and downtown restaurants and activities can provide the perfect venue.

Activity-Driven Retail
While women’s apparel and children’s apparel shops are very helpful, activities seems to be driving a lot of mommy niches. Family friendly restaurants are key. Restaurants that encourage children with play areas, baby and child-friendly restrooms – even toys – and affordable prices and kid-friendly food will attract mothers with young children. Another key factor is children’s learning centers – dance studios, art studios, kids yoga, karate, even the town library. Mothers can spend time with their children at these activities or drop their children off and be free to shop and catch up on salon needs, grocery shopping or buying presents.

This mix of services and activities provides a customer traffic flow of moms that downtown retailers and restaurants can capture.

Mommy Networks
Through their own social activities as well as their involvement in those of their children – car-pooling, preschool, soccer, etc. – mothers need to be networked with other parents. This need is especially strong for those who work outside of the home and rely on the networks to provide some level of care or supervision for their children. Consequently, in most communities there are strong “mommy” social networks that provide word-of-mouth communications channels.

Local “Mommy Merchants”
Over the past year, DANTH has noticed increased reports about local mothers opening commercial establishments in New Jersey downtowns. These “mommy merchants” have many assets that give them a higher probability of success. For example, they usually bring along networks of local friends who constitute a close-in customer base and cadres of likely store apostles. They are also more likely to be attuned to local mommy needs, tastes and shopping habits. Even more, they are sometimes friends of other district “mommy merchants” and these connections provide a spine for referrals and informal cross promotions. Many mommy merchants can probably use technical assistance. DANTH estimates that between 7% and 25% of downtown merchants are interested in obtaining and actually using such assistance. However, because of their high education attainment and prior professional experiences, it is likely that mommy merchants will have a higher participation rate in such programs.

Despite all this, few downtown revitalization strategies have a “mommy” focus.

How To Make A Mommy Niche Happen?
Downtown organizations need to think about how to make their districts more convenient for visitors, especially busy working mothers and /or stay-at-home moms. Thinking about physical improvements in terms of a “convenience analysis” is the first strategy. Downtowns need to have streets that are easy to cross, public toilets available and kid-friendly, parking that is easy and safe for mothers with children and strollers, short-term parking that generates lots of quick customer trips, and a reasonable distance between parking facilities to shopping and activity. Downtowns also have to cultivate relationships with their local mommy networks. This means identifying the networks and the women in them who are the opinion leaders and message transmitters. Hold focus groups with local mothers or arrange discussion groups between downtown business operators and local moms. Finally, help potential local “mommy entrepreneurs” prepare viable business plans, find downtown locations and link them to other sources of assistance such as business schools, the SBA and state economic development agencies.

This posting was condensed from my longer report by Mary Mann. For the full report on “Cultivating the Mommy Niche” and for a full citation of sources, visit www. DANTH.com after June 17, 2008.

Downtown Retail Part II. Food: Capture What You Should Own

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People spend a lot of money on food. In 2006, the average total expenditures for food by households in the bottom, middle and top income quintiles were $3,195, $5,614 and $10,212 respectively. And the need to eat is fairly inelastic. Proximity and convenience are major factors driving food purchases, with higher fuel costs just increasing their strength. Food emporiums and eateries bring more customer traffic into small and medium-sized downtowns than any other kind of retail. Additionally, working parents have been able to juggle increased time spent at work and with their children by reducing their time invested in food preparation and food shopping. Therefore, even with the rising cost of food, small and medium downtowns can and should own the food expenditures of local residents.

Restaurants – First, we’ll start with the obvious. Downtown restaurants play critical economic and social roles for their downtowns and entire communities. They are not only places where people eat, but also where people spend time with significant others, friends and family – allowing time-pressed consumers to both dine and meet their needs for “quality time.” Good restaurants help reinforce the downtown as the Central Social District and the social heart of the community. Notably, restaurants often also serve as entertainment venues for their downtowns. Restaurant niches have been pivotal in the revitalization of downtowns – with local restaurateurs opening in many locations that national and regional retail chains initially bypass. While the National Restaurant Association projects slower growth for restaurant expenditures in 2008 as compared to 2007, it still projects growth. Finally, an analysis of BLS data shows that food-away-from-home spending has been increasing faster than inflation, with the largest increases in households in the top income quintile. In 2006, households with children accounted for 40% of all food-away-from-home expenditures. Downtowns with higher income residential neighborhoods and large pools of working mothers should tap into these markets.

