Multi-Channel Retailing: The Key to Retail Growth and Job ...

Multi-Channel Retailing: The Key to Retail Growth and Job ...

Multichannel Selling: The Key to Retail Growth and Job Creation N. David Milder DANTH, Inc. 718-805-9507 www.danth.com [email protected] Presented at the 2011 Wisconsin Conference on Downtown Revitalization, Fond du Lac, WI, October 20, 2011 DANTH, Inc. All Rights Reserved Steve Jobs: THINK DIFFERENT!! N. David Milder, DANTH, Inc. 2 Introduction The Great Recession fused with many socio-economic trends to produce profound structural changes in how our downtowns and Main Street districts operate A new normal has emerged.

Downtown leaders and merchants must adjust how they think downtowns function, what it means for them to be healthy and successful, and how they can be revitalized This presentation will focus on one of these structural changes, the growing importance of multi-channel retailing N. David Milder, DANTH, Inc. 3 Introduction contd 2 Multi-channel retailing conventionally is understood to incorporate brick and mortar stores, e-commerce operations and catalog sales But, it also can include backdoor retail channels and a lot will be said about them in the second half of this presentation A whole new syndrome of shopping behavior has emerged that meshes with the multichannel retail: Internet search and purchasing

Large retail chains are rapidly implementing multichannel strategies Are these changes altering the amounts and types of commercial space retailers require as well as the criteria they use to assess potential new locations? These are not questions to be shrugged off. N. David Milder, DANTH, Inc. 4 Introduction contd 3 Unfortunately, many -- perhaps even most -- of the independent merchants that dominate our small and mediumsized downtowns and Main Street districts have been slower to adapt successfully Multichannel retail can be a threat to your retailing or it can be a huge asset! Consequently, many downtown and Main Street organizations may need to alter their business recruitment programs to be compatible with multichannel retail requirements While at the same time creating programs that can facilitate and support the transitioning of independent merchants to multichannel retailing. N. David Milder, DANTH, Inc. 5

Introduction contd 4 The magnitude of this change toward multichannel retail is potentially huge Equivalent to the paradigm shifts occurring in the natural sciences that bring about changes in basic assumptions and new theories to explain the world This shift is still incomplete, so the quality data we need to understand it is still often scarce Yet our need to know and act, despite inadequate data, is great. (This often occurs in business and public policy decision-making) In this presentation, I invite you to join an intellectual journey where we try, as best we can, to get a viable understanding of multichannel retailing and how we might effectively respond to it. I do not pretend to have all the answers, but I do aspire to getting you to think constructively about multichannel retailing N. David Milder, DANTH, Inc. 6 The Old, Dominant Paradigm of Retail Success

At the heart of this paradigm are brick and mortar stores According to this paradigm, downtown retail locations are strong and will facilitate merchant success when they: Provide access to a lot of nearby foot traffic That can bring a lot of customers through the door of the merchants store Which increases the probability of sales transactions occurring within the store. N. David Milder, DANTH, Inc. Times Square Pedestrians 7 Under this front door customer paradigm, the indicators of a good location are:

Pedestrian counts, auto traffic statistics and rail ridership counts As are data on the trade areas residents and the downtowns daytime population segments, e.g., office workers, students, hotel guests. N. David Milder, DANTH, Inc. 8 Strong downtowns, according to this front door customer paradigm, also have structural advantages that stimulate and reinforce high levels of pedestrian traffic: A variety of economic functions e.g., retailing with strong destination stores or niches, public and private sector offices, restaurants, entertainment and cultural establishments, transportation centers, etc. all in a relatively compact, easy to walk area. This compact, multi-functional clustering stimulates both the number of pedestrian trips and the number and strength of those that are multi-purpose and/or multidestination. N. David Milder, DANTH, Inc. 9

But, Did The Front-Door Retailing Paradigm Ever Really Fit All Downtowns? Table1. SomeSamplePedestrianCounts City/Town City/Town Population District Pedestrian Count Jamaica Center,NY 363,000 Downtown* 31,965 per day Manhattan 1,537,195 Times Square 113,520 per day Manhattan 1,537,195 34th St BID 11,668 per peak hr Portland, OR 566,143 Downtown 26,577 per day Glendale CA 196,882 Downtown 3,310 per AM & PM peaks Tempe, AZ 178,519 Downtown* 2,545 per day Kingston, ON 117,206 Downtown 3,436 per hr Pittsfield, MA

