Category Archives: Change Agents

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

On the Passing of Steve Jobs

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I greatly admired Steve Jobs for his ability to innovate, but most of all for his view about how to live your life. The latter is captured in this quote from his 2005 commencement speech at Stanford University:


“Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma — which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.” 


Too many downtown organizations are staid and stale. A strong dose of Steve Jobs’s philosophy would do them a world of good. They need to follow an important Jobs dictum: Think Different!  Also, they certainly could benefit from a Jobs-like fanaticism that their programs are well-designed and actually work, producing strong positive results. As a downtown business recruiter, Jobs, who strongly opposed asking consumers about the new products they wanted, would never ask local residents for the names of specific retailers that recruitment efforts should target. 


 These organizations also could definitely benefit from the kind of strategic vision that Jobs displayed since he returned to Apple’s helm. 


And one more thing.  In 2007, I bought an iMac  and immediately had a lot of problems with it. On a whim, I emailed Steve Jobs and detailed my problems. In response, I received a call from Apple and about a week later a technician came to my office and completed a thorough overhaul of my iMac. Is there another CEO in the USA you can email and get a similar response?

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

Trying to Assess the Impact of E-Retail on Downtown Merchants

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The Objective

Since I started working on downtown revitalizations there have always been ogre-like competitors that local merchants see as the primary threats to their financial well-being. First, it was the department store anchored regional malls, then the catalog mail-order operations, which were followed by the big box value retailers. Most recently, e-retailers such as Amazon, are seen as the primary competitive threat. Consequently, I decided to try to assess, as best I could from available data, how strong a threat e-retail has become. My objective was not to be definitive, but to come up with ballpark numbers that would show the dimensions of this impact.

Some Relevant Data
The U.S. Bureau of the Census has long published data on e-retail sales and the proportion of total retail sales that they account for. For the four quarters of 2010 the Bureau found that e-retail sales ranged from $38.7 billion to $44.1 billion per quarter and that these sales accounted for just 4.0 % to 4.3 % of the nation’s retail sales.
These findings are consistent with the hypothesis that e-retail has had little impact. But they are contrary to the widely accepted beliefs that e-retailers have taken over the music and book industries, while squeezing the profits out of brick and mortar electronics stores and even making surprising inroads on the markets for apparel and shoes. One popular argument is that any retail market where the merchandise can be treated as a commodity is prone to deep e-retail penetration.

Unfortunately, the Census Bureau does not provide the e-retail data broken down by retail sectors. But, the Bureau does provide data going back to1992 on national GAFO sales and for sales in NACS 4541 Nonstore retailers — electronic shopping and mail order houses. This category includes the pure play non-brick and mortar e-retailers, but it does not include the online sales of the brick and mortar retail stores. GAFO is a general category that combines the general merchandise, apparel, furniture and home furnishings and other miscellaneous retailing stores sales. GAFO type retailers are usually the ones that are seen by downtown merchants as the most endangered by e-retailers. NAICS 4541 stores are not GAFO retailers.
The top part of Table 1 shows the relative strength of the electronic shopping and mail order house sales compared to GAFO sales expressed in percentage terms. The data are for two time spans. The first, 1993 to 1998, is when catalog operations were stronger than the e-retailers; Amazon went online in 1995. The second is a more recent period, 2006 to 2010. In 1993 the nonstore retailers in NAICS 4541 had sales amounting to just 7.1% of the GAFO merchants’ sales, but by 2010 their sales were equal to 24.4% of the GAFO sales. These findings are consistent with the hypothesis that the strength of e-retailing has certainly grown since 1993. Indeed, the fact that NAICS 4541 sales are now the equivalent of about one quarter of GAFO sales is quite impressive.

But, did the NAICS 4541 nonstore sales take sales away from the GAFO merchants? Between 2006 and 2010 NAICS 4541 merchants grew steadily from the equivalent of 18.2% of GAFO sales to 24.4% of GAFO sales or from $202.6 billion to $276.2 billion, while the actual levels of annual GAFO sales in trillions were $1.113, $1.148, $1.144, $1.098 and $1.1320, with a 1.6% net increase over the period. In other words, while the NAICS 4541 had strong growth, there was fluctuation, but no real major erosion in GAFO sales.