Supermarkets and Gourmet Markets – Nationally, households average 2.1 supermarket shopping trips a week, making supermarkets potentially huge generators of downtown customer traffic. For many small and medium-sized downtowns, “food at home” is their most important retail niche: 62% of supermarket shoppers also shop in other nearby shops. However, traditional supermarkets can adversely impact a downtown when they are located in self-contained, pedestrian-hostile shopping centers surrounded by a sea of parking. The good news: Downtown-friendly supermarket chains, such as Whole Foods, that squeeze into tighter urban locations and in mixed-use projects are growing. Additionally, there is a new trend toward smaller downtown food and gourmet markets with stores in the 6,000 SF to 15,000 SF range, including Balducci’s, Trader Joe’s, Aldi, Garden of Eden, Zeytinia and The Natural. This trend towards smaller, often gourmet markets, means it is much easier to locate a quality food market, capable of drawing many customers, in more downtowns without threatening the pedestrian landscape (as traditional supermarkets with their large size and parking requirements do). These stores often take advantage of nearby commuter rail stations and their homeward-bound commuter shoppers. They work well for time pressed shoppers who, often on their way home from work, are shopping without a list for a meal or two and not a week’s worth of groceries. Gourmet food stores also often offer consumers “pick-up” or “prepared” meals that they can simply take home or to the office and reheat – another important retail trend for the time-pressured consumer.

Take Out – As restaurant expenditures are projected to grow at a slower rate in 2008 than in 2007, the National Restaurant Association projects that full-service restaurants will rely more on “take-out, delivery and curbside service to meet Americans’ desire for convenience.” Middle- and upper-income families feeling the squeeze between declining discretionary dollars and time limits (particularly those with two working parents) increasingly will choose take-out as the compromise option. This brings up an interesting issue for downtowns. A large number of auto trips are being generated to stop, order and pick up food. These trips require very short-term use of parking spaces – 15-20 minutes at most. DANTH has found that downtown gourmet markets and local restaurants often do not have enough nearby, short-term parking and as a result their pick-up and take-out sales have suffered (despite pedestrian and commuter traffic). Over the next five years, downtown organizations and their governments may need to look at short-term parking solutions as this niche becomes a strong driver of the downtown economy during tough times.

For the full report on “Food: Capture What You Should Own” visit www.ndavidmilder.com after June 1, 2008 and double click on the red trends button..

This posting was was condensed from my longer report by Mary Mann.

Downtown Retail Part II. Survive, Manage Effectively and Reposition

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It is essential for downtown retailers to keep the proper perspective. While the media frequently ask and answer the recession question, no one to our ken has suggested that we are entering a depression resembling what this nation experienced during the 1930s. Consumers have not stopped shopping, though they may be spending less, purchasing a different basket of merchandise and making consumer purchases based on new weights for the variables in their decision-making calculations. The consumer expenditure pie has shrunk, not disappeared, and merchants will be facing tougher competition to capture their individual slices. Some retailers will close, while others are likely to open, though overall vacancies may increase.

Although it is true that a few firms can grow during a recession — e.g., MTV, Silhouette Blinds, Trader Joe’s, and the iPod were all launched during economic downturns – most retail experts recommend a more prudent response to tough economic times that emphasizes three key objectives: survival, effective management and repositioning. For some downtown retailers, effective management and repositioning will be essential to their survival.

A. Effective Management
To get through the stressful economic conditions anticipated for the coming five years downtown retailers will definitely need to carefully manage their resources. This may require more inventiveness than just making across the board cuts. For example, the need for some form of effective and affordable advertising will be greater than in fat economic times, but finding the money for it and deciding how to advertise can be a real challenge for small merchants when newspaper readership is in a steady decline, print advertising is losing both its effectiveness and popularity, and ad clicks on Google have flattened. 1

B. Repositioning
Tough economic times create good opportunities for downtown retailers to take stock and rethink their businesses. For example, instead of making a 20% across the board cut, a merchant could reposition by cutting out an entire underperforming line and using the money saved to introduce a new one that is better suited to the current economic conditions.

