STALKING STORES Q&A
Robert Gibbs is a retail consultant based in Birmingham, Michigan, who works with cities as well as shopping center developers. I spoke with him about the future of downtown retail, what goes into a retail master plan and why Wal-Mart may be less evil than some people think it is.
What retail development trends should local officials know about?
First of all, the retailers for the most part have run out of sites. The easy suburban sites are for the most part picked over. And the code is that the strong national retailers have to grow at a certain percentage each year-Wall Street says that if they want to keep their stock prices going up, they have to open new stores. That means they have to penetrate new markets where they aren’t now, or try new retail concepts.
It’s generally agreed now that the underserved markets are urban markets. From inner cities with low-income populations to high-end wealthy cities, urban centers are vastly under-retailed for lots of reasons. If you’re a retailer and you’re growing your stores, you have to figure out how to get into urban locations. To do that retailers are doing things they never would have considered five years ago. They’re modifying their old standards for store sizes in order to fit on smaller, more compact sites. They’re lowering their parking standards. They’re even changing the merchandising mix to fit the urban consumer. So there’s a tremendous opportunity for cities to attract retail.
The problem is that the cities for the most part do everything possible to make it impossible for retailers to go there.
What do you mean?
Most cities either have a policy of not wanting national chains in their downtowns, or the planners have biases against national retailers. They’re afraid chains will raise rents and displace the local candle shop or whatever. I hear it so often, where a city puts an artificial limit on the size of a store; they say they want nothing larger than 20,000 or 50,000 square feet, so it rules out department stores, furniture stores, and booksellers. Just blanketly rules them out.
Cities don’t usually offer retailers predictability. If I do open a new store downtown, I can’t predict whether the other stores around me will operate to my standard. I may be the only store with a $2 million storefront, or the only store open on Saturday and Sunday. Downtowns don’t usually have the signage and lighting standards retailers want. There’s usually not enough room downtown to create that two blocks of critical mass that retailers want.
On the other hand, if downtown could offer predictability, and you could assemble enough property, have parking available and create high design standards and enforce them, then retailers would go there.
Cities don’t have to turn themselves into a mall, but they do have to do what shoppers want. Last year 70 percent of all sales occurred after 5:30 at night. If downtown is going to compete, it has to have stores open in the evenings or on Saturdays. It has to offer the goods that people want to buy at the prices people want to pay. Last year only 2 percent of all apparel sales occurred in downtowns. In that 1950s, that’d be more like 90 to 95 percent. Downtowns have lost almost all their market share. Most are either entertainment districts or they sell knick-knacks and antiques and other things we don’t need.
So how should they go about turning that around?
Cities should have a master plan to show how they can accommodate modern retail. Cities should have a written policy saying they want to be competitive and gain market share. Cities need to have high design standards for signage, lighting and building design and be willing to enforce those standards. And they have to have a public parking strategy.
Cities can get back up to 30, 40 or 50 percent of market share with a policy. There’s a demand for retailers. A lot of them want to locate in downtowns. A lot of cities don’t know that.
The eight or ten cities we consult in have this huge unmet demand. Even a blue-collar town with modest income has a big demand for shoes and apparel. Urban consumers drive farther than normal to get goods and services, and the goods and services they do get downtown they overpay for. That’s the norm. Old Navy knows that now. Target knows that. Wal-Mart is doing a series of urban stores to get into inner-ring cities. That’s a huge growth market for Wal-Mart, to go into cities.
But doesn’t Wal-Mart wipe out all the mom-and-pop shops?
Not necessarily. The small independent retailer has to be near a Wal-Mart or a J.C. Penny or a Sears because large anchors advertise heavily and run promotions and bring people to that location. So instead of having 100 people a day walking by your storefront, a Wal-Mart has 5,000 people a day going in. Well, not everyone walking into Wal-Mart to buy shoes will find what they like. So you can position a shoe store to specialize in children’s shoes or odd-size shoes or sporting shoes-you can go much deeper into a category than a large department store can. Go to any regional mall with four department stores-how do you think the other small retailers make any money? They make money because they’re between four department stores. They carve out niches department stores can’t.
Wal-Mart may put some retailers out of business. But I don’t believe Wal-Mart ever put out a viable business. It may put out of business the guy who closes at 4:30 p.m., when shoppers don’t start shopping until 6.
What else should cities know about retail?
