Farmers Market as Downtown Revitalization Tool

Nur Asri is an associate at Larisa Ortiz Associates

Fall is upon us and for LOA that means the work on a second round of New York State Downtown Revitalization Initiatives is set to begin. In the past year, our work has brought us to smaller, more rural towns upstate and around the country and with that, came many visits to local farmers markets. Farmers markets, or “multi-stall markets at which farmer-producers sell agricultural products directly to the general public at a central/ fixed location” are not a new phenomenon. In fact, marketplaces have been a key economic, cultural, and social component of villages, towns, and cities for thousands of years. Today, smaller downtowns, are seeing a resurgence of farmers markets as economic revitalization tools, particularly in areas with existing agricultural assets. In this post, we discuss the potential benefits that can be reaped from a downtown farmers market and actions that can be taken to ensure the most effective implementation of one.

Farmers markets are community porches

Many of the farmers markets we have observed in our work, whether intended or not, have evolved into the “front porch” of the community and function as key gathering places. Residents and visitors from various walks of life convene at the market through a common interest for fresh, local produce resulting in unique social interactions.

Morganton Farmers Market at the retail core. Photo: LOA

In some cases, farmers markets have also been key in activating formerly underutilized spaces downtown and turning these into active public spaces. From old warehouses to underused parking lots and vacant land, farmers markets have the power to activate these spaces by introducing a new public use and attracting new users of the space.

In Morganton, NC, for example, hosts a mini farmers market every Wednesday in the warm months on a field that was simply sitting vacant by the retail core of the downtown. Meanwhile, in Springfield, OR, a year-round farmers market is hosted in a former church property that was purchased and refurbished with a 3,000 SF event space.

Farmers markets promote health and wellness

The seasonal freshness of fruits and vegetables sold at farmers markets, the in-built nutritional value of goods sold, and the direct linkage made between food producers and consumers, makes the markets fitting platforms for health promotion and nutrition education.  In addition, consumers around the world are also gaining a new appreciation for and connection to their food producers, so farmers markets are the much-needed platforms to further grow support for local food systems.

In addition, farmers markets that offer SNAP programs also expand low-income households’ access to healthy foods, ensuring that all local residents are able to reap benefits from the healthy offerings at the markets and raising nutritional levels among low-income households. Additional free programming such as cooking and nutrition classes offered at farmers markets can often expand the accessibility of healthy local produce by educating those households that are unfamiliar with preparing fresh, wholesome meals.

Now, for the economic benefits.

Farmers markets are visitor attractions

Farmers markets are also great downtown anchors that attract hoards of residents and tourists for hours weekly. Naturally, this raises foot traffic that may otherwise be lacking in smaller downtowns. In Springfield, OR, for example, the famers market attracted an estimated 30,000 people and more than 40 regular vendors in its first year of opening alone.

In a smaller, rural downtown, this regular stream of pedestrian traffic to the farmers market translates to foot traffic into neighboring stores and restaurants, especially when the farmers markets are held on weekends and customers dwell times are more flexible.

Farmers markets add to downtown retail mix

With more traditional farmers markets that host fresh produce and specialty food vendors, these markets essentially act as the local grocery store. In more rural parts of the country where the grocery store is typically a big box Walmart or Wegmans or Food Lion that requires driving 15 minutes outside of downtown, the farmers market can be a solution to bridging a hyperlocal retail gap.  Its location, typically in a downtown parking lot, means that it is far more convenient for residents in the area to grab a carton of milk or spare eggs. Not to mention, the freshness of pastries and bread sold at the farmers market compared to the large grocery store.

As consumer preferences shift, even grocery stores are replacing their aisles with even more fresh, local produce and organic goods – goods that are already filling the wooden crates at farmers markets. In 2008, local food sales were estimated to be close to $5 billion and farmers markets are naturally aligned to leverage the growth in this demand (if it's not already being met!).

Farmers markets function as business incubators and accelerators

From Farmers Market vendor to.....

Finally, and most importantly, farmers markets cut the middlemen who typically distribute farmers’ and artisans’ goods, therefore raising profit margins for the producers. The markets also act as business incubators by providing the opportunities for producers and makers to first test products directly with consumers and get real time feedback thru product samples – all at a much, much lower cost than either setting up a storefront or selling online. The Fresh Friday Farmers Market in Allentown, PA, for example, has provided increased business opportunities for local farms and food businesses proliferating in the LeHigh Valley.

...Storefront! This is Cedar Rapids Whiskey Sauce Co. in Ely

Upon finessing and growing the demand for their products and services, many farmers market vendors have then grown big enough to be able to set up brick-and-mortar stores downtown. For downtowns that lost retail tenants in the last economic downturn, this business incubation function of farmers markets may be ideal to helping fill those storefront spaces. For example, in Richmond, VA, a vacant storefront that was formerly occupied by a bakery was recently bought over by a pastry chef who sells pastries and baked goods at the local St Stephens Farmers Market. Although the owner will essentially be replacing goods that were already on offer by the previous tenant, the farmers market start has enabled her to refine her merchandise selection based on early consumer feedback.

Other examples of farmers market vendors that have moved on to brick-and-mortar include Blacksauce Kitchen that made its start at the JFX Farmers' Market in Baltimore before recently opening a shop that serves customers one day a week. In Iowa, Cedar Rapids Whiskey Sauce Co last year opened a shop on Dows Street in small downtown Ely after making its start at local farmers' markets and several HyVee grocery store locations.

How to ensure farmers markets really become downtown revitalization tools:

Unfortunately, not all farmers markets have been powerful downtown revitalization tools. There are a number of steps that need to be taken to ensuring that the benefits we discussed above can be achieved.

