Economic Development

The Retail Chase Q&A: Robert Gibbs

Robert Gibbs is a retail consultant based in Birmingham, Michigan, who works with cities as well as shopping center developers. I spoke with him about...
by | March 31, 2007
 

Robert Gibbs is a retail consultant based in Birmingham, Michigan, who works with cities as well as shopping center developers. I spoke with him about the future of downtown retail, what goes into a retail master plan and why Wal-Mart may be less evil than some people think it is..

--Governing Associate Editor Christopher Swope

What retail development trends should local officials know about?

First of all, the retailers for the most part have run out of sites. The easy suburban sites are for the most part picked over. And the code is that the strong national retailers have to grow at a certain percentage each year-Wall Street says that if they want to keep their stock prices going up, they have to open new stores. That means they have to penetrate new markets where they aren't now, or try new retail concepts.

It's generally agreed now that the underserved markets are urban markets. From inner cities with low-income populations to high-end wealthy cities, urban centers are vastly under-retailed for lots of reasons. If you're a retailer and you're growing your stores, you have to figure out how to get into urban locations. To do that retailers are doing things they never would have considered five years ago. They're modifying their old standards for store sizes in order to fit on smaller, more compact sites. They're lowering their parking standards. They're even changing the merchandising mix to fit the urban consumer. So there's a tremendous opportunity for cities to attract retail.

The problem is that the cities for the most part do everything possible to make it impossible for retailers to go there.

What do you mean?

Most cities either have a policy of not wanting national chains in their downtowns, or the planners have biases against national retailers. They're afraid chains will raise rents and displace the local candle shop or whatever. I hear it so often, where a city puts an artificial limit on the size of a store; they say they want nothing larger than 20,000 or 50,000 square feet, so it rules out department stores, furniture stores, and booksellers. Just blanketly rules them out.

Cities don't usually offer retailers predictability. If I do open a new store downtown, I can't predict whether the other stores around me will operate to my standard. I may be the only store with a $2 million storefront, or the only store open on Saturday and Sunday. Downtowns don't usually have the signage and lighting standards retailers want. There's usually not enough room downtown to create that two blocks of critical mass that retailers want.

On the other hand, if downtown could offer predictability, and you could assemble enough property, have parking available and create high design standards and enforce them, then retailers would go there.

Cities don't have to turn themselves into a mall, but they do have to do what shoppers want. Last year 70 percent of all sales occurred after 5:30 at night. If downtown is going to compete, it has to have stores open in the evenings or on Saturdays. It has to offer the goods that people want to buy at the prices people want to pay. Last year only 2 percent of all apparel sales occurred in downtowns. In that 1950s, that'd be more like 90 to 95 percent. Downtowns have lost almost all their market share. Most are either entertainment districts or they sell knick-knacks and antiques and other things we don't need.

So how should they go about turning that around?

Cities should have a master plan to show how they can accommodate modern retail. Cities should have a written policy saying they want to be competitive and gain market share. Cities need to have high design standards for signage, lighting and building design and be willing to enforce those standards. And they have to have a public parking strategy.

Cities can get back up to 30, 40 or 50 percent of market share with a policy. There's a demand for retailers. A lot of them want to locate in downtowns. A lot of cities don't know that.

The eight or ten cities we consult in have this huge unmet demand. Even a blue-collar town with modest income has a big demand for shoes and apparel. Urban consumers drive farther than normal to get goods and services, and the goods and services they do get downtown they overpay for. That's the norm. Old Navy knows that now. Target knows that. Wal-Mart is doing a series of urban stores to get into inner-ring cities. That's a huge growth market for Wal-Mart, to go into cities.

But doesn't Wal-Mart wipe out all the mom-and-pop shops?

Not necessarily. The small independent retailer has to be near a Wal-Mart or a J.C. Penny or a Sears because large anchors advertise heavily and run promotions and bring people to that location. So instead of having 100 people a day walking by your storefront, a Wal-Mart has 5,000 people a day going in. Well, not everyone walking into Wal-Mart to buy shoes will find what they like. So you can position a shoe store to specialize in children's shoes or odd-size shoes or sporting shoes-you can go much deeper into a category than a large department store can. Go to any regional mall with four department stores-how do you think the other small retailers make any money? They make money because they're between four department stores. They carve out niches department stores can't.

Wal-Mart may put some retailers out of business. But I don't believe Wal-Mart ever put out a viable business. It may put out of business the guy who closes at 4:30 p.m., when shoppers don't start shopping until 6.

What else should cities know about retail?

Time matters for retailers. Stores have to open to keep their stock prices rising. A development director for a chain is told to open five stores in a region by a certain date, and if they don't open he gets fired. So those people will go to a city only if the city can give them some assurance that the store can open by a certain date. That's hard to do. Even when the city owns the property, it can't always get the assurance that the fire marshal or mechanical inspector will sign off on the building, or that it will even get through the zoning. Sometimes that takes a year.

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