Re-Urbanizing America

Suburban Sprawl Gives Way to the Not-So-Mean Streets of the Big City

The Great American Dream isn’t dead, but it’s certainly on life support.

Shopping street Barfüßerstrasse of Marburg, Germany.After decades of unprecedented growth, suburbia has been surpassed by the inner city. It is — if you’ll excuse an old saying from my quasi-hippie days — where the action is! And that action is attracting an incredibly broad demographic — everyone from young professionals and singles to baby boomers who don’t want to end up living in God’s waiting room.

We have already seen the beginning of an inner city building boom by retailers who want a piece of the action and are willing to embrace the idea that bigger is not necessarily better or practical. Those who are late to the party or ignore this new urbanization should have no trouble finding new careers in the healthcare or dogwalking industries.

But to understand where we’re going we have to look at where we’ve been.

“White Flight”

Most historians concede that suburban life really took off in the late 1940s and early 1950s with GIs returning after World War II. This was the beginning of the so-called “white flight” to bucolic suburban settings where the kiddies were safe, stay-at-home moms traded recipes and child rearing advice across white picket fences and all was right with the world — far from the mean streets of New York, Chicago, St. Louis and L.A.

Those left behind, however, witnessed urban decay, a descent into the heart of darkness where once-vibrant neighborhoods became ghost towns after dark, street crime proliferated, empty stores were boarded up canvases for graffiti and the scent of dinner from apartment windows was replaced by the stench of urine, garbage and despair.

I didn’t read all this in some urban history book. I lived it in New York throughout the 1970s when muggers could elude police by ducking around piles of uncollected garbage. But the pendulum, I’m happy to say, has swung in the other direction.

In places like New York, Atlanta, L.A. and points in between, we are seeing the reanimation of city life and a retail renaissance that has drawn the attention of everyone from Costco and Home Depot to Walmart and a new generation of small but competitive neighborhood stores.

The New Normal

A temporary phenomenon? I think not. I believe the financial crisis of 2008 was a major turning point — a time when the dream of home ownership became a nightmare of foreclosures or at least unattainable for younger people. If you want to add another label to your already overburdened lexicon, forget about Millennials, Gen X, or Gen Y, What we’re seeing is “Generation Rent.”

This isn’t the end of suburban sprawl. Many people still yearn for the pastoral life and the retail industry is happy to oblige. But remember the old saying that retail follows the rooftops. Increasingly, those rooftops are urban high-rises and the impact on people and business will be tremendous.

But reurbanization, gentrification or whatever you call it has its dark side. It often displaces people who have lived in some neighborhoods for generations. For instance, take the Chinatowns or other ethnic enclaves that have been fixtures in cities like New York, San Francisco and London. Young professionals and Millennials are paying rents that have forced out long time residents. Such is the price of urban renewal or, as the novelist and playwright James Baldwin called it, “Negro removal.”

On another front, legal and illegal immigrant populations — now 40 million strong across the country — are growing rapidly and moving from their traditional central-city locations to the inner suburbs or ”exurbs” in order to find affordable housing. They are creating cities within cities.

Chinese Checkers

Of course, if you want an extreme example of reurbanization gone wild just look at China. For decades, millions of people were practically ordered off the farms and into the cities to bolster the country’s insatiable demand for industrial workers. People happily obliged in order to get lucrative factory jobs that would lift them from abject poverty. Now the government is encouraging people to leave the cities for rural areas to alleviate overcrowding and re-populate the interior. It’s like Chinese checkers but with real Chinese.

Reurbanization is an economic issue here as well. Gas and commutation prices and real estate taxes are so high in some areas that you can literally save thousands of dollars annually by moving to the inner city. Besides people like the “walkability” factor and are tired of the sedentary lifestyle that requires one to own a car or two. .Additionally, the number of married Americans continues to dwindle or people are getting married later and having smaller families.

In fact, due to the above factors and lingering economic uncertainly that some call “the new normal,” the US Census Bureau and the Department of Housing and Urban Development (HUD) forecast that by 2025, only 10% of new households will have children. Put another way, only 2.6 million of the 27 million new households to be formed will have children.