Site your farmers market in or near your retail core

Geneseo, NY Farmers Market off Main Street by local theater.

Firstly, the location of the farmers market is crucial to driving spillover foot traffic from the market to downtown storefronts. If the market isn’t located in the retail core of downtown, shoppers are unlikely to stop by adjacent storefronts after perusing the market. In Morganton, NC, for instance, before introducing a mini market on Wednesdays on an empty field at the retail core, hosted its weekly farmers market 0.5 mile away, far away enough (given the hotter climate and elevations) that customers passing through the farmers market would have to get in a car before being able to get to downtown. And we all know, once your customer gets in the car, they’re as good as lost. The farmers market wasn’t quite an anchor for downtown businesses until it was introduced right smack in the retail core.

Locating farmers markets in the retail core will be especially crucial for downtowns that have residential uses located at the retail core or within walking distance of downtown. Having direct and easy access to a large residential shopping demand is crucial to the success of vendors, and of course if vendors succeed, they are likely to return to sell goods, maintaining the critical mass of vendors needed to attract customers and ensuring overall sustainability of the farmers markets.

Provide supportive transportation infrastructure

City of Palo Alto installed bike racks on the
street used for weekly farmers market.

If your downtown is dense and walkable and the bulk of your customers are residents who already live in the vicinity, then supportive infrastructure to help customers get to the farmers market might include wide sidewalks, pedestrian crossings, wayfinding signage, bike lanes and bike parking facilities, and bus stops.

On the other hand, if your downtown is small and much more rural with most customers only able to arrive by car, then convenient and well-maintained parking lots should also be made available to support a “park once” downtown for customers and vendors to visit the farmers market and other businesses all at once without having to worry about moving their cars.

Complement the market with programming

Portland, OR Market Music event showcases local acts.

Educational community programs and local music acts are some activities that accompany farmers markets across the country and these are great ways to further engage local residents and visitors that pass through. The best way to find out what types of programs the local community needs is to simply carry out an intercept consumer survey.

At the same time, programs should also be organized to help vendors grow their business and following. The Neighborhood Economic Development Corporation in Springfield, OR, organizer of the downtown farmers market is an owner of properties downtown. Once vendors at the market reach a stage of expansion that requires a larger and more regular storefront, NEDCO is able to rent spaces it owns at lower rates to support these businesses.

Operate the market during accessible hours

Depending on the downtown and the number of major employers in the area, it may be effective to hold farmers markets on weekdays. In such cases, vendors may leverage the existing daytime worker market demand during lunchtime. On the other hand, if the weekday daytime population downtown doesn’t exist, then a weekend market would make more sense. 

Actively brand and market

Strong local campaigns to bring awareness to and promote the farmers market are crucial to establishing a new downtown anchor. In Livingston County, NY, (where we’re about to embark on a Countywide Commercial District Assessment), a Find It In Livingston campaign encourages shoppers to seek local produce and goods by actively announcing where and when downtown farmers markets happen on the county economic development website. The Charles City Downtown Farmers Market similarly participates in the ‘Buy Fresh, Buy Local’ campaign, a comprehensive marketing program for farmers selling directly to consumers, restaurants, grocery stores and other institutions.

Ensure strong administrative capacity

As with all downtown economic revitalization initiatives, administrative capacity and resources are required to sustain farmers markets. In addition to support from the City, buy-in from local residents is essential to carrying out a successful market. While the City is able to support the market in procuring a vacant site or supplying sanitation facilities and power, support from local businesses and individuals will ensure sustained customer traffic and vendor participation.

The non-economic and economic benefits of farmers markets might tempt you to implement one downtown. However, they must not be assumed to be simple revitalization tools. Farmers markets are complex efforts that often require the cooperation of a wide range of stakeholders (existing business owners, residents, community leaders), thoughtful planning, extensive programming and marketing, and of course funding! Who knows what this second round of funding from New York State will bring to the downtowns we’ll be working with this Fall but we will be keeping a look out for those farmers markets and keeping our eyes peeled for what works for them!

If you already have a farmers market downtown and are looking to assess its impact, take a look at this economic impact study of the farmers market in Downtown El Paso: http://downtownelpaso.com/economic-ripples-felt-from-downtown-artist-and-farmers-market/

How to encourage walking within your commercial district

Nur Asri is an associate at Larisa Ortiz Associates

Pedestrians in downtown NY. Photo: Kars Alfrink via Flickr

In a recent study by Robert J Schneider, of the Department of Urban Planning at University of Wisconsin-Milwaukee, two distinct design features were identified to significantly impact shoppers’ choice to walk along a main commercial street rather than drive.

Sure, we’ve all heard that curb extensions, street trees and transparent ground floor facades all play an important role in creating walkable environments but no research study has associated urban design features with the choice to walk rather than drive. Therefore, in order to understand the relationship between urban design and the choice between walking and driving, Schneider tested roadway variables such as the convenience of parking, sidewalk and buffer widths, corner curb radius, number of lanes, traffic volume and speeds. 

After controlling for personal travel and socio-economic characteristics, the study by Schneider identifies two significant design features that are associated with shoppers choosing to walk versus drive between activities in a commercial district. Most importantly, given that survey respondents included in the study all drove to the district, the findings serve to reinforce the ‘park once’ downtown strategy.

1. Fewer driveway crossings

Schneider’s study found that respondents were significantly less likely to choose to walk when the main commercial drag had more driveway crossings. These crossings were perceived as barriers to walking as they added to walking travel time. In fact, every 10 additional driveway crossings was perceived as adding another minute to walking travel time. 