The bottom part of Table 1 covers the same time periods, but it shows the proportion of non-auto-related retail sales that GAFO sales account for annually. Both e-retailing and mail order houses as well as GAFO stores are included in the total non-auto-related retail sales figures. So are groceries, supermarkets and pharmacies. Between the two time periods there is a definite drop in GAFO’s share of non-auto-related retail sales:

  • The peak, 40% was in 1998, the low point was in 2010 at 36%
  • The average for the 1993 to 1998 period was 2.7% higher than the average for the 2006 to 2010 period.

These fall offs certainly might be considered as indicators of the sales e-retailers took from the GAFO merchants. If these are valid indicators, then the numerical impacts may not seem large, but events have shown that a 3% to 4% drop in sales can take the wind out of any retail sector.

However, other factors were also present during this time period that could account for the reduction in GAFO sales. For example, as the Great Recession manifested itself, GAFO expenditures, especially for big ticket items, were where consumers cut quickly and deeply, while expenditures for food for the home and health and personal care items grew.


Furthermore, GAFO includes some of the nations largest and strongest retail chains such as Walmart, Target, Home Depot, Best Buy, Macy’s, Saks Fifth Avenue, etc. They are not only strong brick and mortar competitors, but also have developed very strong and elaborate online stores. Many smaller GAFO chains and some independent operators have followed suit. Unfortunately, the GAFO data does not provide sufficiently detailed information to look into these issues.
My Take Aways

Reviewing these data I am inclined toward the following conclusions:
  1. E-retailers have had much more impressive growth than the Census Bureau’s e-commerce data would suggest. The proper benchmark is not all retailing that includes auto dealers, supermarkets and drugstores, but GAFO merchants. The latter sell the department store type merchandise that downtown leaders would like to have available in their districts, though many downtowns are just too small to have numerous GAFO shops.
  2. Pure play e-retailers have knocked out many, if not most, book and recorded music stores, but broad swathes of GAFO brick and mortar merchants remain.
  3. Though some erosion among other GAFO segments has likely also happened, it probably has involved marginal firms that were already poor competitors and/or could not develop significant online presences. Large firms fall into this group — think Borders, Circuit City, Blockbuster — but smaller firms with few financial and skill resources are more prone to having such vulnerability. Of course, many of the GAFO operations in our small and medium-sized downtowns fall into this category.  
  4. Many of these small marginal downtown GAFO firms would still be marginal if the e-retail threat did not exist. They have always been there in the 35+ years I have been working in downtowns. The thing that has changed over time is the nature of the threat.
  5. My reading of various articles indicate that to date, the pure play e-retailers have not captured many sales in the auto, grocery, health and personal care sectors. These often have a strong presence in or near downtowns and are usually where a small or medium-sized downtown’s strongest retail market potentials reside.
  6. E-retailing’s biggest impact is not the “constructive destruction” of most brick and mortar merchants, but in changing what it means to be a retailer: retailing now has an electronic as well as a brick and mortar component.
  7. This means that many small downtown GAFO operations will have to “innovate” by either having their owners/managers learn new internet related skills or by hiring outsiders who have them. This is a strong challenge, as I outlined in my previous blog posting, that admonishments to get on the web alone cannot address.
  8. If the current operations of these GAFO retailers are badly managed — a likely condition if they are marginal — it is unlikely that they will either acquire the necessary skills or be saved if they do.

What do you think?


N. David Milder



The Use of the Internet by Downtown Organizations and Businesses

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About a week and half ago I went to a workshop put on by Downtown New Jersey that focused on the use of web sites and social networking media such as Facebook. While I learned a lot and thought the presenters did a good job — they certainly were enthusiastic — I still came away with my major concerns being unanswered.


Being Able to Afford the Time, Money and Skill Acquisition Needed to Create and Maintain a Website. For many years I have heard several other downtown revitalization and business development experts strongly recommend that downtown organizations and individual downtown businesses have attractive and effective websites. I certainly concur with the potential positive impacts of effective websites. Moreover, I agree that organizations, with say $300,000+ in annual revenues, can have at least a useful website and that it gets easier for them to have a really effective website as their budget increases.