Other sources have gone even further, stating that by 2025, families with children will account for only 25% of all US households. Basically, the days of cheap money, cheap mortgages, cheap gas and long-term economic stability are over. As Yale economist and Nobel Laureate Robert Shiller has noted: “the heyday of the exurbs may well be behind us.”

Foundations for Growth

I’m not sure I agree and the reasons may be of interest to retailers formulating expansion plans over the next few years. It’s the far fringe suburbs that are in jeopardy for the reasons previously stated. The exurbs, in my definition are the inner-ring suburbs — places outside of city centers but accessible by public transportation or even bike paths. I believe these areas will be the foundations that support economic growth in cities across America.

Herein lies the conundrum for retailers who have erected those monuments to consumerism called malls and supercenters. They aren’t obsolete. But how many more of these pleasure palaces can you build before reaching the saturation point or the point of no return on investment?

The entire concept of retailing needs a refresh to compete in space-starved urban environments.

Some say retailing is retailing no matter where you are. For years, the mantra was “bigger is better” But urban living means give and take — giving up space and taking less home. Trust me. In New York closet space is scarcer than a parking space.

From the retail perspective, building in a city like New York means dealing with uncompromising union rules, convoluted fire and electrical codes and erratic deliveries. Getting timely deliveries is like planning the Normandy invasion. Only Allied forces never had to deal with parking violations.

Nonetheless, retailers like Target, Walmart, Costco and others have seen the future and are focusing more closely on smaller urban formats.

Urbanization is not a fad or a simple trend. It is an inevitable, unstoppable force. Retail will follow the rooftops in the cities as they have done in the suburbs, creating new jobs and becoming one of the foundations of urban economic growth. This in turn will hopefully contribute to a stronger infrastructure and, in turn, a better quality of life for everyone.

Kind of makes you wonder. America’s Heartland may not be where you think it is.

People Improvement is a New Frontier of Growth

In my last article, I addressed the importance of “individualizing” store growth plans based on each store’s metrics and specific DNA. Now, let’s discuss the next step in the process — looking further inside the “black box” to the individual associate’s performance to help each person reach his or her full potential as reliable, strong contributors to store growth.

Developing associates to be more productive has never been more important than right now! Retailers face increasing pressures on labor costs. The Affordable Care Act (ACA) forces companies to make hard decisions on full-time vs. part-time staff. Although many retailers remain committed to maintaining a core staff of full-timers, these higher costs must be offset somehow. Our answer is to systematically increase individual productivity. When associates learn and apply new skills to help more customers buy, and buy more, they dramatically offset increases in wages or path

As we all know, retail boils down to customers and associates. Associates are the ultimate touch point — where their interactions with customers strongly influence the likelihood of hearing, “Yes, I’ll take it.” So what’s the best way to systematize individual performance improvement and develop more top sellers? [Read more...]

The Harder They Fall

ex_tiger_woods_watchConsumers love celebrities and are more than willing to fork over billions of dollars for things they endorse. But do you want them to land on your product when they fall from grace?

That multi-million dollar celebrity endorsement deal for your store’s organic clothing line is going gangbusters, with sales soaring 20% in just four weeks.

But then your squeaky clean, environmentally-active spokesman is caught in a sleazy hotel room wearing a sequined ball gown, with two underage prostitutes, a German shepherd and a bag full of crack cocaine. What now?

A little over the top? Maybe. But when it comes to celebrities nothing is impossible. As someone once said, “you pay your dime and take your chances.” [Read more...]

Unintended Consequences: The Price Race to the Bottom

mysupermarketConventional supermarket retailers can’t catch a break — even sometimes.

Conventional operators — Kroger, Safeway and the like — face a vast array of competition developing on all sides. That includes food purveyors such as deep discounters, mass merchants, membership clubs and restaurants, just to cite a few. Competition is always evolving with new strategies and new players, but one constant is that shoppers demand good value for low prices, and are quick to change stores if they think that’s not happening.

Regrettably for supermarkets, the battle for the low-price prize isn’t in their favor, and not just because of increased competition. The looming threat is really information: thanks to increasingly sophisticated online price-comparison websites and mobile apps, it’s getting easier for shoppers to take a look at several retailers’ price lineups before leaving home, or while in the supermarket.

Up to now, most online services compared prices among competing supermarkets in a defined geographical area so shoppers could make a convenient shopping choice or decide to patronize more than one local store in their quest for low prices. [Read more...]