Or the merchant might develop a stronger, yet affordable customer service program to counter his customers’ increased desire for low prices. Along these lines a merchant might devise a program to encourage “customer advocacy.” Advocates – some experts call them Store Apostles — will “like your store, recommend you to others, buy from you and stay with you.” 2 Whether a shop has customer advocates or customer antagonists can have a big impact on its bottom line, especially in tough economic times: a small core group of customer advocates may account for as much as 50% of a store’s sales and profits. 3 A recent study of customer advocates among apparel shoppers found that the two characteristics that were most important to them were that the shopping experience be pleasant and enjoyable and that it is easy to do. 4 The biggest attitudinal difference between an apparel store’s advocates and its antagonists was on their perceptions of whether or not the store had an “always fresh and new product selection.” 5

Customer antagonists can pose a real problem: about 31% of shoppers tell many people about their bad experiences and 48% of customers will avoid a shop because someone told them about having a bad experience there. 6

C. Strengths Of The Unscathed
A recent magazine article identified some retailers that appear to be weathering the current recession unscathed. It is probative to review the explanations given for their enviable situations: 7

• Tiffany & Co.: “… wealthy folks still have Valentine’s Day and wedding gifts to buy. Luxury retailers without an international presence are the ones struggling. ‘Tiffany’s end results were pretty good because they don’t only sell to clients looking for affordable luxury but to very rich customers who are not necessarily impacted by the U.S. dollar’ says Dave Sievers, retail practice leader at Archstone Consulting.”
• Wal-mart: “…on the other hand, does better with sales of food and nondiscretionary items, which continue to perform solidly.”
• Urban Outfitters. “No other store looks like them. The catchy windows draw people inside. The funky clothes sell themselves.”
• Costco: “They offer constant newness and incredible value.”
• Walgreens: “…leads the drugstore sector in sales and profits with 1,600 24-hour stores (out of their 6,237 outlets), convenient locations and easy online access.”
• J.Crew: “… made the designer business affordable through brilliant product development. Now customers get cashmere sweaters and tailored suits for less than high-end labels.”
• Kroger: “The largest traditional food retailer in the U.S. is doing well because its stores are convenient and people still need to eat.”

The following factors can be distilled from the above comments:
• A focus on non-discretionary consumer items
• A very upscale customer base
• Convenience
• Value through price alone or a high design quality per dollar ratio
• Merchandise and shopping environments that are unique and frequently refreshed

The discussion above is not exhaustive, but it is hopefully a good place for many downtown merchants to start when thinking about how to adapt their operations to the economic conditions that are likely to dominate their downtowns over the coming five years.

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Endnotes
1. Julia Angwin and Joseph Hallinan, “Newspaper Circulation Continues Decline, Forcing Tough Decisions – WSJ.com,” Article Here.
Louis Hau, “Newspaper Ad Decline Accelerates – Forbes.com,” Article Here. Robert Hof, “Google: What Goes Up…,” Article Here.
2.Melody Badgett, Maureen Stancik Boyce and Jeffrey Hittner, Why advocacy matters to apparel retailers :Customer focus requires apparel retailers to dress for success, IBM Institute for Business Value, 2007, pp.14, p.2
3. Michael J. Silverstein and Neil Fiske, Trading Up: The New American Luxury, Penguin, New York, 2003, pp.305, p. 18
4. IBM Institute for Business Value, “Customer Focused Apparel Retailer Study.” 2007
5. Melody Badgett, Maureen Stancik Boyce and Jeffrey Hittner, Why advocacy matters to apparel retailers :Customer focus requires apparel retailers to dress for success, IBM Institute for Business Value, 2007, pp.14, p.8
6. Ibid. p.2
7. Kristina Dell, “Retail Stars of the Recession – TIME,” March 18, 2008, Article Here.