Case Study: Morganton, North Carolina

Earlier this year, we worked in Morganton, North Carolina. A beautiful, small downtown with a commercial core with about 1,300 linear feet of ground floor retail and office space. We found, anecdotally, that customers in the district could easily cross shop at the retail core because there were few barriers to walking, including only two driveway crossings, as shown below.

In addition, one of these driveway entrances is slightly elevated, requiring vehicles to slow down before making the turn into the driveway, increasing safety for pedestrian shoppers who are already walking and browsing up and down the commercial drag.

What was also interesting was the moderate correlation between driveway crossings and annual average daily traffic volumes. This begs the question of average daily traffic as a critical retail site selection criteria. Sure, more cars passing through the street increases visibility of the retailer but if this means fewer shoppers on the street willing to walk over to your business (i.e. sidewalk foot traffic), then what’s the point?

2. Lower speed limits

Next, Schneider also found that the posted speed limit had a significantly negative association to walking within the shopping district. The lower the posted speed limit, the more respondents walked within the shopping districts.  In fact, every 5-mile per hour higher speed limit was found to be equivalent to between a minute and 75 seconds of additional walking time – again, increasing walking time for pedestrians.  

In many downtown districts, the 25mph speed limit has become a common traffic calming action to take to increase comfort levels for pedestrian shoppers. Here in Brooklyn, on Atlantic Avenue, the slow zone has a posted speed limit of 25 mph (in addition to retimed traffic signals to a 25mph progression) to help check motorists’ speed.

Of course, Schneider recommends that other complementary changes be made in order to increase walking within shopping districts. Past studies have alluded to compact and diverse developments leading to increased walking. According to many studies, in compact and dense areas, walking distances between different buildings and stores are short and these short distances are a main reason why walking is a more common mode of transportation in traditional urban shopping districts than in newer suburban retail areas where buildings are farther apart.

In support of this, Schneider’s study also found that when travel times for either walking or driving are the same, for short distances, walking is still preferred over driving. However, when travel distances increase and walking times become much longer than driving times, driving has an advantage over walking.

Finally, mixed uses, mixed jobs and mixed population within an area are all things that enhance walkability, and oft-repeated, that can now be further complemented by the proven design features of fewer driveway crossings and lower posted speed limits.  

Read: Schneider, R. J. (2015). Walk or Drive between Stores? Designing Neighbourhood Shopping Districts for Pedestrian Activity. Journal of Urban Design, 20(2), 212-229.

Prospecting White Elephants: Some Thoughts on Pop-Up Brokers

Dan McCombie is a research associate at Larisa Ortiz Associates

Last week I read an article by Matthew Flamm in Crain’s Business where he talked about the rise of a class of real-estate brokers specializing in pop-ups for vacant spaces. This struck me as an interesting development since we have several entries on the blog discussing how vacant retail storefronts—otherwise known as White Elephants—can have detrimental effects on the health of neighborhood downtowns. My understanding is there are two main reasons for this.

First is that it results in shorter shopping trips. A blank storefront can be an uninviting visual eyesore that discourages foot traffic. Perhaps it’s located in the middle of a corridor in such a way as it feels like it segments it into two unrelated districts.

Second is that it reduces the number of shoppers visiting the district. A hole in the tenant mix reduces retail density, creating one less reason why a shopper might think to make a trip. Maybe a coffee shop closes down next to a bookstore, and this prompts people to patronize the bookstore less.

Source: Thisopenspace.com

There are plenty of other reasons too. Vacancies are obviously an issue for landlords because they represent lost revenue with potential snowball effects. Imagine the impact when a large mall anchor like Nordstrom or Macy’s decides to close up shop. Once it’s out, it’s only a matter of time before the smaller in-line stores see their sales diminish and also start disappearing. It’s an extreme example but demonstrates why vacancies are problematic, and also why some landlords might consider subsidizing certain tenants or encouraging pop-ups to retain a healthy tenant mix.

So the presence of pop-up brokers sounds good, right? In effect, they provide a real service to commercial corridors by rounding up all the White Elephants into a directory and curating them to prospective retail tenants. These tenants can be small start-ups looking to test the market, e-commerce retailers looking to transition into brick-and-mortar, or more well-established brands who are looking for an experiential pop-up opportunity to engage their customers in new ways. And whether or not you believe we’re in the middle of “retail Armageddon,” it’s a creative solution for the growing number of vacancies in neighborhoods like SoHo where the perception is this trend will only continue.

Available vacancies clustered in lower Manhattan
Source: Thisopenspace.com

And these brokers have managed to turn it into a process as seamless as booking a hotel room or an uberPOOL. In past posts we’ve advocated that commercial district managers take on the task of populating vacant spaces; but now we’re seeing a quintessentially private sector solution which is fast, easy, and done on an app in minutes. And that has given me pause….

…It feels a bit inaccurate to say this is a solution for ailing districts and long-vacant spaces in search of a tenant. Perhaps it’s true that was part of the initial inspiration, but now it sounds like it’s becoming a high growth industry unto itself. I think Matthew Flamm’s use of Airbnb as the residential analog to these new companies is appropriate. My initial understanding of Airbnb is that it was just another component of the growing gig economy and a way for cash-strapped Millennials to make a few extra bucks off their couch, their car, their whatever it may be. But now I understand it can be an agent for speculation too—like when the gap between a rent or mortgage payment and the going rate on Airbnb becomes too great for people to turn down. I’m not taking issue with anybody who might purchase a condo with the express intention of having it listed on Airbnb as an investment, but I am expressing caution about companies that see an advantage in maintaining a steady supply of vacant storefronts, or landlords that believe they can make a better profit through punctuated short-term rentals. It feels like profiteering off the White Elephants.