How Do Changes in Brand Loyalty Shift Marketing Responsibilities?

The Robin REportSupermarket retailers are facing a sea change when it comes to how the products they sell are marketed. That responsibility is going to migrate from manufacturers to the retailers themselves before too long.

Why? Because supermarket shoppers are a fickle bunch. And nowhere is that more evident than in their fast-changing attitudes toward brands and their loyalty to them — or, to be more precise, their lack of brand loyalty.

Of course, brand loyalty has been fading for a long time, but for the first time, surveys of motivations behind consumer buying decisions show that a large majority of supermarket shoppers have no brand preference at all. Instead, they are prone to swing between brands, or to opt equally for specialty or store brands. [Read more...]

Land Of Opportunity To Barren Wasteland

rr_3-13_cover“Bubble Capitalism” Crushes the American Dream

Forget the cresting, breaking and other visible economic waves we discern on the surface of our economy — all accompanied by “cyclical” blathering of the dire necessity to create jobs and growth, and reduce debt and deficit spending.

While we blather, we’re blind. The less visible, stronger undercurrents of our dying free market capitalism that catapulted us to global economic dominance with the promise of an “American Dream” along with it, has been morphing into what I’m calling “bubble capitalism.” Some are calling it “crony capitalism,” which is equally descriptive. It’s just that bubbles are what the cronies feed off of. And it is crushing the American Dream by tipping the once-level playing field in favor of a narrowing segment of big finance and big business, aided and abetted by big government.

And let me be crystal clear. I am not whining for redistribution. I’m suggesting that if we don’t figure out a way to get back to good old democratic capitalism and its level playing field, we will have a barren wasteland in our future, albeit one that will be filled with a bunch of worthless stuff (popped bubble residue), scattered across a country that will look more and more like the third world. Think about three million empty, decaying and devalued houses following the leveraged-up mortgage crash of 2008. And what about the jobs lost, and spike in the number of people living below the poverty line?

Sorry, you want nice, you probably won’t find it in the Robin Report. We like to make wake-up calls. [Read more...]

Private Labels, Public Nuisances, and Captured Moments

rr_3-13_private_labelAll the recent hubbub over a certain Connecticut homemaker’s image and brand is only the tip of a major merchandising movement that is starting to consume the home furnishings field. As national brands continue to recede from the category—they are pretty much null and void in soft home categories, like sheets and towels, and hold a tenuous position at best in some smallappliance and housewares classifications—the ascendency of private and captured brands is nearing unprecedented levels.

The spectrum goes from the extreme of Kohl’s where virtually the entire home department is proprietarily branded, to stores like Target, and now Penney, where soft home is all private and hard home is mostly national brands—to ones like Macy’s and Bed Bath & Beyond where the assortments are still…well, assorted. [Read more...]

The Green Marketing Act

cell phone sales_greenYou got rid of the landline three years ago because two-thirds of your calls were from telemarketers. Then you downgraded your cable service wondering why you were paying so much for so little. Now you watch stuff on your Tablet and laptop more and more. And when the price of a New York Times went up to $2.50, you decided to read news online from a wider variety of sources, and like it decidedly better.

Today, you live a new kind of life than you did five years ago. You have several e-mail addresses so that you can filter the spam. The snail mail is more than 90% junk so you’ve even stopped opening it; the envelope gets a glance and often gets chucked. When you drive, it’s commercial-free Satellite Radio since traditional ads, with their crazy voices and incoherent offerings, drive you crazy. You loved Marc Gobé’s film, This Space Available, downgrading billboards, and outdoor media in general, to visual pollutant status. You take a pleasure in buying the store’s house brand, not because you have to, but because the ‘superiority’ of branded products is something you seriously question. We watch commercials at the Super Bowl and Oscars for the entertainment value and once in a while on YouTube; the rest of the time you conspire to avoid them. [Read more...]

How Trader Joe’s Lures Shoppers With Quirky Products and Brands

Trader Joe's Opening - 08Trader Joe’s is undoubtedly the nation’s most successful limited-assortment grocery chain; lines actually go around the block in New York City’s two outposts during the holidays.