My problem is: Can most small businesses and small-budget downtown organizations really have effective websites? Many small and medium sized downtowns have numerous businesses that are in the $150,000 annual sales range or perhaps even less. With few, if any, full-time paid employees and modest revenues, these shopkeepers usually work long hours and may not have either:

  • The computer skills needed to create and maintain a website
  • Or the time to acquire them
  • Or the funds and networking skills needed to hire an outsider to build and maintain the website.

These problems can be particularly acute when it comes to a small merchant  building an “e-store.” The chores of keeping the online inventory current and packing and transporting the sold merchandise can be daunting.  

Of course, what most downtown managers also know is that getting their small merchants to advertise is very often analogous to pulling teeth. So, if they are resistant to shelling out less than say $100 for a co-op newspaper ad, you can expect that getting them to even entertain a website they fear might cost in the thousands of dollars is likely to be far more difficult. Moreover, if they cannot have online stores, they may doubt the value of a website that is simply something akin to a fancy directory listing.

Much the same is true for small downtown organizations — small budgets constrain what can be done — but, my online observations strongly suggest they have both better skill sets for the  electronic media and a greater willingness to spend a significant portion of their budgets on them than the small merchants. Many of their sites are good at promoting their downtown events and sharing news relevant to the downtown community that the local media might be overlooking. They  usually have an online business directory, while some even try to provide a webpage for each business. 


But, too many fail to take on business development functions by providing essential, easy to find and easy to use information that would be useful for a business looking for a new location. This can range from demographic data to information about prevailing rents and the town’s permission and approvals process. 


While small businesses probably will always lag in the creation and quality of their websites, there are reasons to believe that in the coming years there will be significant improvement among them:

  • The younger among them are more adept and comfortable with using computers and the internet — and with time the proportion of the internet capable will rise and be dominant
  • There are website hosting services appearing that make the creation and — most importantly — the maintenance of a website much cheaper and easer to do. They use templates and modules to achieve the fast, easy and affordable website, but they also bound a site’s creative potential.  We are redoing our DANTH, Inc website, under the guidance of our website consultant 180 Interactive,  and using one of these services. I’ll report on the experience in a later posting.

When Is Electronic Social Networking the Answer? At the risk of sounding like an electronic Luddite, I am having a difficult time figuring out how something like Facebook or Twitter could provide real added value in the marketing of DANTH. Though I can see their value to some large downtown organizations and consumer products companies, I keep feeling that many small business people are in a similar position to mine:

  • I barely have the time to operate my business and still write a blog, maintain our website and write periodic email blasts. Where will I find the time and energy to also deal with a Facebook presence, which to me seems like another resource demanding website? 
  • My company does not generate enough “news” to keep a constant information flow through any communication channel  
  • Our clients do not usually come to us from the web, but through word of mouth. They then do go to our website to get more information about us and to “confirm” the positive messages  they have received from other sources. What added value can Facebook offer that has a sufficient cost/benefit justification?
  • The times have been economically desperate and in such conditions people often look for “silver bullet” solutions. The faddish popularity of Facebook and Twitter suggest to me an unthinking groping for magical answers to tough problems. 
I think that there is a real resource threshold for small businesses to properly utilize websites, blogs and the social networking platforms. To do all of them properly and advantageously demands proper staffing and the resources to pay them. To do just one properly takes skill and effort — and time.

Our firm’s approach to the design of our website and this blog is based on a set of marketing objectives we want to achieve. So far, we cannot see any objectives that a Facebook or Twitter presence could help us achieve. Perhaps, if we had DANTH events or if we sold my books directly from our website we would have a different assessment of the electronic social networking opportunities.  

My fear is that too many downtown organizations are doing Facebook and Twitter without having any substantial strategic justification, but simply because more and more downtown organizations are doing it. I fear, too, that many small businesses are falling into the same trap.