Downtown revitalization is not in the mission statement of these pop-up brokers. One explicitly states on its website that prospective tenants should be wary of inquiring after un-vetted spaces precisely because they’re probably “situated in low footfall area[s]” or have “zero potential for retail or brand marketing.” The assertion suggests their portfolio doesn’t include spaces that are unattractive, but is rather a professionally curated assortment of opportunities in a pay-to-play scenario. Again, I’m not decrying a company’s attempts to distance itself from the competition, but trying to make the distinction between a company providing a service to an individual client and a district manager looking out for the health of the larger district. That being said, the potential for dynamic shopping and unexpected retail under this pop-up model sounds fun. And I’ve read many broker success stories about clients who turned a successful short-term rental into a long term lease agreement.   

  

Most of these pop-up brokers are active in dense urbanized areas. If you’re a commercial district manager in a town of less than 20K, it might be a minute before you see a private pop-up broker looking for vacant spaces, and so this screed is probably for naught. And if you’re a district manager in a large city or a neighborhood like SoHo, the troubling number of vacancy rates may warrant a larger discussion about rental rates in that district, and whether “retail Armageddon” is a legitimate characterization, or if it’s more likely a self-inflicted wound and one that can be addressed through some retooling (to which I recommend reading Larisa’s latest post).

To summarize it all up, I think the development of pop-up brokers is an incredibly interesting phenomenon. Are they solving the vacancy problem caused by structural changes happening in retail? Or are they profiting off the presence of White Elephants? No reason why it can’t be both. If Airbnb and the changing state of retail provide any sort of indication, we can be sure they’ll be around a while yet. I believe that's a good thing if at the end of the day it means less vacant storefronts.    

Past blog posts that explore vacancies and pop-ups:

Temporary stores fill vacancies and serve as an incubator for local entrepreneurs

Drive Retail Traffic: Using Vacancies for Art Galleries and Pop-Up Stores

Pop-Up Stores: Here to Stay?

Retail Incubator Models and Downtown   

When skyrocketing rents don't always mean the death of a small business

Larisa Ortiz is founder and principal of Larisa Ortiz Associates.

Broadway between Houston and Canal Streets in
New York is one of the highest rent districts in the City. 

For many New Yorkers, Pearl River Mart was Pier 1 Imports before there was a Pier 1 Imports. The family run Asian-goods department store, founded in 1971, grew over many years until it occupied 30,000 sf on Broadway in Soho. When the lease was up in November of 2016, the landlord increased the rent from $1 million/year to $6 million/year and the family decided to close shop. At the time, the news reported that the "44-year-old store is the latest victim of rising rents on Broadway and increased competition from online retailers like Amazon and Alibaba." A simple explanation for what was likely a much more complex problem.

The old Pearl River Mart at 477 Broadway - among
the most sought after retail addresses in Manhattan, NYC.

So it came as a pleasant surprise to see an article in The Wall Street Journal chronicling the retailer's travails since closing their original Broadway location. It seems they have developed a streamlined formula - a store layout with 3,500 sf instead of 30,000 sf - and a new location four blocks south of their previous location where rents are significantly less. Now the WSJ reports they are expanding to Chelsea Market, a "sprawling urban food hall" in the Meathpacking District - and a "must see" stop along the very popular High Line. Clearly a rent hike wasn't enough to put Pearl River Mart out of business. But they did need to reinvent themselves and find a suitable spot to relocate.

The "new" Pearl River Mart at 395 Broadway,
about four blocks south of its previous location. 

Chelsea Market, soon to be
home to a second Pearl River Mart location.

The lessons here for other businesses - and the city planning officials who support them - are worth noting. It reminds me of what fellow panelist Tony Hernandez, Director of the Ryerson University Centre for the Study of Commercial Activity said last week during our pre-conference session at IDA, "change is not new". This seems like a trite point, but it is one we have to recognize as an enduring truth of retail. He pointed out that since the 1940's, retail concepts have come and gone, and retailers have had to reinvent themselves again and again and again. From the climate-controlled shopping centers that dominated during the 1970's to the Entertainment complexes of the 1980's to the Power Centers of the 1990's, fickle customers and their every changing shopping habits have always been a challenge for retailers. Today's online challenges may be scary, but they fit a trend of innovation and disruptive change that is not without precedent.

What comes next is likely to result in painful change for retailers, but the good news is that retailers like Pearl River Mart have found ways to survive and thrive. The rent hike trend that caused Pearl River to close has also affected other retailers. In early 2016 we completed a market study for the Broadway SOHO BID and projected a market correction that was only then just beginning. In 2015 the Commercial Observer quoted a local broker said "Everybody's asking for too much money. Nobody wants to pay. It's a very overrated market." So it should come as no surprise that the softening the brokers were anticipating then is having an effect now. The same WSJ report that announced the expansion of Pearl River Mart also found that vacancy rates of 23% and asking rents that have fallen 14% to $478/sf.

Yet high rent does not mean lack of opportunity for intrepid business owners. As the Pearl River Mart move suggests, not every street commands the same premium as Broadway between Houston and Canal and businesses should generally search for a better deal in up and coming markets. In fact, the ability to both market and sell on-line means that a high rent location may be as necessary as it once was. In fact, our study found that within the BID area, asking rents of $425/sf were more than double neighborhood asking rents of $195/sf. So moving off the main corridor to lower rent space, and perhaps even shrinking a floorplate, might be a good opportunity, rather than a death sentence. In Perhaps the answer for communities is to support small businesses in their efforts to relocate to lower priced alternatives as a way to help them stay in business for the long haul.