So what’s really going on here? Trader Joe’s uses product and pricing strategies that could easily be emulated by other chains that sell quick-turn consumables. But Trader Joe’s is not just privately held, it is fiercely private, making every effort to fend off any effort to learn how it works.

We do know, however, that Trader Joe’s net sales-per-square-foot are roughly twice those of the similarly situated Whole Foods. And Trader Joe’s performs better in smaller selling spaces, with about a quarter of Whole Foods stockkeeping unit count.

That’s impressive, but the real secret formula is Trader Joe’s product lineup. More than 80% of Trader Joe’s 4,000 SKUs are private brands, most under the Trader Joe’s name, and others under offshoots such as Trader Jose’s (Mexican food) and Trader Josef’s (baked goods), and so on. [Read more...]

Bribery, Felony or Line Item?

iStock_000010810931_SmallAre we all felons bribing our way though international commerce or victims of corruption, forced to pay the price of admission?

Let’s face it. Bribery is a cottage industry in many countries—part of their cultural DNA. The sad truth is that buying and selling influence is often the grease that lubricates the wheels of global commerce.

In Spain, it’s “mordita”– the bite. In French, “dessous-de-table,” loosely under the table. In German, it’s “schmiergeld” or smoothing money and in the Middle East the ancient Persian practice of “baksheesh” or gratuity has been common currency for a thousand years. [Read more...]

The 10 Commandments of Home

tencommandmentsTO: Ron Johnson, Plano, TX
FROM: A Higher Authority
RE: The Way to the Promised Land

Cecil B. DeMille, where are you now that we need you?

The expedition that Ron Johnson is leading the Penney-ites on will not last 40 years – he’ll be lucky if he gets 40 months – but in just about every other way, the trek is of biblical proportions. Johnson is trying to free one of the most enslaved retailers in the business from what seems an eternity of lackluster merchandising, dysfunctional buying and a generally disjointed business strategy that seems to go in every direction but forward.

Frogs and pestilence have nothing on this saga.

Whether he can lead the company to the Promised Land remains to be seen. Frankly, 2012 was just a warm-up and the real test comes this year when JCP has to start anniversarying its lame numbers that started last February. If they can’t beat those comps, Bill Ackman – the hedge fund honcho who has been manipulating this whole thing from the other side of the balance sheet – is going to show why patience is not one of his virtues and there’ll no doubt be a new

sheriff in Plano before long. So, as Johnson tries to part the retail seas and find a route for JCP to succeed, I say it is his Home business that is going to help lead the way. More so than at any other national general merchandise retailer, JCP Home is a larger percentage of overall sales, led by soft home. That has always been a core strength of what those in the trade still call “The Penney Company,” and regardless of the name over the front door these days, if Home doesn’t work, JCP doesn’t work. [Read more...]

MK is no LV: It’s Not Coach Either

Is this any way to manage a Jet Set brand? Maybe, if you’re looking for a quick exit.

Listening to Michael Kors CFO Joe Parsons speak at ICR on January 16, 2013 on the Kors Jet Set aesthetic—spanning wings, wheels and water—I was reminded of the brand Louis Vuitton, also rooted in luxury travel.

iStock_000019271426MediumI make the comparison to Louis Vuitton for several reasons, beginning with its origins as a provider of luggage in the 1850s. In October 2010, I visited Paris (not just because I love to travel… and I especially love Paris) to see the installation of a Coach shop-in-shop at the Printemps flagship on Boulevard Haussmann, and do a store tour of Ralph Lauren’s new Left Bank flagship on Boulevard Saint-Germain. While I was there, I visited the Musée Carnavalet (the museum of the history of Paris). I never quite understood the fascination and demand for Louis Vuitton until I walked through the museum’s exhibit, Voyage en Capitale, Louis Vuitton & Paris.

On exhibit were the tailor-made trunks for nobility, celebrity and the wealthy. The exhibit told the brand story rooted in travel, a phenomenon that excites the imagination with the romance of new places and people, and different cultures and experiences. What holds more allure than travel? At the show, I discovered the basis of the brand’s aspirational DNA, which combines best-of-class quality and aesthetic with fashion’s excitement and superior execution at every touch point.

Is Michael Kors brand association with Jet Set travel designed to be the LV of the 21st Century? [Read more...]