Are We Taking Our Eyes Off of the Real Prize?  A week or two ago our friend and strategic partner Mark Waterhouse of Garnet Consulting Services sent us this link to an article:

http://www.nhregister.com/articles/2011/04/10/business/doc4da114e0961da239903377.txt

It is from a New Haven newspaper and it details how the merchants in downtown Guilford, CT have prospered right through our nation’s Great Recession. No where does it mention the merchants’ slick use of the social networking media. But, there are vivid descriptions of merchants who work hard to have the right merchandise for their customers, who provide a deep level of customer service and who avidly recommend other nearby merchants to their customers. All of this is perhaps just a part of “Being A Successful Merchant 101,” but apparently they are actually doing it in Guilford. The part of the story about the merchant referrals had a particularly strong resonance for me because:
  • I have become increasingly convinced that this is one of the most effective and inexpensive ways to do cross marketing in a downtown
  • I have also become convinced that most downtown organizations do a lousy job of encouraging cross marketing.

Furthermore, I have not heard of any similarly effective downtown cross marketing effort that is based on electronic social networking. 


The Bottom Line. I am all for e-marketing and using websites, blogs, social networking platforms, web photo galleries, etc., as long as they can fulfill an organization’s strategic objectives and fit within its resource constraints. Most importantly, I fear that downtown business operators and their downtown organization’s leaders are shifting their attention and resources so much to the web that they will forget the importance of mastering the non-electronic ABC’s of being a successful merchant. If you have dull merchandise, fail in customer service and have not learned how to work with your fellow downtown merchants to generate and SHARE customer traffic, no amount of adept electronic marketing will save you…or your downtown.  

The Often Slow Pace of Implementation

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Last week we were in Garden City, NY. Back in 1996, DANTH had recommended that the site of a gas station on the very important corner of Franklin Avenue and Seventh Street would better serve the community’s needs if it were redeveloped by a project having retail on the ground floor and residential units above. I was happy to see that our recommendation finally was being implemented (see photo on right).


The fact that close to fifteen years had passed between recommendation and implementation strongly reminded me that downtown revitalizations seldom occur quickly and usually require patience. Some downtowns have been in the revitalization business for 40 or 50 years. For example, the formal revitalization effort in the Jamaica Center commercial district in Queens, NY, started back in 1968. The improvements have been steady over these years, with the total amount of investment attracted to this district totalling well over $1 billion by 1987 and the investment flow continuing on to this day.

Other downtowns seem to be overnight successes, but years of unnoticed hard work usually precede their rocketing economic upswings. In the mid 1990s, for example, downtown Englewood, NJ, attracted a significant number of national retail chains and eradicated a 20% retail vacancy rate. Many outside observers noted how quickly this downtown had turned around. Mayors and council members in other NJ communities envied this quick success and wanted to replicate it in their downtowns. Few of these observers knew of the 10+ years of prior planning, improvement projects and coalition formation that enabled Englewood’s “overnight success” to occur. 


One of the most important things that Englewood’s political leadership did was to form a common strategic outlook among the city manager, mayor and city council. This took time to forge and energy and attention to maintain. Unfortunately, many local political leaders in other communities do not understand the need for such a strategic coalition and/or do not have the political time or patience to create them. 


Sadly, the need for a revitalization effort to have some patience can slip into lassitude, inaction and redevelopment doldrums. Then, impatient local political leaders can give the downtown revitalization organization a badly needed kick in the butt.


As a general rule, DANTH recommends that clients treat a downtown revitalization effort as never ending, not something that in a few years they can strike from their To Do lists. Success not only has to be won, but then also maintained.   
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Slot Car Racetrack Update

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In a June 2006 posting I described how the staff of the Bayonne Town Center worked with Vincent Margiotta of Pastime Hobbies to bring slot car racing to the district’s car shows.

The slot cars now have graduated to their own venue, PHM Racing, next door to Pastime’s shop. There is a larger and more sophistcated layout, where four cars can race, an electronic score board and even real racetrack sponsors.

At the heart of this operation is a slot car racing club. Members pay annual dues. Parents usually accompany their youngsters as the latter participate in club racing events.

The race track can also be rented for parties. Walk-in slot car racing enthusiasts are also accommodated.

Margiotta claims the slot cars are able to draw
youngsters away from their computers and phones and out of their houses.