IDA Session Post-Mortem: The Future of Physical Retail in the Age of Online

Larisa Ortiz is a Principal at LOA

Last week I had the pleasure of speaking on a panel at the International Downtown Association Conference entitled The Future of Physical Retail in the Age of Online with colleagues Mike Berne of MJB Consulting and Tony Hernandez, Director of the Ryerson University Centre for the Study of Commercial Activity. I may have been a panelist, but I was as enraptured as the audience by both presentations. Each shared insight into their own research and offered some enlightened perspective on the future of downtown retail for attendees.

Tony Hernandez helped put the changes he has seen in context. Retail is always changing. Consider this - Outlet Centers started making waves in the 1990’s and have only grown in size and scale since then. But if you consider who the major shopping center tenants were in 1996 and now, you will find that the majority of those tenants no longer exist. Hey, no one said retail was an easy business. So when viewed from a historical perspective, today’s concerns about the impact of on-line shopping are part of the normal cycle of “creative destruction” that leads to innovation and improvement, not necessarily the end of the world. And while e-retail may be a small portion of sales at the moment, Tony made the point that on-line influenced sales are what we should really be talking about. Research by the JC Williams group found that 86% of Canadians researched their purchase online before cutting a check.

Mike Berne added that while the news is chock full of an impending “retail apocalypse”, pure play retailers still account for only 4.5% of market share. The future, Mike said, belongs to retailers who pursue omni-channel strategies. He suggested the Amazon’s purchase of Whole Foods was because Amazon needed Whole Foods, not the other way around. As he has written for this blog in the past, the Whole Foods acquisition was a response to the “last mile” challenge. The fact that Amazon has yet to turn a profit on e-commerce and makes nearly all of its profit on cloud computing suggests that e-commerce still has a ways to go before dominating the retail landscape. When you consider that the “last mile” challenge – i.e. the ability to get to and from the last point of distribution to someone’s home – is incredibly expensive and that off-price chains like T.J. Maxx have been doing quite well at getting customers to do that for them – Mike thinks the retail apocalypse concerns might be overblown.

My contribution to the conversation was targeted to the practitioner. How do we turn the data into something actionable? What should Business Improvement Districts and Business Improvement Associations (as they are known in Canada) do in light of this information? I suggested a few policy prescriptions and actionable interventions, much of it based on recent work we completed with the City of Cambridge, MA.

The first is to drive experience. It may sound cliche, but people are searching for things they can’t get on-line, so BIDs will increasingly need to activate streets and public spaces with activities that cannot be replicated on-line. That means making sure public spaces are well designed and maintained, and that those spaces allow for public gathering, activities and events. We simply must make our public spaces work harder for us. In San Francisco, the City has spearheaded an effort to engage local non-profits as formal stewards of public plazas, giving them the ability to generate revenue from activities and events. New York City has a similar program. These programs allow for the formal oversight of a public space by an entity that is best positioned to drive pedestrian traffic to an area.

The second is to build capacity of the organizations upon which all of this activity depends. Without organizations with capable staff and sustainable revenue sources, the ability to activate space, build brand recognition, and promote both activities and businesses is seriously hampered. In Cambridge we shared the example of Coro Neighborhood Leadership Program in New York City that trains 20-30 BID leaders every year and has created a network of well-trained advocates for place management. This highly trained network of practitioners now collaborate and cooperate on a regular basis, sharing information about best practices for everything from fundraising to leadership skills. 

The third intervention involved taking a deep dive look at the regulatory and zoning barriers that are making innovation by retailers and new business concepts much more difficult and challenging. Consider the small business that wants to start making some of their products on-site and triggers a change in use permit. Or a brewpub for whom there is no retail classification (who had heard of brewpubs forty+ years ago when the regulations were written?). Or the business that wants to offer in store educational classes and is now considered an “educational institution” with higher threshold building code and parking requirements. These rules and regulations are particularly vexing for small businesses with limited capital – precisely the kinds of businesses that many communities want to support. Another issue that falls under this heading is the fact that restaurants and eating establishments, one of the healthiest and growing sectors of the retail economy, are particularly hampered - higher parking regulations for eating establishments are not uncommon and can make opening a location in some cities nearly impossible. Add to this things like sidewalk cafes, which are proven profit drivers, yet these too require another layer of permitting that can be overwhelming for the small business owner. Overcoming these issues is critical to enabling new business ventures that will be so critical if downtown is to sustain a competitive advantage.

As my last point, I discussed the need to fill gaps in the pedestrian experience as the inevitable market corrections will result in vacancies. BIDs are well positioned to ensure that vacancies do not undermine the local pedestrian environment by advocating and supporting pop-up retail or pop-up temporary art installations (like those of New York based non-profit No Longer Empty). These are important stop gap measures that will help existing businesses. In the long term, softening demand for retail spaces may require a wholesale rethinking of how we manage downtown tenant mix. As retail spaces get taken up by less dynamic economic activity, including offices and services, how will we maintain a sufficient concentration of retail in close enough proximity to ensure corridor success?

I want to thank my fellow panelists and the fantastic IDA members who participated in our discussion. Clearly that this issue will not be going away anytime soon!

Follow us on twitter @cdadvisor and Facebook (cdadvisor) where we share timely articles and news related to downtown retail. 

Dockless Bike Shares: Addressing the First and Last Mile

Dan McCombie is a research associate at Larisa Ortiz Associates

These days there’s a lot of talk about whom or what the next big disruptor is going to be and what industry it’s going to shake to its very core. I wasn’t expecting it to happen in the bike sharing industry. I say this because bike sharing still feels in some ways very nascent. My neighborhood of Crown Heights just had a rollout of new docking stations this year to meet still growing demand and yet now we have the emergence of these “dockless” companies? What exactly are they and what do they mean for commercial districts? 

