Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Tuesday, July 16, 2013

Experience retail: can support a business but not enough to get rich

Is anyone shocked that Living Social announced they are closing their DC events space ("Why LivingSocial is pulling the plug on its 'Adventures' brand" from the Washington Business Journal)?  I'm not.

I was surprised at all the speculation in the print media previously that experiential events would be a growth area for them ("With Aerosmith, LivingSocial doubles down on events business" from the WBJ).  It's a small market, hard to get repeat business, with high costs.

(Note to people who think Groupon and Living Social are great businesses.  They are direct marketing organizations who happen to sell via the Internet.  Nothing more.  The Internet in itself isn't a business model, it is a channel.)

Similarly, the point in the Post this weekend that Barnes & Noble ("Barnes & Noble can succeed, but not by competing with Amazon") could reshape itself along experience lines, using the example of local hardware stores missed two fundamental points.

First, local hardware stores are not really successful because they are locally owned, but because they sell necessary goods that people need (called convenience goods) so that they can take care of their houses.  The local-ness and short distance for travel is a benefit over going to a big box, but if they weren't selling stuff people needed, they'd be screwed.

People don't need books (at least most people don't).


Our stores all have Community BoardsLeft: community information board at a Lululemon store.  Photo by Lululemon Athletica.

The second is that chain stores, except for Lululemon, aren't focused on building deep connections within communities, not unlike the experiential events space for Living Social.

They make their money systematizing operations and merchandising so that they can run the store with limited skill personnel who don't cost that much labor wise. 

For Barnes & Noble, becoming an event space--like Busboys & Poets--is a lot harder, more time consuming, and requires local connections.

Ever notice that chain stores, even "cool" places like athletic shoe stores or bike shops like Specialized don't have information boards for local events?

Lululemon is different.  But the stores are really small and the markups/profit margin on what they sell so high that it's not very expensive for them to put some investment into community building.  It's tougher on a book that sells for $8, with a 40% profit margin before expenses.

The NYT, "Why Barnes & Noble Is Good for Amazon," also argues that there is a place for Barnes & Noble.  But maybe it's not that bookstores are good for Amazon but for publishers.  And publishers might have to step in and help out.

There is still a place for bookstores, but not necessarily Barnes and Noble, and to make it, bookstores might have to move more towards the Busboy and Poets model of (1) restaurant (people eat every day); (2) event space; and (3) hopefully a bigger books department than the itty bitty one at Busboys & Poets. The Kramerbooks and Afterwords bookstore-restaurant combination on Dupont Circle is another example.

For Radio Shack to get their business model together (see "RadioShack in Talks to Bolster Finances" from the Wall Street Journal), they are going to have to figure out how to market themselves like hardware stores, or to join in with hardware stores in order to reposition.  It's about electronics gear as convenience goods, but to sell electronics items (specialty goods have a different sales process than convenience or discount goods), they have the same problem with showrooming as everyone else, and the difficulty of providing a wide range of items in small stores.

Maybe they could make money on service, like the Apple Store genius bar, but at the neighborhood level, there isn't enough business to make it work.

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9 Comments:

At 11:00 AM, Anonymous Anonymous said...

I know at least 2 art teachers who have done very well by Living Social- they teach classes there that are obviously in demand- they speak in glowing terms of this outfit

 
At 11:01 AM, Anonymous charlie said...

Apple isn't making money on services, but it wants to. No question the genius bar helps move product but even they want to convert more.

Big exception for alcohol sales. But in a city that brings the wrong crowd. If you tailor it right it can be done.

(In fact, the reason alcohol sales can work in that enviorment is we limit where you can sell and drink then. Open that up and the advantage drops).

This is a problem for cigars as well.

I'd hate to ask how many corner stores depend on cigarette sales.

I've been thinking of a "thinking consumers guide on how to gentrify your neighborhood".

 
At 6:26 PM, Blogger Richard Layman said...

Maybe we could co-write it, or just collect a bunch of pieces from the Onion.

wrt cigar bars, cereal bars, and other micro segment businesses, I always wonder why people think there is a big business there.