Time matters for retailers. Stores have to open to keep their stock prices rising. A development director for a chain is told to open five stores in a region by a certain date, and if they don’t open he gets fired. So those people will go to a city only if the city can give them some assurance that the store can open by a certain date. That’s hard to do. Even when the city owns the property, it can’t always get the assurance that the fire marshal or mechanical inspector will sign off on the building, or that it will even get through the zoning. Sometimes that takes a year.
Timothy Angell is the deputy director for community and economic development in Des Plaines, Illinois. He also co-chairs an Illinois committee on public-private partnerships for the International Council of Shopping Centers. I spoke with him about mistakes municipalities make when talking to retailers, the do’s and don’ts of ICSC’s spring convention in Las Vegas, and why not every city can hope to get Trader Joe’s..
—Governing Associate Editor Christopher Swope
Why are communities so interested in attracting retailers?
It brings the municipality sales tax revenue, in states where they can collect sales taxes. And it brings in property tax revenue. But the bottom line is quality of life. In Des Plaines, we just updated our comprehensive land use plan and a component of it is a market study. In terms of retail we looked at all the types of retailers in our community and surrounding communities, whether it’s bed and bath stores, electronics stores, office supplies, books, groceries, what have you. We said, OK, where’s the hole in the donut for us? What retail niches don’t we have that we’d be very likely to fill? Our residents don’t necessarily like to get in their cars and drive 30 minutes to pick up a book. They want a diversity of stores.
Why is doing that market analysis so critical?
In our area, every suburb wants a Trader Joe’s. Doing a market analysis is crucial to answer the question: Here’s why we don’t have it. Or: Here’s why we could have it.
Communities need to look at their demographics. The retailer or the shopping center owner or the commercial realtor may say, well, you don’t have the average median income we’d like to see. Or we’ve got a store next door in another community and we don’t want to cannibalize those sales. Or you don’t have the daytime population we like to see.
Municipalities have really got to understand their town. They have to think like a shopping center developer. They have to think of their retail mix, the price of the land, the leasing costs, their consumers, how long it takes to get from one side of the community to the other.
Have you ever been to the ICSC’s spring convention in Las Vegas? What’s it like?
My lord. I went in 2001, then in 2005 and again last year. It’s like no conference I’ve ever been to. As I was walking the trade-show floor last year, it was so crowded that if I’d tripped and fallen, someone would have stepped on me.
What local officials often do is they go to the show, like my first year, and they walk around-I’m not exaggerating, it takes a day to walk the show. They look at booths of retailers, shopping center developers, commercial realty and brokerage booths. So the first year I went that’s what I did.
And I learned what I ought to do. Starting in February, communities going out there should start calling or e-mailing either the retailers they’re trying to attract, or if the stores are represented by a commercial broker, call or e-mail those folks and set up a time to meet at the show. Because these trade show booths are immense. Some literally have a reception area, and you go to the receptionist and it’s, “Hi, I have a 2 p.m. appointment with Jill Smith.” And they literally have individual suites in the booth. So you go in and shut the door and have a conference right there. It’s immense. It boggles the mind.
What are some mistakes cities make in thinking about retail?
A common mistake a lot of elected and appointed officials make is they’re around their commercial cores or downtowns during the day and don’t think about what it looks like at night. And if you want retailers to stay open past 5 p.m., if you want restaurants that serve dinner and not just lunch, if you want nightlife, then you have to be concerned about details like streetscape, landscape, signage and lighting.
Another mistake municipalities make is when the economic development department is trying to get a retailer to come in, and OK, the retailer commits. Now the planning department beats them up. Whether it’s the faÇade or the setbacks or the parking spaces, they get beat up. So municipalities have to understand that if they’re going to reach out to retailers and developers there’s a balance they have to achieve between economic development and aesthetics. Not that those have to be exclusive of each other.
I’d say to retailers, do your due diligence ahead. If you want to put a location in our community, call us first. Understand that we’ve got rules-we want the parking lot in back of the building, or we’re going to ask you to have that shopping center LEED certified as a green building. Know that ahead of time.
Walk Away Lessons From Day Three
1. Retail is Saturated (think Montrose) so it looking for Underserved Markets — which is good for Kent because we are underserved.
2. Downtown Redevelopment Is Unpredictible, So Take the Guesswork Out of It (e.g., assembling land)
3. Retail Lives on Nighttime Sales — A Vibrant Night Life Leads to Retail Success.