Unlike traditional bike shares, which require picking up and dropping off a bike from designated stations, dockless bike share eschews them altogether so that riders can use their smartphone app to locate, unlock, ride, and drop off the bike in conceivably any public space (think Car2Go). This is important for commercial district practitioners because it deals with the “first-and-last mile” issue. Most people are comfortable walking a ¼ mile to a bus stop, train, or other fixed-route transit system, but the number drops off precipitously as the distance grows. This pushes people into their cars, to other shopping districts, or prompts them to stay home. Traditional bike shares have sought to address this, but their locations have been subject to certain criteria like population density, number of jobs, or the presence of certain anchor institutions. Not so anymore. For that reason we need to think creatively and critically about how dockless bikes might impact our commercial districts. What follows is a breakdown of what I think are the key benefits, issues, and ways to move forward.

What are the benefits? 

1. Cheaper for cities  

Unlike publicly subsidized and corporate-sponsored traditional bike shares, dockless companies are privately owned and operated. The money the city saves on building stations and maintaining the system can hypothetically be diverted towards better infrastructure, like more bicyle racks and lanes for all users.

2. Better access

Whereas bike share stations are put in locations based on a set criteria, dockless bikes can be anywhere. If your neighborhood has missed out on getting a station in the past, this is an equalizer.

3. Cheaper for riders

Private dockless bikeshares cost roughly half the price of traditional bike shares. Washington, DC's recently implemented dockless bikes cost $1USD/half hour compared to $2 for Capital Bikeshare. 

What are the issues?

1. Ineffective rebalancing

Without designated stations and a well-staffed team, bikes may not always be where people need them during daily commutes. This can also result in bikes concentrating into disorganized piles, creating eyesores, and being an overall public nuisance.

2. Socializing private costs 

Maybe the city saves money by not having to build stations, but if it has to expend money and resources to clear sidewalks and streets (and even trees), at what point does the calculus stop making sense?

3. Lack of regulation

Cities lack the regulatory framework to address dockless bikes. Some companies have employed Uber-style tactics to break into markets without municipal consent, creating public backlash. Cities have tried to respond with stricter policies that could hamper growth. Until cities establish a regulatory framework with the cooperation of these companies, tension is likely to grow and with unpredictable externalities.  

What are the solutions?

Much of the rhetoric around dockless bike shares treat them as a referendum on how well our communities care for public goods. If bikes are vandalized, abandoned, or lost then it’s somehow a commentary on its citizens. Whether or not you agree with that statement, it doesn’t solve the issue. It makes better sense that these dockless companies would want to address the issues head-on in order to realize a better bottom line. If bicycles are being abandoned, that’s one less bike generating revenue. And it doesn’t help that cities aren’t taking kindly to cleaning up the mess. For cities like Singapore and Melbourne, this has meant impounding bicycles and assessing fines to the operators. In the case of Amsterdam, it was so dissatisfied with its own experience that it put a comprehensive ban on all forms of dockless bikes until further notice.   

Companies are seeking to mitigate concerns and inefficiencies by implementing their own credit and penalty systems. Credits are earned for reporting broken and illegally parked bicycles, posting a ride to Facebook, and otherwise having a successful trip. Penalties are assessed for parking in non-designated areas, forgetting to lock the bike, violating traffic rules, or losing the bike outright. The aggregate effect of these credits and penalties is either an increase or decrease in future prices. Other remedial measure include creating approved parking areas and geo-fencing, where the smartphone app clearly delineates where bikes are allowed to be parked and imposes fines on users who violate the boundaries. For me this presents an argument in favor of information-sharing arrangements between companies and cities. If cities are going to spend money on infrastructure like bicycle racks, lanes, and parking lots, they should know where it makes the most sense to do it. What better way for a company to cultivate goodwill than to share what it has learned through practical experience?

As commercial district practitioners, dockless bikes represent a potential opportunity. Does a shopping district lack the capacity to create a traditional bike share station, but has parking that could be converted into a bicycle lot? Is a high-volume train or bus station just far enough from a commercial corridor as to discourage pedestrian visitation, but could attract cyclists? Are you looking to attract tech-savvy Millennials and consumers who don't own cars?

Maybe dockless bikes are an answer. 

Below is a chart of some of the leading actors in the dockless bike share industry. 

For further information, I strongly recommend the Common Position Paper on Unlicensed Dockless Bike Sharing by the European Cyclists' Federation website. You can find it here.

Technology in Retail

Nur Asri is an associate at Larisa Ortiz Associates.

As we continue to move forward in this digital age, consumers are expecting simpler and seamless processes at home, at work, and at the retail store. As a result, retailers are making significant investments in technology in- stores to meet these consumer demands for a connected and convenient shopping experience. Here are some ways that retailers and brands are using technology to enhance consumer experience but also personalize marketing, improve logistics and customer service in brick-and-mortar stores.

1. Data Integration: Understanding consumer preferences, personalized marketing

Connecting data from smart appliances, mobile phones and other portable devices to digital systems helps businesses understand how customers actually use products and services, and which ones are preferred. To take advantage of this data and metrics, retailers can begin using devices to facilitate a more seamless retail experience in the store, and at home, to integrate products and services.

Retailers can use “customer genomes” to create highly personalized offers, promotions and experiences.

Source: Let's Talk Payments.Com

Macy’s and Apple are using in-store beacons to provide personalized offers directly to customers via mobile devices. House of Fraser, another department store in the UK, inserted beacons into mannequins for a proximity marketing campaign. When shoppers download an app and browse in- store, they receive information about the clothes on display. In other bigger retail stores, in-store shopper tracking systems have been installed to pinpoint a customer’s location. Retailers can then send targeted messages to customers (via smartphones) about nearby items.

