Thursday, January 5, 2012

Retail Blog-off

And we're back from a long holiday break and vacation, not particularly rested in the least, but slowly but surely recharging the juices to keep at this thing. The first post of the new year will be part of a retail blog off with fellow urbanists/bloggers, sprung from a twitter dialogue. Shortly thereafter, I hope to recount some of my visits to small towns in New York and, oddly, Arkansas and tell their stories. Or at least, the stories as I interpreted their current condition.

BLOGOFF BACKGROUND

As for the blog-off, this really began with a dialogue on twitter as Hazel Borys of the Placeshakers blog covered/live-tweeted a talk by noted retail consultant Bob Gibbs. Gibbs is on the circuit promoting a new book Principles on Retail Planning and Development. Gibbs specializes in the kind of things that chain stores crave, hard numbers and fast rules with little in the way of gray area. Particularly, things like market catchment area, like how many people it takes to sustain a certain type of store given the size and service of said store, be that a coffee shop, a local neighborhood sundry store, or a walmart.

It is this particular detail that started this entire thing. Borys quoted Gibbs stating that 1,000 households is what it takes to support a neighborhood store. Of course, this is one of those things that gets into the inherent chicken/egg interconnected and intertwined complexities of all things urbanism. For example, even a neighborhood of 500 households will still have demand for goods and services to be provided locally, so should they not be able to at least approach something of a complete neighborhood, where needs and wants can be met locally?

This factoid drew a bit of fire out of Steve Mouzon of the Original Green blog (whose book I recommend), who defended the need for neighborhoods smaller than quoted necessary threshold to have needs provided locally, 1) to improve the value and desirability of the homes within that neighborhood and 2) to reduce the overall vehicle miles traveled therefore at least making a bit of a dent in automobile dependence.

A few things, from my work with local developers in the DFW market, I have a pretty good sense of the number of trips/VMT reductions inherent in different development formats. If unwalkable, car-dependent suburbanism = X, walkable suburbanism, such as what Steve was referring to (in this case, The Waters in Alabama) = X(80%) of total VMTs. And lastly, walkable urbanism, such as in uptown Dallas = X(60%) or a 40% reduction in trips due to the proximity of things. And if you're anything like me, you see the monetary value (and otherwise) of proximity. So Steve has a point.

My question to Steve was, to what level must that store in The Waters be subsidized? In essence, I was digging for what Gibbs' true point was, that it takes roughly 1000 homes to support a local sundry store without subsidy. But as Steve was pointing out, sometimes subsidy is necessary. Chicken/Egg. Just look at the grocery store in downtown Dallas, urban market. The common rule is retail follows rooftops. Except rooftops (residents) often are skeptical of pioneering into new markets without basic services, whether that be in outer, exurban locations or in desolated downtowns. The city of Dallas deemed it necessary to support the market at a cool $3 million/year.

The downtown real estate market tried to hit the uptown market rental rates and missed. Similarly, Urban Market tried to hit a niche Whole Foods specialty market. It also missed and is now providing more basics including a Dollar Store section. It is competing with the plethora of 7-11s instead of Whole Foods.

Ultimately, Mouzon pointed out that the old school developer thought it more wise to build a $1million entry feature to the neighborhood than to subsidize a neighborhood store because the size of the neighborhood didn't meet the threshold. Now one of the ironies here of course, is that without the services/goods provided by such a market, the neighborhood would never approach capacity, nor would it spin off auxiliary developments adjacent that might fill out that magic 1,000 household number, thus allowing the store to sustain itself.

I don't remember the exact dollar amount that the store needed each year just to stay in business, but I calculated that the cost of the entry feature, put towards the store, could have sustained it in business for about 16 years without even factoring in potential interest from an escrow.

Ultimately, that is a decision for the developers/investors to make and consultants like ourselves are only left to provide opinions and suggestions.

OTHER BLOGGERS BLOGGING OFF

As for the actual blogoff, given our backgrounds and aligning opinions, I don't expect this to take on any kind of adversarial stance. Any debate might only be found in the little details. In fact, I quite like what both have written as they track with things that I often talk/write about as well. Emotion and science. What might be deemed the subjective and the objective realities underlying urban places.

