One of the most misused statistics in researching trade areas is that of average household income, because median income figures are often confused with average and mean incomes.  An average household income is obtained by adding up the income of all homes in a study area and then dividing it by the number of home units in the study area.  Conversely, a median household income is the middle number in a string of values where half of the numbers are above the median and half are below.  A simple example could be in a remote area where three of five homes have annual incomes of $40,000, $40,000 and $60,000 respectively and another two houses have incomes of $200,000 each.  In this example, the median income would be $60,000, but the average income would be $108,000.  In this case, the median income of $60,000 would tell you very little about the buying power of the neighborhood and the fact that the homes with incomes of $200,000 would typically spend substantially more than those households at the median or below.  How much more? – three to five times more than the average income.

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I have long predicted a fundamental shift in the retail distribution channel by a new and lasting divide between fixed brick and mortar retail locations and other points of purchase, other than online shopping.

In brief the fixed marketplace is going to go mobile. But this is not another catch phrase for web based purchasing from PDAs, and cell phones. What I am talking about is a market place that is mobile and fluid. This is a market that goes to the consumer rather than the consumer going to the mall. Think in terms of the circus coming into town for a 10 day run and then packing up and moving to the next town. Translated into a real mobile marketplace, think of a vintage produce truck locating on campus and selling soaps from fruit baskets and fruit crates.

However many experts will point out that this is more prophecy than predictive calculation, given previous predictions on the long term impact of internet shopping. But we believe that some emerging changes may even be more profound than online retailing and involve many more levels and channels than on-line shopping. In this scenario, technology will only be a component of the new channel but hardly the defining mechanism. Most importantly, the new mobile channel will disconnect from fixed location and it will change the static shopping centers. Consequently, all parties connected to any retail development will therefore, require a complete comprehension of these coming changes in the consumer goods distribution channels in order to properly position their developments. Read More

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Over the past decades I have worked in almost every major metropolitan area in the United States.  In this capacity I often encounter reports that the subject market is significantly under stored.  While doing my market research I am always amazed to find newspaper articles reporting that a market has significantly less retail space than the national average which always turns out to be wrong.   So, I will share some insights into one of the biggest myths in the retail real estate industry – “my market has significantly less retail space than the national average”.

The proliferation of this myth falls right into the lap of an uninformed media which appears to want to take a position of supporting growth or showing that an area is over stored with retail space.  This is because of the rapid expansion of power centers in the 1990s; lifestyle centers after 2000; and free standing mega stores in recent years have all contributed to a crowded retail landscape.  Therefore, in an attempt by the media to quantify the amount of retail space and to compare the density of retail in one market to another, retail space per capita has been used as a common indicator.  However, our analysis concludes that these types of numbers are among the most misquoted and misunderstood data points in the analysis of retail real estate.  The problem is like the old joke – “one lies and the other swears to it”.  In this case, retail space per capita is the number that is often, if not almost always, reported inaccurately and then the next article repeats it all over again and before you know it, you have a fact that everyone relies on.  But, when comparing vastly different markets and using so called national averages one may end up with nothing more than a comparison of apples to oranges.

The most commonly used database on retail space comes from The National Research Bureau (NRB); however, they only include shopping centers and not the total of all retail space. Consequently, shopping center data has often been incorrectly used as a total for all retail space and then compared to the local population to generate a per capita number.  In brief, the retail space per capita that is often quoted is actually shopping center space and not retail space.

This type of comparison works well as a barometer across the United States, but it is highly inconsistent when using it as a source of retail density in major urban areas that have a large amount of retail not located in shopping centers.

