Retailers Spill the Beans about Finding Opportunities for Growth in Urban Markets

By Larisa Ortiz Pu-Folkes

Larisa serves on the ICSC Alliance Planning Committee. Larisa Ortiz Associates was also one of the ICSC Alliance event co- sponsors.

This morning was the culmination of New York’s ICSC Alliance Program entitled “Local Chains Strike Gold in Emerging Markets.” The Planning Committee was very excited to have a great keynote and thoughtful panelists who provided real insight into how New York-based chainlets are growing and making site selection decisions in urban markets. The event included keynote speaker Aaron Fleishaker, Vice President of Real Estate for Fairway Foods, and three panelists, including Denine Pappalardo, VP of Sales for Carol’s Daughter, Jack Falack, President of Cookie’s Children's Department Stores and Seth Datz and Jason Richelson, Owners of The Greene Grape.

Each panelist represented a retailer at various stages of growth and maturity. Carol’s Daughter is a high-end cosmetics company serving an African-American clientele (investors include Will Smith, Jada Pinkett-Smith, JZ and Mary J. Blige) with nine retail stores and over 400 points of sale throughout the nation. Cookie’s Department stores is a children’s clothing store that serves an urban clientele in the outer boroughs, and The Greene Grape is an upscale wine and gourmet food chainlet with three outlets in the New York area. The panelists provided attendees, a mix of brokers, developers, and economic development practitioners with thoughtful insight on how they make their site location decisions in urban markets, whether these markets include 125th in Manhattan, Fort Greene in Brooklyn, or Fordham Road in the Bronx.

So, what did we learn today from these retailers with the foresight to establish themselves and focus on growth in urban markets? The lessons were simple and varied…

• Retailers who make money in urban commercial districts understand the value of density. They get that customers, in many cases, are not driving to their stores and are less mobile than suburban customers. These retailers see this as a ‘pro’, rather than a ‘con’. Aaron Fleishaker of Fairway Food says “the urban customer is the most loyal customer.” Another panelist, Jason Richelson of The Greene Grape, a wine and gourmet food chainlet with three locations in Brooklyn and Manhattan, agrees, ‘our customer can’t jump in a car so easily to get to the competition.’ He goes on to add that there is often less high-quality competition in urban commercial districts, which puts his stores at a distinct advantage. Although the dynamic of less competition may be changing as retailers ‘discover’ urban markets, the retailers on this panel know that the urban customer doesn’t have so many options, and as a result is very loyal to businesses that provide a quality product in a convenient location.
• These retailers are often much more intuitive about their site selection decisions. Every retailer on the panel mentioned that great foot traffic is an excellent barometer of a neighborhood’s retail potential, but when asked whether they do research into pedestrian counts before making a decision to open a new store, Falak, the owner’s of Cookies, a regional children’s department store, said flat out “no”, and his colleagues seem to agree. Instead, they seem to get to know a neighborhood first by walking the streets over and over again to see if their target customer is there. When the Greene Grape, for example, considered space in Lower Manhattan’s Financial District, the fact that thousands of pedestrians passed the location every day was less of criteria for the owner than the fact that more and more of the buildings were being converted to residential uses. “We knew that most of the people walking in front of the store were not coming in, they were getting off the train and going straight to work. But we did see families and strollers and that made us believe we could be successful” says Richelson of the Greene Grape.
• Successful urban chainlets are flexible when it comes to space. They eschew formulaic floor plans favored by national chains in favor of finding spaces (any space really) in the RIGHT location. Fleishaker says ‘if you had to wait for the right space, you would be waiting for years and the market would pass you by.’ He mentioned an experience he had while working with Modell Sporting Goods during their period of rapid expansion in the New York and Philadelphia markets. The retailer was looking at spaces in Bay Ridge, Brooklyn, ideally in a location as close as they could get to Century 21, another New York-based chainlet and well-known discount department store. They eventually found an old theatre and negotiated a favorable lease with the landlord that included a second floor balcony that had not been used in years. Modell’s renovated and put in an escalator to the second floor – in the process acquiring additional square footage for a cost significantly below market rent. Basically, they did what they could to make the space work, and in the end, ended up within a block of Century 21 - exactly where they wanted to be. Most national chains would have rejected the space that Fleishman and his team turned into a very profitable store for his company.
• There is no ‘one size fits all’ model for determining how to use precious capital. In the case of Cookies, their business model is one that lends itself to owning buildings outright. “We are our best landlord” says Falak. As a children’s apparel store, his space needs are larger and tenant fit out is less expensive than his fellow panelists, so spending his capital on real estate made sense. In the case of Carol’s Daughter and The Greene Grape, they both have made strategic decisions not to tie up capital in real estate at this time in favor of using capital for tenant improvements. “We are less interested in being a landlord than in finding space and fitting it out to the level that our customers have come to expect” says panelist Denine Pappalardo of Carol’s Daughter.