Entertainment opportunities like this will be increasingly important in small- and medium-sized downtowns

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“You never want a serious crisis to go to waste”

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Rahm Emanuel’s statement about not wasting a serious crisis was music to my ears and anyone committed to real change in their downtowns should keep it always in mind during this very trying recession.

Two of the socio-economic theorists I most admire, the American economist Mancur Olson and the French sociologist MIchel Crozier, forcefully argued that real change in most social, economic and political systems can only occur during a crisis. During the non-crisis periods they’ve become ossified, paralyzed, stalemated and bureaucratized by powerful interest groups. For change to occur the existing system must be severely shaken — and that is exactly what a crisis does. A crisis greases a paralyzed system and enables real, meaningful — not just incremental — change.

Now is the time for downtown leaders to think BIG, to come up with innovative programs, perhaps in areas their organizations have not ventured before. These programs certainly will be of value during the recession, but have even more utility when the economy turns around. For example, I think that the vast majority of downtown organizations now need to get much more involved in helping small businesses find financing. I also think that BID/SID advertising and promotional programs based on the “old media” need to be overhauled. BID expansion is another possibility. I am certain you can come up with your own list of possibilities. Now is the time to undertake such ventures!

Long ago, I was told that in the Chinese language the character that means crisis also means opportunity.

BEING A DOWNTOWN CHANGE AGENT: Facilitating Change for Downtown Business Operators

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Small Business Operators Are Slow To Adopt Changes

At conferences and other events where downtown managers congregate, the conversation at some time usually turns into a group therapy session focusing on the seemingly intractable, but certainly dysfunctional attitudes and behaviors of downtown business operators and landlords. Some of the dysfunctional behaviors raised might include deteriorating facades and signs, poor market research, lousy merchandising, “wrong” business hours, inadequate customer service, high rents, poor building conditions, harmful tenant selection, etc. Many readers, I am sure, know the rest of the litany.

Many downtown managers also consider it almost impossible to “re-educate” most downtown business operators and landlords or to otherwise induce them to improve their business behaviors. Years ago, based on my own management experiences and field observations as well as reports from friends managing downtown districts across the country, I came to a kind of Bayesian subjective probability estimate that only about five to seven percent of downtown business operators and landlords can be retrained or otherwise induced to innovate.

However, more recently, based on my program development experiences in the Bayonne Town Center (NJ), I have come to believe that significantly more downtown business operators can be induced to change, if, and this is a critical if, downtown leaders, acting as change agents, can help make it easy for them to change.

How To Get Existing Merchants To Renovate Their Facades?

About four years ago I took on the management of the Bayonne Town Center Special Improvement District. The previous executive director had done a great job of getting a highly respected architect, Walter Chatham, to write design guidelines, which were then adopted by the city as an ordinance. The city was offering then, as it still offers today, strong financial incentives to stimulate façade and storefront renovations in the district: a shop with a frontage of 25 feet can get a grant for as much as $10,000; a corner shop can get up to $15,000. However, while new businesses in the district were improving their facades, none of the existing street-level business operations were doing so, though many storefronts badly needed renovation. Officials in city hall as well as the Town Center board of directors could not understand why the city’s generous financial incentive package was not stimulating more façade improvements in the district.

While I quickly ascribed this situation to the typical change -adverse way I believed small downtown business operators behaved, my intellectual curiosity and feeling of management responsibility led me over the next year to talk informally to many merchants about why they were not improving their facades. Here are the surprising conclusions I reached as a result of those discussions:

  • A lot more merchants than I expected were interested in improving their facades. My rough estimate would be somewhere between 20% to 25%, not my expected 5% to 7%.
  • Merchants who owned their buildings were more apt to be interested in renovation than those who leased their spaces. This was understandable since they had more to gain and one less decision-making gatekeeper to deal with
  • Almost no one had any idea of what kind of new façade they might want!
  • No one felt they had a good idea of how much a façade renovation might cost!
  • Few knew an architect or contractor who might help them! Most small business people will not have architects or contractors in their social networks. They often work long hours and lack the opportunities to establish such contacts on their own
  • There was wide spread concern about getting city approvals for their projects!
  • Almost everyone knew about the city’s façade improvement financial incentives.
  • A minority of those interested in doing a facade improvement felt that even with the city’s financial incentives, they still could not afford to renovate
  • Most of those interested in improving their facades felt that, with the city’s financial assistance, they probably could afford to renovate. They were not moving forward because they did not know how to proceed and lacked the time and energy to remedy this situation!