If you've read this space for any period of time, you know I care little for the superficialities that many (even professionals) mistake for urbanism. Such as "mixed-use," "build-to lines," structured parking, etc., etc. These are by-products of something deeper, more innate, and more profound.

Adhering to such facile and superficial prerequisites is how we get faux urbanism and Potemkin Villages like Victory, Park Lane Place, or Shops at Allen & Fairview. These are developments brought about by people who whose understanding of urbanism is quite shallow. Getting urbanism right, meaning getting right at its very deepest core, is a must for lasting value. That is, unless you're simply trying to fool people and get your money and profit out before tossing the hot potato to someone else shortly before it fails. The experience of these places is similarly shallow, unmeaningful, and unlovable.

Along these lines, Mouzon writes about the necessity of hope and minces no words getting directly at the issue above:

let's think about the prerequisite of hope. Because without hope, we will not change. Today, some really smart people (whom I respect very highly for other reasons, by the way) have put together guidelines and rules of thumb which poison the transition from sprawl to sustainable places because they make it appear that most places have no hope of succeeding with their transformation.

The classic example of a poison guideline is the "corner store requirement." The best experts say that you can't even support a corner store with less than 1,000 homes… and for pretty much every other type of retail establishment, you need even more "rooftops."

Which tracks right with my stance that human emotion is the core driving force and the creator of cities, as cities are merely the platform for the delivery and exchange of human wants and needs. Without understanding this, and maximizing the ability and potential of the city to meet those needs as efficiently as possible, we can't possibly build successful, sustainable, lovable cities. And as Mouzon has often written, if we don't love a place, we won't care for it, and therefore we won't sustain it.

The city, at its best, facilitates social and economic exchange. Where emotion is the stimulus, the objective and scientific aspect of cities is the connective tissue and the accelerant between these things: the infrastructure, more particularly the interconnectivity

Borys, in her own way, echoes Mouzon's questioning of the rules using quantum physics in her post When to Bends the Rules and Breaks the Law:

When things are very small or very fast, classical mechanics’ laws – as well as their corollaries – do not hold true. Then you’re into the realm of quantum physics where things get very interesting.

Everything boils down to relationships, probabilities, and the fact that when things get small and fast, they act quite differently. Sound a little bit like our economy?

An electron may sometimes act like a particle, and other times act like a wave. And whether or not it tunnels makes a big difference to all the silicon-based artificial intelligence in your life.

In other words, different rules apply for different contexts. And context and the various interrelationships can change, or actively be changed. That is not to say that any place on earth can support density, the changes are never that dramatic. We often try to make too much out of cheap pieces of land. They're cheap for a reason.

Instead, the context and interrelationships are changed in more minor ways. For example, take a typical suburban thoroughfare. Or better yet, a suburban-style thoroughfare in a more urban location, such as West 7th in Fort Worth which I wrote about when introducing the concept of convergence:

[w+7th.jpg]

In that post, I wrote about infrastructural convergence, ie roads leading towards "high streets," in order to make retail work. However, that is simply not enough. Suburban arterial streets are designed for speed. It is written into their DNA. If traffic speed isn't averaging a certain requirement, they're deemed failing. The irony is that the resultant development will certainly end up failing as it is cannibalized by something further down the road. People simply don't like to be near high speed traffic. It is dangerous, loud, and the air is bad. Fast moving car traffic is by nature repulsive, sociofugal, rather than sociopetal.

What has resulted is the proliferation of semi-walkable bubbles, all-at-once developments like malls or their more recent brethren "town centers," which ironically aren't towns and quite off-center and face a similar future as malls where only one or two will survive and continue to serve the region from which they draw. They are walkable only once you arrive, but you must drive to get there. They are forced to take a defensive towards the hostile roads purveying the majority of consumers to the points of consumption. The intent is clinical, with assembly line efficiency. Convenience is placed at a premium. But that convenience means shuttling people in and out as quickly as possible. Not keeping people there.

Illogical city vs. the Logical

This is the development of the illogical city, rather than the logical. In the logical city, traffic means value. Development wants to get as close as possible to where the people are, hence you end up with buildings interfacing directly up to the street, with demand to live immediately above or adjacent. The place is yet desirable when it isn't hostile, but rather sociopetal. It draws people together. Opportunity is inherent.