These retailers are really helping to pave the way for growth in underserved urban markets. Learning how they successfully maneuver these markets and turn a profit is a lesson that will help all of us interested in attracting a greater variety of retail to our commercial districts.

Advisor Insights: Putting on a 'Taste of' Event in your Commercial District

'The other day I had the opportunity to attend the Union Square Partnership's Harvest-in-the-Square Event. Union Square Partnership is a business improvement district in Manhattan well-known for its critical mass of wonderful world-renown eateries. Now in it's 14th year, Harvest-in-the-Square is the Partnership's marquee fundraising event that showcases more than 50 participants who provide ticket holders with small 'tastes' from their restaurants or bars. Proceeds from the event benefit neighborhood programs and the beautification of Union Square Park. With some of the city's most highly regarded food and drink purveyors in participation, event tickets begin at $125 dollars for general admission and $400 for VIP tickets. Not everyone can charge tickets that high...but it does show that people will pay for the privilege of eating great food...


The event not only helps with fund raising, it also helps to further differentiate the district as a foodie destination - and is very much in keeping with a district branding strategy that has served Union Square so well over the past decade.


In my community of Jackson Heights, Queens - also know as a foodie-destination among those seeking authentic ethnic food, we put on the Jackon Heights Film and Food Festival (now it it 4th year and going on this weekend, October 24th! Check out our website at www.jhfff.org for more info.) and so I was particularly excited to see the mechanics of this event in action. Every year our event team learns a thing or two that helps improve the event, a program of the Jackson Heights Community Journal, in a way that better meets the objectives our sponsors and participating restaurants.


Here were a few good ideas that I took away from this event that I'd like us to incorporate next year:

• Each participant chose only one or two select dishes for sampling. This made preparation and serving MUCH easier for the restaurants. The chosen dish, or in some cases drink, was described in mouth-watering detail right on the restaurant signage. The signage also helped ticket holders figure out what they wanted to try more easily than asking the server.
  
• Small single bite plates were prepared for the taking and laid out attractively on serving tables. This meant that tickets holders did not have to wait in line to be served. It was a very efficient method of serving food that also helped to ensure simple rationing.
  
• Each table had very tall attract harvest decorations that lent an nice elegance to the festivities.
  
• There were two sit down eating areas and some standing tables - but for the most part the tastes were only a bite or two - so sitting was not required.
  
• There was a red carpet for the arrival of VIP's...so very New York! That and the roving tv cameras
  
• There was lots of support staff (easily identified by their colored t-shirts) on hand to ensure that people were not walking around with empty plates if they had trouble finding a garbage right away.
  
• And finally, pick only the best...the food vendors at this event were only those known for high quality.

There is obviously so much more needed to put on a great food tasting event...but as always, the devil is in the details...so keeping an eye on quality and planning an event that works for both you and your vendors is critical.

Helping Small Businesses Improve Their Bottom Line

By Patricia Blakely

Patricia Blakely is the Executive Director of The Merchants Fund and contributor to this blog. She describes her job as a cross between the Wizard of Oz (“Ignore that Woman behind the curtain.”) and a “Buy Local” advocate on steroids.

How does a small local coffee shop increase food sales by 50% and decrease food costs at the same time? Small

businesses often struggle to get costs under control – and finding ways to finance improvements that ultimately affect the bottom line is what The Merchants Fund, based in Philadelphia, is all about.

The Fund gave Jocie Dye of InFusion Coffee and Tea in the Philly neighborhood of Mt. Airy a grant to take on a variety of investments and improvements to the store. For example, many of you might not be aware, but coffee houses often run air conditioning even during the winter months because of the heat generated by the machines. The Merchants Fund grant allowed Jocie to install operable windows up high so that she could take advantage of cool days and save money. She also got serious about food quality and hired Jill Fink, owner of Mugs Shots Coffee House in Manayunk (also a TMF company) and Angie Vendetti from Fairmount to review all their food sourcing, employee procedures, improve the green profile and basically shake everything up! All of them are members of the Independents Coffee Cooperative which is an area consortium committed to fair trade and a support group for small business.

And Then There was the Hand Dryer…

Together, they found a number of ways in which Jocie could improve her product sourcing and reduce costs from both a price and environmental perspective. In the process, you can’t overlook the small things. Take hand driers, not only are hand driers greener than paper towels, but Jocie’s staff found that it was also impossible to keep the bathroom well stocked. The small staff was always running to the restroom to replace the towels. It happened during my visit just to prove it! They also added a changing table to make the place more family-friendly.