Facilitating Change

As I mulled about these findings some research I had done in 1989 came to mind. Back then I was trying to find out why manufacturing firms were moving out-of-state from the Bronx, a borough of New York City. My research indicated that:

  • These firms were successful, expanding and needed more space

  • They were too small to have a real estate specialist on staff
  • Management was too busy with their growing business to look for a new location
  • They often need specialized training for their blue collar workforce
  • They had concerns about high crime
  • Recruiters from out-of-state economic development organizations had come in and offered turn-key solutions that included low-cost new space, manpower training, low crime, etc. The recruiters made it very easy for the Bronx firms to move to their states. In other words, the recruiters had facilitated change.

A program that could facilitate change seemed precisely what was needed to unleash façade improvements in the Bayonne Town Center.

The Jump Start Façade Improvement Program

Consequently, I designed the Town Center’s Jump Start Façade Improvement Program sm.

This program provides each participating business operator with the following products and services:

  • A well-known architect in the field, Margaret Westfield of Westfield Architects visits with them to listen to any ideas they might have about their new façades
  • She comes back several weeks later with a rendering of their new façade, cost estimates for the improvement project and samples of the materials that should be used
  • The façade design, because it is done by one of the Town Center’s architect’s in conformance with its design guidelines, has assured acceptance by the city
  • The Town Center’s staff, if necessary, helps participants with the paper work for the city’s incentive program and provides them with contact information about contractors who have done successful façade projects in the district.

Of the five storefronts in the initial round of the program, two renovations have been completed and three are in process, with completions expected by August 2007. A second round of Jump Start has been completed recently. One entire building façade has been renovated; action on six other storefronts is awaited.

The slide show below shows three of the improved building facades, before and after their renovations.


The Kick Start Building Renovation Program

Based on the success of the Jump Start program, the management of the Bayonne Town Center leaped at the opportunity to obtain a technical assistance grant from the Community Preservation Corporation (CPC) to create the Kick Start Building Renovation Program sm. Kick Start is aimed at stimulating district landlords to renovate the upper stories of their buildings and create market-rate residential units.

The CPC is a very large and successful nonprofit that uses CRA funds from over 80 banks and insurance companies to fund housing projects in NY, NJ and CT.

The Kick Start “treatment strategy” is again to facilitate change, this time by having the CPC’s architect-engineer provide each participating Town Center landlord with a feasibility study that describes how many residential units might be built on their property, the types of units that should be created and cost estimates for the project. The CPC also will be ready to finance feasible projects. Furthermore, because of the CPC’s reputation, it is anticipated that the feasibility studies will help ease their associated renovation projects through the city’s permissions and approvals process.

At the time of this blog posting, Kick Start is underway, but none of the three initial feasibility studies have been completed.

Facilitating One Change Can Help Facilitate Other Changes

As consultants have long known, developing a client’s trust and confidence in you and your firm is essential for having your recommendations implemented. Downtown managers, when acting as change agents, face a similar challenge with the business operators and landlords in their district. The Jump Start Program has helped to significantly increase the trust and confidence that district business operators and landlords have in the Town Center’s management team. This is true even among those who have not participated in Jump Start, but knew what happened in it. This has stimulated not only interest in participating in Jump Start and Kick Start, but it has also made some landlords more willing to work with us on business recruitment and redevelopment projects.

Some Additional Observations

My experiences with Jump Start strongly suggest that money, while not a negligible factor, is certainly often not the prime factor that impedes change and innovation among small downtown business operators. Knowing what can be done and easy access to needed professional assistance are also very strong factors.

The city’s permissions and approvals process also can have an enormous impact on downtown change and innovation. The Town Center has city legitimated design guidelines and its architect determines whether or not submitted designs are in accordance with them. The Town Center is thus able to provide designs for renovated facades that are guaranteed to be accepted by the city. This factor alone reduced anxieties about delays and escalating costs among the participating business operators.