Twelve Tips for a Recession-Proof Commercial District

Without a doubt, businesses in our commercial districts are feeling the pinch as consumers cut back discretionary spending and need to pay close attention to the bottom line, now more than ever. They can do this in one of two ways: either cut expenses or increase revenue (ideally both!). Unfortunately, district managers are in no position to substantively change store operations – so helping businesses cut operating expenses often lies outside of their purview. However, district managers ARE in a unique position to impact the commercial district as a whole, and as a result, they can help drive traffic to the district, minimizing losses to local businesses by attracting customers who are still spending.

In this economic climate, you have to find ways to make your district more competitive and attractive to customers who have fewer dollars to spend but more places to spend it. Here are a few tips to ‘Recession Proof’ your commercial district.

1. Scrutinize your district marketing budget, even increase it, but DO NOT eliminate it. In fact, now is precisely the time to take advantage of the fact that businesses from other parts of the community are cutting back on their promotions, which gives businesses in your district an opportunity to increase their market share. Find more cost effective ways to reach your target market. Are you collecting business cards? Are you developing a mailing list? Put your district mailing list to work (and dedicate time and effort to grow it!). If you don’t have an electronic newsletter, develop one. There are many low-cost on-line email newsletters like Constant Contact or I-contact where you can promote in-store and district events and sales.
2. Get a better sense of where your current (and desired) customers get their information, and target those media venues. A simple, well designed customer intercept survey can shed significant light on your target customer, what their needs and wants are, and what kind of media and publications they read so that you can better direct marketing dollars.
3. Use Social Networking as a tool to grow your customer base: Are there any on-line bulletin boards or list-serves for your community where you can tell folks about sales or in-store events? Do you—and your area businesses-- have a presence on Facebook? My Space? If you can’t answer these questions – do your research and use these resources now.
4. Support in-store events and promotional activities that give customers a reason to walk in the door of your retailers. If you’ve got a bookstore, conduct readings. If you have a specialty clothing store, put on a fashion show. If you’ve got a restaurant or coffee shop, support weekly jazz nights. Help your businesses find that competitive edge that will make a visit to their store more attractive than the next.
5. Find ways to share costs. If you haven’t done so already, ask your businesses to direct their marketing dollars towards a joint marketing campaign of the district. For example, your businesses might jointly contribute to hire a consultant who can increase the presence of your area businesses and the district as a whole on the internet.
6. Find cooperative ways for businesses to share costs and facilitate the contracting of services. When times are good, businesses shy away from cooperative spending because of the perceived hassle. But when every penny counts, businesses may be more willing to share expenses like office supplies, office equipment, software, printing, shipping, bookkeeping/order processing, etc.
7. Clean house, both inside and outside of the store. Help businesses get rid of their discontinued or distressed inventory. Use this down time to clean up, organize, and refresh the interiors of your local businesses. Or organize a volunteer event to give the street and storefronts a good cleaning over the course of a weekend. Contract out for pressure washing services to clean facades and windows, paint facades, sweep the streets, replace or remove broken façade or street elements. Then celebrate with a press release and event that brings people together – and be sure to get your local retailers involved by combining the celebration with a sales event.
8. Plan for the future. Use this time to re-evaluate your strategies and tactics and get ready to take full advantage of the recovery when the time comes. If you don’t have a work plan, now is the time to think carefully about how your organization is using its resources and whether those uses are strategic and effective. Be brutal in assessing yourself. What you have been doing in the past may no longer be appropriate…needs change and so should your annual work plan.
9. Renegotiate leases. Help your businesses renegotiate their leases – your relationships with property owners may help grease the wheels for this negotiation. This strategy works best when property owners have relatively low debt on their properties – as they are the ones in the best position to be a bit flexible because their debt payments may not be as high.
10. Help your businesses self-assess and address problems that are affecting their productivity. Effective shopping center managers perform Tenant or “Retail Audits” a few times a year. This is a valuable service that commercial district managers can apply to their district businesses. These audits are voluntary – and give retailers the opportunity to get an honest assessment of the store. By utilizing ‘secret shoppers’, you can gather information about the state of store’s maintenance, merchandise presentation, the appearance and knowledge of sales staff and management, and the status of their inventory. You can then gather this information and turn it into an evaluation used in a one-on-one discussion with the retailer. This will help identify opportunities for improvement and ways in which the district management organization can help. For example, if the tenant audit program reveals that customer service is a deterrent to shopping in the area, a district manager might find value in implementing a retail training program. If sloppy window displays are preventing someone from going inside area stores, you might consider hiring a visual merchandise expert to work with a few business owners to improve their window and merchandising aesthetics.
11. Help your businesses capture the benefits offered by online merchandising. A district management organization could develop something like Oakland Unwrapped (www.oaklandunwrapped.org), a website that gives local businesses an on-line venue to sell their goods. This additional revenue stream can help diversify revenue for local businesses and help them survive the downturn in local spending.
12. And finally, help your businesses mitigate other common risks to their survival. While surviving the economic downturn is at the forefront of everyone’s mind, it is pointless to implement all of the steps above if the businesses themselves haven’t prepared for an unforeseen emergency such as a waterline break or a fire on their property. Yes, the recession looms large and is affecting customer spending—but small businesses go under every day because they didn’t have a business contingency plan in place (with things such as contact information for their most important suppliers and customers stored off-site) to deal with these unforeseen emergencies. As a district manager, think through some turnkey ways in which you might help them develop these contingency plans. You should also think about what your district contingency plan would be if a larger disaster (such as a multi-building fire or a flood) affected your commercial corridor as a whole. (Would you know how to contact all of the building owners? Would you have a way of sending news alerts to all area businesses? Would you be able to get a team in place to quickly start a clean up process?) In this already-tough market, don’t let major or minor disaster unpreparedness be the final nail in the coffin for your businesses or the district!

