Rightsizing retail for traditional shopping districts

Seth Harry and I have been discussing urban retail development issues.

Seth Harry, AIA is a practicing architect and town planner, with a very active practice through his firm, Seth Harry and Associates, Inc. Architects and Planners. The dozen+ current projects include several New Urban town centers. The firm has just designed a 650 acre TND [Traditional Neighborhood Development] in Nashville, which the local planning director declared one of the best new TNDs in the area. Earlier in his career, Seth spent six years working as director of design for Jim Rouse at the Enterprise Development Company, working on over a billion dollars worth of urban mixed-use and urban specialty retail projects. Seth's approach includes a fine-tuned regional perspective on making the retail ecosystem work in a true urban context, benefiting both traditional urban infill and New Urban projects.
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We started with this article, "New grocery store is marketing tool for downtown: It adds to the attraction of Warehouse District living" from the Cleveland Plain Dealer, about Constantino's Market, a small 10,000 square foot grocery store--"There are truffles, a $42 bottle of balsamic vinegar, fresh flowers and other high-end merchandise, which speak to the loftier incomes of downtown's residents and workers. There also are cigarettes, modest produce and meat sections, and a frozen-food stock. 'We have the basic necessities, but not the depth of supermarkets,' Mavromichalis said."

Seth said:

Grocery stores have always been the cornerstone of real neighborhood retail, and it is one of the reasons I focus on them so much, as opposed to "lifestyle" retail, which will be another passing fad that does little to anchor real places. Interestingly, the other things they mentioned, a pharmacy and a video store, are two other staples of neighborhood retail.

This is not really a "grocery" store, of course, so much as it is a "convenience store plus" with a large selection of beer and wine, and prepared foods (sort of two or three of a regular grocery store's specialty departments with a smattering of daily needs, much like what you might find in a large convenience store). At 10,000 square feet it is actually smaller than the average suburban chain drugstore, but it gets the job done. There were several much smaller stores in my neighborhood on Capitol Hill that did essentially the same thing. (One of these days I'll post some photos of these stores--RL)

Richard said:

How many different skus of toilet paper do people really need to choose from? I haven't been to a Fresh Market store, have you? But I came across a story about 'em and they are 25K sf. that seems like a reasonable size to me.

The challenge in neighborhood-downtown districts is to help the development of "right-sized" stores and formats and get them to actually come in and open up.

I have long thought there is a place for a retail development operation that would develop formats and systems for businesses that could be offered to revitalizing commercial districts. People experienced with revitalization can work and are comfortable with different demographics that the big companies. But scaling this is another question.

More from Seth--

Don't get me wrong -- there is absolutely nothing wrong with a 10K grocery store. It just won't have a pharmacy, a video store, a branch bank, a liquor store, a flower shop, a hardware store, a seasonal general merchandise store, etc., etc.

Also, it may only have three brands of toilet paper, instead of twenty.

The point I keep trying to make that few people are grasping is that it's the physical structure of the community, as well as the larger regional competitive context that is most influential in determining what is a minimal threshold increment of scale for any given retail category.

It is also completely irrelevant whether that retail category is served by a local, regional, or national player, other than the fact that each has tended to optimize around specific increments of scale, relative to those two issues above, and the strengths that each brings to the challenge, relative to the weaknesses (vulnerabilities) each one exhibits relative to those issues.

In general, the nationals do best in suburban locations, or, where the need/ability to maximize the value of the underlying real estate is greatest. Locals tend to do better in locations that do not meet the criteria necessary to attract/support the nationals, and where proximity and connectedness to the immediate context/community is most greatly valued. This generally means more urban locales.

Everything else is just a matter of relativity.

Hmm says Richard--

The problem is that through consolidation and the development of national chains the retail industry has ended up concentrating on the suburban end of this scale (after all that's where the most growth is as well as better ROI--return on investment [generally, not always]-- and their store formats etc. are designed to fit that scale.

They are like deer in headlights when considering in-city locations.