Hugo Boss Heat Sensor in Regent Street store.
Source: Bloomberg

In London UK, Hugo Boss uses heat sensors to track customer traffic in its clothing stores, which helps store managers organize priority merchandise in high-traffic areas.

Monsoon Accessorize uses multichannel data sources from in-store and online customers to deliver unique personalized offers via emailed receipts. Similarly, UK department store John Lewis is partnering with an omnichannel personalization company to customize product recommendations for each individual shopper.

Walmart Media Exchange is using data collected from store sales, social-media platforms and third parties to supplement data from its Savings Catcher loyalty program. From the data, Walmart plans to create customer segments, and eventually individual customer profiles, to make better offers, as well as to improve targeted marketing.

2. Building brand/ product awareness: Educating consumers on what’s available on offer, sharing products through social media

Photo: Fashion Network.Com

Sephora has installed display screens showing latest trends, make-up tutorials, and new Made in Sephora exclusive offerings updated by theme each month. The screen greets customers as they enter the store, much like a mall directory screen. In addition, Sephora also has Beauty Boards. These are physical social media platforms to like a look, tag products used and share with the Sephora beauty community. Finally, Sephora’s snapchat geofilters feature highlighted products in-store and are designed to engage everyone within a mile of a store.

3. Product Testing: Allowing consumers to test products digitally or via augmented reality

Again, at Sephora, the Beauty Hub is a virtual look book which provides a catalog of beauty inspiration while the Virtual Artist service enables customers to test looks on an iPad or connected mirror. Developed with Pantone, the Color Profile application helps choose the right foundation shade with almost scientific precision. Recommendations are then made from all the complexion products available at in-store.  

Marie Claire’s pop-up store in NYC SoHo, called “The Next Big Thing Concept Shop”  has dressing rooms with interactive mirrors from Oak Labs that recommend accessories for outfits being worn. Similarly, Clarins beauty stores now feature Sensor Mirror Pro virtual skincare mirrors developed by MemoMi to educate consumers about their skin types so they are able to select the most suitable skincare products.

Photo: Connected-store.Com

Finally, fashion retailer Uniqlo has also piloted a “Magic Mirror” technology from Sharp that allows customers to virtually change the colors of clothing they’re trying on while standing in front of the mirror.

Photo: Ikea

Even when consumers aren’t physically in stores, they are now able to test products thanks to advanced technology. Ikea will soon enable shoppers to virtually test drive merchandise before making a purchase via an augmented reality app called Ikea Place. The app will allow customers to virtually place any Ikea furniture in any space and share the images with friends. The app will automatically scale furniture with 98% accuracy. This enables customers to experience how light and shadows will render on furniture within the space, and is intended to make buying decisions easier and inspire customers ahead of purchasing products. Other furniture retailers such as Wayfair and Ashley Furniture are similarly preparing to launch such initiatives with their products and brand.

Ashley Furniture will take technology a step further and feature in-store virtual reality tech bars that will combine a guided iPad-based space configuration experience with VR headset visualization, allowing shoppers to design and visualize their own homes.

4. Payment Processing: Easy and seamless payment methods

With a smartphone in every pocket and imaging technologies now available for scanning products, faster alternative checkout methods will continue to grow across the retail industry, predicts Tony Rodriguez, CTO of digital identification solutions provider Digimarc.

Self-service checkouts have gotten more sophisticated in grocery stores and moved into other retail sub-segments, such as home improvement, fashion and electronics stores. Tesco, a grocery store in the UK for example, is testing a high-speed checkout solution that automatically scans products placed on conveyor belts. The system can process up to three customers at a time.

Apple Pay at Whole Foods. Photo: Eric Risberg

Integrated mobile apps and “contactless” mobile payments now also enable visitors to make seamless cashless transactions, supported by MasterCard and Apple Pay, from anywhere within the store, including via fitting room mirrors. The Sephora store at Newbury Street, Boston, for example, has no cash registers because staff associates can process payments digitally, on their phones from anywhere on the floor of the store.

Since Apple’s launch of its Apple Pay solution, retailers including Staples and Whole Foods have announced plans to accept Apple Pay at their retail locations, adding to an impressive list of other major brands such as Bank of America, Disney and McDonald’s.

5. Customer service: Efficient appointment bookings, improve staff efficiency, deliveries

Many stores now enable customers to use an integrated mobile app to book one-on-one appointments with fashion stylists, and sign up for a variety of in-store events and activities. Neiman Marcus, for example, has already piloted this at their pop-up store in SoHo.

To free up store employees’ time, Lowe’s has also begun rolling out customer-helping robots into the aisles of 11 stores in the San Francisco Bay Area. Lowe’s Innovation Labs unit worked with Silicon Valley start-up Fellow Robots on the LoweBot. The robots allow store associates to devote their attention to customers that need more thoughtful advice and personalized service. Likewise, Safeway grocery store helps customers locate stock and obtain product information through its Just for U service app. The app also goes a step further by helping shoppers create and sort their shopping list by store aisles.

Wearables, or ‘smart glasses and other connected devices intended to be worn on the body’, are another productivity booster. Tesco distribution center workers wear armbands that track the goods they are gathering. The band also assigns tasks to the wearer, forecasts task completion time, and quantifies precise movements among the facility’s shelving and loading bays.