The logical city is sustainable as long as its logic isn't undercut via transportation planning intent on moving vehicles rapidly. Once again, is it quick and efficient for me to walk across the street to a store in a dense, desirable place (those two things inextricably linked in the logical city, desirability = density) or is it quicker and more efficient to hop in the car and drive to the nearest store? The car is certainly travelling faster.

But if we look towards physics again, we can understand how these places are formed and maintained. It starts with the science and infrastructure as I alluded to above. Centers of gravity, places that draw people, are created by condensing energy, molecules bouncing about, into a slow vibration.

Now think of that suburban style arterial designed to move its "electrons," or cars, as quickly as possible from points A and B and beyond and occasionally delivering them to adjacent development parcels via curb cuts, large turning radii (to maintain travel speeds), and of course parking lots. Because the street traffic is fast, the buildings don't want to be close, so they use the parking lots as a buffer. Everything slowly but surely becomes increasingly disconnected, fragmented. The bonds of gravity no longer holding strongly together. Each of the little design decisions decreases the safety and amenity of the pedestrian.

It is that pedestrian that holds everything together, that lives nearby (because it is desirable to do so). The pedestrian provides permanence, sustainability. Not just because they're not operating a gasoline-powered internal combustion engine, but because they're nearby. They're taking advantage of the amenity of proximity as long as the infrastructure allows, which it must.
Our transportation planning is based on maximizing regional mobility at the expense of local. There are several problems with this. First, planning (one would think) is thinking about the future along with the present. With uncertain gas/oil prices that will likely do nothing but rise with increased population pressures, demand, multiplied by scarcity and increasing refinement costs, it makes little sense (cents?) to build a city dependent upon said fuel behind the entire operation being cheap and plentiful.

Second and relatedly, by doing so, a city is essentially mandating car ownership and operation. Because on the regional scale, the personal automobile is always more suitable than other forms as all destinations are scattered. Effects are two-fold: the poor are unfairly squeezed by having to pony upwards of 30-40% of income just to participate in the local economy. Otherwise, there are similar costs lost in the way of time (and inefficient metro systems covering decentralized places). Also, there is downward pressure on the local middle class, because the vast majority of money towards car O&M costs leaves the local economy by way of car, gas, insurance companies.

Lastly, if city form is defined by the predominant transportation technology, I have argued that the new primary form of transportation is the smart phone and the internet. At least, in how it cuts out a good percentage of the need for physical regional connectivity. Yet we continue to plan and subsequently foist more expensive, inefficient infrastructure upon cities. The internet and smart phones are amplifying the need for local connectivity. As always, Joel Kotkin is wrong about this.

The implications of these factors have multiple effects on local economies (besides infrastructural). First, is the amount of money that remains locally is what drives demand. Or perhaps better said, is what translates human emotion (want and need) into demand. That demand is then manifested in goods, retail opportunities.

The other benefit is the power of synergy. Ideas spring from two creative people bouncing ideas off of one another, working together. Retail businesses do better when clustered with others, through cross-shopping. Mall developers knew this, however that tension between local and regional has cast the institution of the mall to the scrap heap of history. Those that remain are and will continue to slowly but surely relocalize, focusing on the permanence of their context, trending towards complete neighborhoods with housing, jobs, and services all proximate.

Development form follows infrastructural pattern. There is a natural desire (via opportunity) to capitalize by being near traffic. But if that traffic is hostile, an unnecessary and corrosive tension exists, the push-pull of the confused, illogical city where "location, location, location" is overtaken by "if you build it, they will come," a mantra heavily underscored with inherent ephemerality.

Our busy streets must be made amenable to a variety of transportation modes, most importantly with the understanding of how to still move people, but do so in a way that can interface with development. I draw an allegory with a healthy stream vs. an eroded streambank from too much runoff, too fast.
The above diagram shows the relationship of travel speed to development parcels. Much like a healthy streambank, the most biodiversity (activity), happens at the edges, where current is the slowest. If traffic is moving too fast, too close to the edges, development will erode. And as StrongTowns recently pointed out, so will the local tax base. And then cities can no longer support their infrastructure without the tax base. The entire retail dynamic, of providing goods and services to customers, becomes inefficient, stretched too thin.