Remember Learning Annex?

apple is lucky that they have great sales/s.f. and you're probably right that they see the services they provide at the stores as a way of providing ongoing support to people who will buy more stuff.

e.g., I remember being pissed that Ikea stopped selling a molding that matched their stuff, because I wanted it to complete our project.

On a piece basis, they probably didn't make money on it. But they should have thought about it in terms of the $1500 (ours was small, we didn't buy appliances, we have a small kitchen and only had 88 linear inches to work with) to $8000 total sale, then it made sense to keep producing it.

I read something today somewhere about a study that proved the 80/20 rule for restaurants although it was actually something like 72% of business was attributable to the top 20% customers.

It's really easy to get fixated on the moment, and not think of the annual value of the customer.

In a neighborhood restaurant that's crucial.

At a place like Planet Hollywood or Harry's, not so much.

Although I argue that Destinaton DC should do mystery shopper visits to places like Harry's in order to get them to get their act together, to better serve tourists.

 
At 6:28 PM, Blogger Richard Layman said...

3 onion articles related to your idea are linked in this piece:

http://urbanplacesandspaces.blogspot.com/2007/06/s-neighborhood-rallies-against.html

 
At 8:17 AM, Anonymous charlie said...

Are you familar with Belly? They are being very agressive on the local space here. Agreed that idenityfing that 20% of customers is critical, but other than figuring out the "regulars" nobody has cracked this code.


Also, some link rot on your old post:

http://www.theonion.com/articles/shitty-neighborhood-rallies-against-asshole-develo,2229/


And yes, while I am not the person who could write that post, I think it is an interesting exercise. How many pennies on your dollar should you be investing in the "neighboorhood." What is the return on picking up trash (which I haven't done). Or watering trees? Serving on boards?

And spending more locally. Guilty of that; with the heat I did't feel like going out to the Gtown safeway this week to get some sherry vinegar, and so ordered it from amazon.

And how to create clustering?

 
At 10:19 AM, Blogger Richard Layman said...

we all buy stuff online and that doesn't make us terrible people. will try to learn about belly.

... and I will fix the link.

2. as far as ROI in your community, who the f* knows? The streets I pick up trash from are cleaner, it helps the area, etc., but I don't see more people doing it. I do get people thanking me from time to time. I am not looking for thanks, I am looking for them to do it too.

b. similarly, with boards and projects, it does really make a difference but so many communities have f*ed inter-"personal" relations that it's very hard to get things done.

we were lucky with the facade program here in Takoma. the biz association, mostly TP, but also covers the DC side, had capacity, and the volunteers did too. That being said, it was one retired person who acted as project manager and she totally kicked a*--I am not a detail person to that level... Without her it wouldn't have succeeded as well.

These kinds of projects contribute to the overall milieu and environment for other projects.

c. but like with H St. I contributed to its current level of improvement. So did many other people. But I remember saying back around 2000, that the neighborhood would continue to suck if I didn't get involved.

There is no way that the H St. Merchants assn. had the capacity to produce and submit a winning application for the Main St. program, back in 2001/2002. But Kevin Palmer and I (with some assistance from Drury Tallant) did have that capacity. We produced a winning application. These efforts contributed to the city's decision to do a comp. plan for the corridor, which sparked developer interest, etc.

 
At 6:05 AM, Blogger Richard Layman said...

happened to happen across belly yesterday. (I guess I don't normally frequent the kinds of places that use it.)

 
At 7:33 AM, Blogger Richard Layman said...

Takoma Bicycles is part of belly. So I joined.

It raises 3 issues. One, that we need to compile a master list of programs, initiatives, and strategies for supporting local business. (This is a general point, it's probably what I need to focus on "work-wise", not unlike the _Tactical Urbanism_ manuals. Cookbooks for practice.)

Two, it's too bad cities haven't done this on their own. OTOH, you can build scale and the general appreciation for buying local across geographies.

Three, not sure how old you are, I think a bit younger than I... are you old enough to remember S&H Green Stamps? These kinds of programs used to exist, then died, as most retail sectors became dominated by national players.

Belly is a modern form of this. And it's one tactic, like parking validation, package delivery, etc., that independents need in their toolkit, but have to have help (technical assistance), usually, in order to do so.

 
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