The advancement of such technology amongst retailers will serve to deliver a seamless shopping experience for customers. However, even with all of these gadgets, customers still walk into brick-and-mortar stores to get the personable experience of getting expert advice from a staff person who’s tried and tested products for themselves. From 2015 report on Navigating the New Digital Divide, Deloitte noted that “one in three customers still prefer to consult store associates for assistance when selecting and validating products.” Retailers must therefore adapt and learn to balance both the human experience and technological convenience in stores to attract consumers in the digital age. 

The Social Media Story

Nur Asri is an associate at Larisa Ortiz Associates

According to retail strategist and consultant, Steve Dennis, “The most disruptive force in retail is not e-commerce but the fact that most customer journeys start in a digital channel.”

This past weekend I started my own journey to finding a perfect, new cardigan for the season online. It started at 9am on Saturday morning when I turned my phone on, checked my emails and opened the daily mail from Madewell – a women’s apparel retailer I’ve grown to trust and love. The email featured a beautiful cardigan for the Fall (just what I was looking for) and after a click, I was led directly to the product page on Madewell’s main site. After 5-10 minutes scrolling through images, checking sizes and comparing products available on the site, I wasn’t quite sold yet on the cardigan so I switched channels and browsed my Instagram feed instead. Lo and behold, one of my targeted ads turned out to be that very cardigan I had been browsing from Madewell. This time, it was being worn by a ‘regular person’ in a beautiful setting – it looked just like any other content on my Instagram feed, I barely even noticed it was an ad until I accidentally single-tapped the photo to reveal tags of the product name and price. The next day, I ventured into Manhattan to purchase said cardigan at the nearest store in SoHo. This omnichannel retail journey of mine wasn’t the first, and probably won’t be the last. In fact, according to a November 2013 survey of US digital shoppers by consulting firm Accenture, I’m not alone. 78% of respondents to the survey reported “webrooming,” or researching online before heading to a store to make a purchase.

Source: Accenture, 2013

Researching online, as demonstrated in my experience, often includes perusing social media posts by various brands and retailers. Today, roughly 2% of all e-commerce traffic in the United States now comes from social networks and continues to grow. Many of us younger consumers who are tapped into various social media channels are hence driving the rapidly growing social media influencer marketing strategy amongst retailers who want to capture as much attention as possible online. In a single year, brands are spending over $1 billion on marketing via Instagram influencers alone (Mediakix, 2017).

The history of influencer marketing can be traced back to a 1940 study entitled “The People’s Choice” by Lazarsfeld & Katz. Although the study analyzed political communication, it found that the majority of people are influenced by secondhand information and by opinion leaders. Fast-forward to 2017, people are increasingly being influenced by ‘regular people’ who have gained celebrity status or built a brand and following on social media channels such as Facebook, Twitter, Instagram and Snapchat. These people are more popularly known as social media influencers.

An influencer is: “A third party who significantly shapes the customer’s purchasing decision” (Brown & Hayes, 2008) and “has a greater than average reach or impact in a relevant marketplace” (Word of Mouth Marketing Association Handbook).” From cardigan to vacation destinations, consumers are turning to influencers and their product reviews and endorsements before committing to making a purchase online or in-store.

These influencers often have credibility in a specific subject area – hiking gear, street fashion, interior design, photography – and have built a brand and following around their personalities, interests and skill sets. Their unique and trusted voices enable them to engage large, targeted audiences – the sweet marketing spot for retailers grappling to adapt to the digital age. Engaging social media influencers, however, doesn’t necessarily result in sales activity. Twitter, for example, only drove 12% of social and email generated e-commerce revenue in the fourth quarter of 2014 and only 30% of Pinterest users made online purchases after browsing Pinterest content. However, this may change as social media channels continue to introduce new call-to-action features and direct-response imperatives like “Shop Now” buttons for products and “Sign Up” buttons for services.

Social media influencers, however, have proven to be most successful at building brand awareness and trust. In fact, 92% of consumers trust an influencer more than an advertisement or traditional celebrity endorsement, according to Musefind, a social media marketing company, and 49% of consumers looked for purchase guidance from social media influencers last year. Many consumers place their trust in these influencers specifically because they are not tied directly to retailers or brands.

Source: Musefind, 2016

Of course, social media influence works differently on consumers by retail category. Some purchasing journeys are more highly influenced by the digital than others and can be more critical at different points within a single journey.

Source: Deloitte, 2015

In a 2015 study by Deloitte, consumers shopping for baby and toddler, electronics, and furniture and home furnishings products turned out to be most heavily influenced by social media during their shopping journey, while grocery customers were least influenced by digital overall. Critical interaction points started from the beginning of a consumer’s journey, during the ‘finding inspiration’ and ‘researching products’ phases, till midpoint when consumers are ready to select products for purchase.

Source: Deloitte, 2015

For the apparel retail category, the critical point for digital interaction appeared to be in the beginning of the consumer’s journey. With such a wide selection of products, over 15 percent of apparel shoppers are unaware of the product until they see a brand or retailer’s digital advertisement or communication that makes them want to buy the item, compared to an average of only nine percent across other categories. (Remember that Madewell email notifying me of the new Fall season cardigan and also the targeted Madewell Instagram ad?)

In a famous example, Lord & Taylor, designer clothing department store, proved the power of social media influencer marketing by getting 50 influencers to put on the same dress, photograph themselves in the dress, and then post the photos on social media. Within three days, Lord & Taylor sold out of the dress but more importantly, the retailer built awareness around the brand’s new collection, which resulted in a halo effect on other products in the same line.

Regardless of the varying magnitudes of impact that social media influencers have on consumers, they continue to be a strong marketing force for brands and retailers. Retailers should seek new ways to influence the influencers through their marketing campaigns or build partnerships and creative collaborations with these influencers, in order to achieve greater brand authenticity and trust amongst consumers.