According to many, NRB[1] is the premier provider of retail real estate information in the U.S.  Its database of information contains information on over 40,500 shopping centers which is the most comprehensive and detailed information source on U.S. retail properties available. Likewise, NRB has prepared the Shopping Center Census for the past 20 years, which is published by the International Council of Shopping Centers (ICSC) and by the U.S. Department of Commerce / U.S. Census Bureau in Statistical Abstracts of the United States.  The NRB census is widely considered the authoritative source to calculate the retail area per capita.  While the NRB is an excellent source for shopping center gross leasable areas (GLA), it is insufficient when analyzing per capita GLA for urban areas for a number of reasons.

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In the book Small Wonder, author Jonathan Zimmerman, covers the history of the one room school house and describes how the Little Red School House became an American icon.  In his book he poses the question which asks if the school house is a relic or an enduring and relevant image of American Culture.

Mr. Zimmerman notes that the one-room schools were “a central venue for community life in rural America.”  He also described the rift that emerged between urban elites seeking greater control over the national educational system and rural values that emphasized liberty and democratic self control.  The debate was obviously won by the centralists and resulted in the closure of almost all of the small schools in favor of the predominantly larger, standard tested, and efficient warehouse-like schools by the mid 1950s.

Over time the one room school house became a symbol of rural individualism and home front democracy and the larger schools became the symbol of a centralized, spotless, and well planned educational system.  Often the debate became more about hickory stick justice, monkey trials and school prayer but eventually it was framed primarily as an efficient consolidation of schools to provide a better education.  Yet, the leading proponents were often the highway and automobile lobbies that sought reasons to expand highways and the new consolidated primary and high schools presented a compelling reason.  In the end the classic themes of liberty and self rule lost out to a bigger and more enlightened educational system.

While Mr. Zimmerman chronicled many of the strengths of the small school that included individualized study programs, self guided study working at one’s own pace and group learning; it eventually was challenged because it represented local and community control which often taught values that were very different from those in larger urban areas.

In the end of the book, Mr. Zimmerman’s Small Wonder, raises a question: Did the benefit of the technologically advanced educational warehouse off-set the lost soul of the communities?  In a Wall Street Journal review of the book by Bill Kauffman he poses the question.  “I wonder if Americans will ever tire of chasing after the gods of Progress and Bigness and rediscover the little things, red school houses among them, that once gave us our soul”.  I too wonder, if other icons of a lost era will be rediscovered, valued and re-invented for the sake of real communities?

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Starbucks Experience

In order to differentiate itself from McDonalds and Dunkin Donuts, “The Starbucks experience will now include the whir of the grinder and the smell of the aroma all day”, according to new written procedures for the 7000 units  of the U.S. chain.  According to the Wall Street Journal,   Starbucks Coffee, “will now grind beans each time a new pot is brewed”.  Seems like telling the baker to vent his fresh baked goods into the shop than out the back. But, something does not smell right when the most basic of assumptions must be converted into a manual.  Sounds more like a statement in a failure of a corporate culture than a lesson in process management?

Best Buy

Facing a number of challenges including new competition, Best Buy reported a 15% drop in earnings for the first fiscal quarter of 2009.  While the company is projecting cautious numbers for the balance of the year, officials are upbeat with recent increases in market share and increases in margins.  After the closure of Circuit City, the firm’ overall market share increased to 21% of all consumer electronics, about 2% higher than 2008, reflecting gains in a computer notebooks, flat panel televisions and mobile phones.  Likewise, the company’s gross margins improved from 23.7% a year ago to 25.3% in 2009.  However, new competition from Wal-Mart, Amazon and regional players such as HHGregg have also taken market share away from Best Buy.  One other challenge is the lack of consumer stimulus checks for 2009 to match those given out in 2008 unless Congress caves into to fund another rounds of consumer confidence for 2009.

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The remnants of the industrial economy often surround the downtowns of major cities and form a large part of the fabric of what many would consider to be insignificant neighborhoods.  These combined semi-industrial and residential zones typically form barriers between first ring gentrified neighborhoods and the city core, producing in-between waste lands, lost economies and failed communities.  Ironically, while the focus often is directed to the showcase block of the downtown and hip new restaurants in the historic suburban neighborhood, it is the in between zone that actually has the most potential for true economic development.