As an example, Safeway had/has two smaller city formats: Townhouse and another one (probably no longer, I forgot the name but it might have been "Marketplace", it was in Van Ness). Townhouse still exists on 19th Street NW btwn S and Florida Ave. They had one on L Street around 21st, but they lost out to CVS on re-leasing.

But they have no desire to perfect and strengthen this more appropriate city format
This is how we get killed by chains, and why we (cities) need to address these "barriers to entry" issues. And I don't see the city engaging Safeway on this...

This is where effort needs to be focused, to help provide quality (reasonably) competitive retail, particularly grocery, to traditional shopping districts. Duplicating systems and formats isn't that difficult probably. It's getting the capital, leadership, and pool of managers/management expertise.

When independent retail closes it's usually because store owners haven't been able to find-develop managers to take over (and buy). Grocery stores are key because they are the anchors of neighborhood retail comparable to how traditional department stores anchor(ed) downtowns.

Most city government urban retail attraction strategies focus on the chains and the big formats that tend not to be amenable to the the traditional scale of pedestrian or transit-oriented development--meaning "old transit" and therefore traditional"downtowns"-- in cities.

In DC the DC Marketing Center, funded in part by the DC Government, is the prime mover on retail development strategy. The city is known for exhibiting at national trade shows like the International Council of Shopping Centers (see "D.C. officials meet with Wal-Mart, Costco and Ames" and this city press release). This is important, but ICSC is mostly about large chains, big box formats, and the like. Small independent business proprietors aren't the people that go to ICSC, and this are the kinds of businesses that are most likely to locate in unique traditional commercial districts.

This is a big disconnect, particularly in DC, that I have pointed out for awhile. Without recognizing what constitutes the various pieces of the paradigm, it's hard to identify the right "problem" and it's impossible to come up with decent "solutions."

What we need are incentive, financing, and training and development structures in order to support the development and continuation of "right-sized" formats for the city and town districts that people like me work with.

Main Street in DC isn't enough, especially when vastly more $ get spent by the city in other venues to support chains (Brentwood Shopping Center, with suburban styled Home Depot and Giant stores as one example) than for all of the Main Street program for five years.

Although, as you know, city economic development organizations traditionally haven't done a very good job in supporting the development of independently-owned successful stores. Too often money is lent to businesses that don't succeed. And, it's hard to convince consumers that smaller format stores are quality and cutting edge.

E.g., the Mega Food store in my neighborhood that was born and died in the late 1980s (it had many issues and doesn't really illustrate my point in terms of a quality format but...). I loved it, it was close and they had Richfood Raisin Brand or oatmeal for much cheaper than the national brands. But I talked to an African-American neighbor and she thought that by not carrying as many skus and national brands that neighborhood consumers were being "disrespected".

Solving that dilemma is tough.

Final thoughts from Seth--

The problem is, that these questions (including sprawl which is not part of this entry) are not "just" about urban retail -- it's about the entire retail spectrum as played out against the national landscape.

What a lot of people don't know is just how highly leveraged the national/suburban retail industry really is, and how close it is to a sort of "dot.com" kind of meltdown. The difference between the two, however, is that we don't "need" a telecommunications stock to feed and clothe our family. And -- at the end of the day, we are still stuck with the underlying fabric of our national landscape, which is still, for now, and for the foreseeable future, suburban.

This is why I don't buy Kunstler's argument that a 10 cent rise in gas prices is going to bring suburbia to its needs. That money is just going to come from someplace else, because if you live in suburbia, life without a car is just not an option. Period.

The same is true for suburban retail, unless you change the fundamental underlying paradigm.

Now is the time to begin to lay out a practical long-term strategy for reestablishing a practical, sustainable relationship between retailers and the communities served by them. But it has to happen within the context of a much larger conceptual framework of understanding of the real issues if it is going to stand a snow ball's chance of happening in any substantive kind of way. "Lifestyle" centers and Caruso Development, alone, are never going to get us there.