Chain vs Local

There are then the implications transportation patterns have on the types of businesses that can succeed. In the car-centric pattern, there is a distinct competitive advantage tilted in favor of publicly traded chain businesses, with greater access to capital and investment, with more buying power and leverage, with more ability to secure goods and material at lower costs from suppliers.

It's a business model based on generating profit (what isn't?), at the expense of jobs, (not making value judgment), but is predicated entirely on cheap global transportation (and labor costs overseas). Are either of those things sustainable? I wouldn't bet on it personally. But it sure has paid off handsomely for the Baby Boom Generation born at the right time to take full advantage. The only problem is that very context is set within one of radical upheaval moving forward.

While chains come with the promise of jobs (yes, they do employ people), studies show that for every 2 jobs they create, they replace 3. The net is typically negative. The reason is that local demand remains relatively constant so they're effectively just replacing local businesses. There are likely studies out there refuting this, but the logic is strong. Chains typically pay less than do local businesses. Furthermore, more money stays local from chains. Profits stay local with the owners and small businesses are more likely to utilize the services of other local small businesses (ie accountants, advertising, etc.), which are typically in-house at the chains HQ or subbed out to another national brand.

The wealth gap you see today is this very dynamic in action. It isn't trickle down, but vacuumed upwards. Again, no value judgments, it's just good to be the one operating the vacuum. However, can this system sustain itself? I'm a capitalist, but I prefer a capitalist system that is healthy rather than one that eats its own tail. If people don't have jobs or aren't making enough money, then demand for goods diminishes. They can't even support these businesses. The profit at all costs motive drives quality of goods and most worryingly food down, leading to an assortment of direct and indirect externalities.

Then there is the question, of whether the skill set and training even exists (via education), to even begin thinking about "import replacement," and you start seeing the high degree to which all of these things are interconnected.

When Local Biz Has Competitive Advantage?

The only advantages I've been able to discern for local businesses competing against chains are 1) flexibility, in terms of the type of building/size of space they're able to operate within, and 2) quality of service. The ownership is local and therefore a concerned stakeholder in the neighborhood. If the neighborhood/context suffers, they suffer. All too often with national chains, there is little concern for the area, just profit extraction to shareholders elsewhere, who only care enough to ensure continued profit extraction.

Furthermore, and this is highly anecdotal, but repeated enough that I feel confident in deeming it empirical, the service is better with local businesses. Not all of course, but those that don't dare suffer their fate. They have to rely on good service and a personal connection with their clientele. Whereas chains, with their often miserable and underpaid staff, can rely solely on name recognition (and often, lack of real competition).

Local businesses need a neighborhood. Meaning, they need density nearby that can and wants to walk. they need locals and they need to be a "third place," a Cheers where everyone knows your name, you feel welcome, or the shop owner that is part businessman, part steward of the neighborhood as Jane Jacobs writes in Death and Life. Meanwhile, it's hard for many big chains to get into dense, resilient, complete, walkable neighborhoods primarily because they aren't needed.

As you can tell, it is impossible to talk strictly about retail without discussing the broader context of the economy (and its dynamics) as well as the variations of individual neighborhoods, where they are, where they want to be, and perhaps unwittingly, where they need to be in order to survive.

While the various dynamics of cities, with regards to transportation and commercial opportunities, may all be interconnected, it all starts with physical interconnectivity. And the places with the highest degree of walkability, are the places with the greatest interconnectivity, and therefore, demand, and with it predictable levels of resilience, permanence, and lasting value.

Discussing any subset of urbanism, such as retail, within in the tightly packaged vacuum that the corporate world of today appreciates, I believe to be the deeper issue that troubled Borys, Mouzon, and myself. And that is how Gibbs approaches the subject, within the static frame of today, that rules of retail are constant when they're anything but. Certain rules, might apply today, but not tomorrow. Here, but not there. Not in the everchanging world based within certain constants (like human emotion). Without, the entire exercise of setting rules all just seems so very superficial... kind of like a form-based code without regulating block size, which will be in my February D Magazine column.
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