In recent years many of these quasi industrial and residential zones have been absorbed by hospital and university expansions as well as new arenas, stadiums, exposition centers, and the next half baked version of No Dough.  However, seldom are these industrial zones re-energized with significant investments in cultural facilities which are more typically reserved for the showcase locations of the downtown.  One of several major exceptions is the Frank Gerry designed Guggenheim Museum located in an aging industrial district in Bilbao Spain.  It is here that a new model of urban gentrification can be recognized where art becomes the engine of the urban renaissance. This model involves the use of public art and cultural facilities as a promoter of community regeneration. In particular, unpopular and stigmatized urban neighborhoods can now be revitalized more than ever in the current economy when underutilized land and aging and often functionally obsolete buildings are reclaimed.

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Contemporary film often reflects the sentiments of its audience and initiates varied emotions that are generated well beyond the subject matter of the movie itself.  In this regard, the music, location, and lighting can serve as a window into a deeper set of emotions and yearnings.  This is for the simple reason that images and sounds link our consciousness with the unconscious to bring back memories of the past that ultimately reinforce the thoughts and feelings about the present.

In the movie You’ve Got Mail, Meg Ryan plays the role of Kathleen Kelly, an owner of a children’s bookstore in New York. It is a quaint intimate and well stocked independent and profitable shop that is a clear extension of her own sensibilities, perhaps allowing Ms. Kelly a needed connection to a lost childhood.  But, life was good for Ms. Kelly’s and her devoted patrons until Foxbooks, mega-big-box-store, announced plans to move next door, seemingly to quickly serve the role of category killer.

Hugh Grant, in the 1999 film Noting Hill, played the role of William Thacker who also owned and operated another independent book store in a vibrant London neighborhood, known for its antique shops, small cafes and one of a kind specialty stores.  Perhaps the shop was a frivolous commercial experiment with a recent inheritance or a deliberate move to a more pragmatic phase of life after a recent divorce, but it served a vital role in the neighborhood as a place of socialization and community connection. In real life, Notting Hill is an area in West London, close to the north-western corner of Hyde Park, in the Royal Borough of Kensington and Chelsea. It is a multinational district, once considered as a slum, now known as a creative community and home of the annual Notting Hill Carnival and the Portobello Road Market.

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Micro-transactions on the web

• Consumers are proving that there is a market for small dollar amounts for on-line content.   Ring tones, cheap internet calls through Skype, iTunes and more are ringing up big dollar amounts on micro-transactions.  It was once believed that consumers would not pay for on-line content and the only way to profit was through on-line advertising and monthly subscription services.  Now advertising revenue for the time being is not as profitable as once thought and consumers expect information to be free.

Home accessories, a luxury in a down market

• Little luxuries in depressed times cheer people up.  In the down market designers of big ticket furniture items are facing a major challenge.  A few smart ones are adding well designed home accessory collections to their offerings.  But this is not just about pure design; consumers also want functional products that are long lasting, something that the discounters do not provide. Consumers of high quality furniture are attracted to premium materials and finishes and high levels of craftsmanship.
• Home gift and table top retailer recently engaged famed British Architect Zaha Hadid to design a collection for the company.
• Unlike big ticket furniture, home accessories can change by the season to better reflect both design and fashion trends.

Aspirational and luxury retail taking a hit

• Luxury brands in the recent economic boom of 2003-2007 focused on their existing trade with a greater variety of high priced goods, but often with perceptible reductions in quality.   The luxury brands also sought to expand their empire by attracting new aspirational consumers by opening more points of purchase to reach a larger market and by developing new products at lower price points for those who aspired to step up to the brand.  This resulted in more consumers paying more for premium goods.  But just a few years later, the consumer at all levels has traded down and perhaps to never return to the same level of consumption, in this generation.

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