As the Commercial District manager, you are in the best position to serve as a conduit and facilitator for collaboration. Your businesses need you now, more than ever. This is the best time to demonstrate your value, so take advantage of the opportunity!

As Spending Patterns Change, So Should Commercial District Management

The recession is not necessarily bad business for every commercial district. We do know that some retailers are benefiting from changing consumer habits. So what is doing well? Dollar Stores, McDonalds, Netflix, CostCo, and Forever 21 all benefit from what retailers call 'trading down.' ["Recession Proof Stores", CNN Money] Probably not what you want to hear if you are working to revitalize and upgrade your commercial district.

But there are ways you can work with the trend. As people watch more movies at home, eat lower cost food and buy in bulk to save cash, take heart in the fact that they are still spending money...just on goods that they percieve are lower priced, and on low-to no-cost entertainment. With a creative commercial distict manager, you can you take advantage of this trend on your corridor. Consider providing low- to no-cost entertainment options during store hours. Consider a 'music day' where you arrange for street musicians to perform in front of select retailers. Or organize your stores in a well publicized sidewalk sales event. This will not only drive retail traffic, but it can also help clear stores of stale inventory. This extra cash can then be funneled back into the business to help the retailer buy merchandise that IS selling. Marketing and promotion, in whatever form, is more critical now than ever.

Why do Affordable Housing Developers Struggle to Fill Ground Floor Retail Space?

It is such a noble instinct that sometimes goes awry. Affordable housing developers seek a way to diversify their income stream or respond to civic desire to create walkable mixed-use commercial districts. Why then do these ground floor retail spaces sometimes lie vacant for years?

This story is played out again and again across the country. Often, ground floor space in these projects is poorly designed, more of afterthought than a space planned with a retailer in mind. The space may have columns or an elevator shafts running through it, it may be too deep, or have inappropriately located front door that lacks visibility or access to parking. Affordable housing developers know housing - but the lack of knowledge about what makes a retail space work sometimes means that a retailer must fiddle with their format to make a space work. In markets where demand is untested, few retailers are willing to incur the additional cost associated with making changes to their store format. And in a market where there may be many vacancies - poor design may make a space significantly less competitive than another spaces, resulting in prolonged vacancy...a situation that developers and lenders would like to avoid at all costs.

Another frequent problem is the inclusion of retail space in areas that lack the pedestrian or vehicular traffic and/or visiblity to warrant retail at all. Consumer demand in a neighborhood may already be served by existing retailers - and the additional of more retail space on the market only creates a glut of space for which there is no demand.

Early due diligence, including outreach to retailers and brokers before and during design and development, and adequate commercial market analysis at the outset, is critical to prevent these problems.

Twitter - the future of downtown tourism?

Have you ever found yourself in a new city or neighborhood in search of a bite to eat or an off the beaten path store or coffee shop? Do you sometimes find it hard to avoid the known (i.e. Starbucks) for the unknown and perhaps difficult to find (i.e. the quaint neighborhood coffee shop).

Portland, OR is one of the first cities to begin to harness Twitter - a relatively new technological tool (to most of us at least) in a way that supports its tourism efforts. Twitter is sort of like an email list-serve that you can access from your phone. If you find yourself visiting Portland, for example, you could, using Twitter, easily ask questions about where to go and what to do by texting from your cell phone. Answers would be provided immediately from the staff of Travel Portland. Could this be an effective tool for downtown districts hoping to connect shoppers with retail stores in real time? Check it out for yourself... http://twitter.com/travelportland

How are Retailers are Coping with the Recession?

These days, commercial district managers are struggling to figure out how to help local businesses survive during these difficult economic times. If you are one of those, a good New York Magazine article worth the read is What will it Take for Small Businesses, Shops and Restaurants to Survive? It discusses what many of you are wondering - how are small businesses coping as people cut back on their discretionary spending? New York magazine surveyed 100 businesses of all kinds throughout the five boroughs to find out. Reduced pricing, cheaper cuts of meat, adding lower cost items (like burgers) to the menu, more careful selection of merchandise that leaves out less popular items...all are strategies that businesses are employing to keep customers coming back to their stores. There also seems to be a return to old fashion customer service - taking extra care of the customer, greeting the customer at the door, taking the time to find out customer needs and wants...these are the tactics that will distinguish retailers that survive from those that don't.