The results of Jocie’s efforts speak for themselves, a 50% increase in food sales and decreased food costs!

The Merchants Fund has helped other small businesses with similar investments. For example, we also helped Dan Thut, the owner of Greenline Café purchase point-of-sale software so that they could get control of supply and demand.

We were excited to have a hand in helping these small businesses, but in the end, what's cool about this is how all these little companies work together and support each other.

Using Google Adwords to Promote Your District

Some of you may be thinking, what are Google Ad Words? If you've ever done a search on Google, you'll notice that advertisements pop-up on the right hand side or at the top of the screen depending on what you search for. A search for 'New York restaurants', for instance, will bring up the 21 Club, a restaurant in mid-town Manhattan as a 'sponsored link'. You might wonder how that happened. The 21 Club likely paid a pretty penny to be linked to the search phrase 'New York restaurants', and every time someone clicks on the 21 Club restaurant link (known in industry parlance as 'Pay Per Click'), the restaurant pays Google for the privilege of advertising on the Google search results page.

For commercial districts, Google AdWords can be a useful tool. Consider a district interested in promoting a growing (or existing) restaurant dining niche (something pretty common among the communities we work in). My firm recently worked on a Google Adwords marketing campaign for a business improvement district in Westchester County, New York where Google AdWords campaign were used to drive traffic to the BID's website and their "Downtown Dining Stimulus Package" (a clever play on the stimulus package making the news at the time). Whenever anyone search for "Westchester Restaurants", the BID's ad would appear at the top of the page. By clicking on the sponsored link for the BID, individuals were able to print dining coupons redeemable at participating restaurants. Google later informed us that this program was among the more successful ad words campaigns they had ever sponsored. Our Google AdWords campaign had a click through rate of almost double the typical AdWords campaign.

While this campaign was successful, there are clearly do's and don'ts with this technology. I was excited to see some of these outlined in an article in today's New York Times entitled "Real-Life Lessons in Using Google AdWords". I encourage you to give it a read before starting a Google AdWords campaign....

Tales from Philly: Small Business Marketing at its Finest

A few weeks ago I had the distinct pleasure of interviewing business owner James McManaman, owner of Absolute Abstract, a ‘frameless’ art store with two locations in Philadelphia, one on 13th Street and the other on East Passyunk Avenue where I was doing some work with the local BID.

James is an excellent businessman who puts into practice all the strategies that we consultants often preach about.

Location, Location, Location
James opened his second store on East Passyunk after attending an evening social event sponsored by the East Passyunk Business Improvement District (EPBID). It was an eye-opening experience for the entrepreneur, who knew about the neighborhood, but professed to being surprised at the changing neighborhood demographics. With its evening traffic of restaurant-goers, the district was a perfect fit for his inexpensive frameless art. It met the need of potential customers who were wandering the streets in the evening looking for something to do before or after dinner. In a stroke of good luck, he found some space in the district that was ‘retail ready’ – it had been a gallery before going vacant and needed very little, if any tenant improvements. What a coup!

Advertising in the 21^st Century
James understands that his that the process of building a clientele is organic. He doesn’t believe in too much advertising, instead choosing to donate art to events in the neighborhood and building good will that generates buzz for his business. He also piggy-backs on EPBID’s evening social events by raffling off art and providing gift bags to participants and truly understands the power of great visual merchandise display. He takes extreme care with his window displays – changing them every three days!

Also critical to James’ success is his email distribution list of 3,000 customers. He makes every possible effort to get every person’s email and is the quintessential provider of customer service. He makes every effort to greet every single customer who walks into the store, telling them first about his strong concept of ‘frameless, affordable, custom-sized’ art. You can’t be in the store for more than ten seconds before hearing these buzz words. As a customer, I was immediately intrigued (anything ‘affordable’ intrigues me these days – and I’m not alone!).

James also created a website where customers can purchase art and provides free consultations. In fact, customers can send a picture of the wall they want ‘designed’ and he will create an assemblage of art to meet the customers needs. What a great concept!

It’s Not Just the Store, It’s the District
James understands that his business is not successful in vacuum. He was instrumental in helping to form a merchants group at his first store in Midtown Village, and is at it again along East Passyunk. He knows the power of district marketing and is pushing for a map of the district that can be distributed in all stores. He is also committed to helping his next door neighbor (a long standing district merchant) improve their window display. On the day he went to speak with the owner, he found himself standing in the near empty store for 20 minutes before the merchant came to help him. Undeterred, he plans to go back and find a way to help the merchant, while ensuring they are able to ‘save face’ even as they accept his help. This from a man that won’t let customers go ten seconds without being recognized and greeted.

Overall, I say kudos – and what a fantastic addition to this already bustling commercial district!