Interestingly enough, there is a silver lining for some businesses. I can personally attest that IKEA is doing extremelly well - these days I'm there almost every other day picking up items for a minor renovations in my apartment! Other retailers are also showing gains, Walmart, Forever 21 and 99 Cent stores among them. Stores are also considering lower cost ways to reach their customers - see my post on Pop-Up stores for more on that...

If you are a commercial district manager struggling to find ways to help your local retailers - consider compiling a list of 'recessionary tactics' and including it in your next electronic newsletter and/or sponsoring a panel or seminar of merchants that are finding successful ways to cut costs.

Image: A restaurant in Astoria, NY - a great commercial district in Queens, NY

What We Can Learn from the 'Single-Owner' Approach to Tenant Mix

Today's New York Times had an interesting article on Northeast Alberta Street in Portland, OR, a now thriving mixed-use district of once underutilized "cement-block and wood buildings."

According to the Times: "Much of the district’s commercial awakening can be traced to Roslyn Hill, a civic-minded landlord who began snapping up the street’s hodgepodge of cement-block and wood buildings in the early 1990s and renting them to gallery operators and designers. Ms. Hill laid down new rules: no metal bars on windows and no locked doors during business hours."

I immediately thought of Dana Crawford, a similar visionary who began purchasing buildings in Larimer Square in Downtown Denver in the late 1960's. People thought she was crazy when she starting buying property, improving buildings (and the street), and began leasing spaces to antique stores and other interesting uses. Now, this woman REALLY understood the concept of creating a destination. Her tenanting efforts were further supported by promotional activities that reinforced her unique brand, and gave people even more of a reason to visit and shop at Larimer Square. Today, the area is on fire. Consider that the Real World Denver was filmed in the area, and you get a sense of how far it's come. The way in which these 'single-owner' commercial districts function, and the way in which they so carefully control tenant mix (not always renting every space to highest bidder to achieve a more interesting mix of businesses) is so similar to traditional shopping centers that it's difficult to overlook.

Whether you agree that this is 'success' or not - the principal still holds...managing merchandise and tenant mix in a strategic and thoughtful way is a critical piece of the commercial district revitalization puzzle.

Image: Larimer Square, Denver, CO

Helping your Businesses Cut Costs without Losing Customers

Today I read in ICSC's Shopping Centers Today Weekly that Simon Property Group, one of the largest shopping mall owners in the country actually posted a 28.6% increase in net income. I almost stopped breathing. How was that even possible in this economy?? Well, to hear their CEO David Simon tell it "we recognized well over a year ago that the economy was deteriorating and adopted aggressive cost control measures, significantly reduced our development spending, and enhanced our liquidity position." In short, they cut costs.

As a commercial district manager, you are in an excellent position to help facilitate discussions between merchants about cost savings measures. When times are good, businesses may shy away from cooperative spending because of the perceived hassle - so now may be the right time to suggest cooperative ways for businesses to share costs and facilitate the contracting of services. When every penny counts, businesses may be more willing to share expenses like office supplies, office equipment, software, printing, shipping, bookkeeping/order processing, etc. They might also be more interested in participating in sales events that help them clean house and get rid of their discontinued or distressed inventory.

Another idea is to see if you get them to share the costs of a professional cleaning service for the inside of their stores. We often talk about getting a street clean to attract customers - but what happens on the inside of the store is just as critical. So now might also be the time to help a critical mass of businesses hire a cleaning service to clean up, organize, and re freshen their inventory and store, making your district as a whole more competitive.

Is There a Silver Lining for Retailers in this Recession?

Shrinking customer spending is hurting retailers everywhere. For commercial district managers interested in helping retailers through these difficult times, finding a way to help is at the top of their 'to do' list.

A few recent articles in the NYTimes got me thinking, is there a potential silver lining to this recession for retailers? While sales may be falling, the silver lining is that occupany costs (i.e. rent - which for most retailers should be between 8-12% of gross sales) are on the decline in many markets as well. That is because as some businesses close shop or consolidate, landlords are more and more willing to lease on more attractive terms just to fill their spaces. Keep in mind that this tactic works best with owners who have owned their buildings for awhile, and therefore have lower debt service payments than a recent owner who bought at the height of the market. (See NYTimes article: "Recession Has Landlords of Retail Tenants Extending Discounts of Their Own" .) And for businesses with the capital and ability to sign long-term leases (see the NYTimes article: "Putting Capital at the Top of the Menu") there are opportunities for unique spaces at prices that would not have been available before the downtown.

So if you've got a business whose lease is ending, consider helping them renegotiate their lease or helping them move to a space that may be more suitable and maybe even more productive for them in the end.