42,424 Downtown 550 per Midday-PM Peaks Morgantown, WV 30,333 Downtown* 3,000 per day Carrboro, NC 18,368 Downtown 1,936 per 12hrs Sources: From relevant downloaded municipal and BID documents. *College or University in or near downtown N. David Milder, DANTH, Inc. 10 Some issues about its applicability to small and medium sized downtowns: What does it mean when someone claims that their downtown or an intersection in it has a lot of pedestrian traffic? Library and Internet searches failed to reveal any metric that specifies how many pedestrians walking nearby are needed to make a retail operation successful? In many smaller communities pedestrian counts may be just a few hundred, or even less, per day In many of these smaller communities there just are not enough interesting shops to generate lengthy pedestrian trips or much strolling and window shopping

Many of the successful stores, even though they may be relatively small, function as retail destinations. They are not found by shoppers strolling through town. Instead, shoppers know them and go directly to them, usually with a specific type of purchase in mind. N. David Milder, DANTH, Inc. 11 Counter Example 1: Blanchester, OH In the 1960s and 1970s, well before the emergence of the Internet, many field visits to Blanchester, OH, (a town of around 4,200 in 2010), found few people strolling its commercial core In countless conversations with local residents one heard suggestions about going to the Dairy Queen, the bank, Krogers, Snyders (a local appliance store) or maybe the movie theater or library But never about walking for pleasure or amusement or window shopping along Broadway or Main Street.

N. David Milder, DANTH, Inc. 12 Counter Example 2: Washington Borough, NJ Had a population of 6,651 in 2010. Numerous field visits in recent years found scant pedestrian traffic on the sidewalks of its two-lane, easy to cross main thoroughfare, though the average daily traffic on it was about 17,400 vehicles. Moreover, a convenience store reported averaging about 1,000 transactions a day while the operator of a pamper niche establishment reported averaging about 288 patrons a day. Lots of people may be going through this town and patronizing several of its businesses, but there is seldom a pedestrian in sight. N. David Milder, DANTH, Inc.

13 The Emerging Multichannel Paradigm Successful retailers are increasingly pursuing a multichannel strategy in which they integrate their physical store(s) with a strong Internet presence and sometimes also with catalog sales. The power of the Internet sales and marketing channel is what sets the current multichannel retailers apart from those of the past. N. David Milder, DANTH, Inc. 14 The Scope of the Emerging Multichannel Paradigm McKinsey & Company described the current status of multichannel retailing in the following manner: By 2011, we believe the Internet will play a role in more than 45 percent of US retail sales, as either a research tool or a sales channel. Whats more, consumers who shop across a number of channelsphysical stores, the Internet, and catalogsspend about four times more annually

than those who shop in just one (see Table 2). Companies that get multichannel retailing right can enjoy larger profit margins and yearly revenue growth. Table2. AverageAnnual Customer SalesbyChannel inApparel Apparel Retail SalesChannels Dollars Catalogs $201 Physical stores $195 Internet $157 Catalogs and physical stores $608 Physical stores and internet $485 Internet and catalog stores $446 Catalog, internet & physical stores $887 Source: Steve Noble, Amy Guggenheim Shenkan, Christiana Shi, "The promise of multichannel retailing", McKinsey Quaterly, October 2009. N. David Milder, DANTH, Inc. 15 If the folks at McKinsey were

correct Today almost half of our nations retail sales involve the use of the Internet in one way or another Consequently, the many merchants not on the Internet are, in effect, outside of the loop of activities that increasingly surround retail purchases and are thus unable to tap substantial portions of the consumers expenditure potentials in their trade areas. They are not in the game. Based on DANTHs experience managing downtown districts and informal interviews with many other downtown and Main Street managers as well as with many downtown merchants, it seems reasonable to conclude that independent merchants are the most prone to have an inadequate Internet presence and not be in the game. N. David Milder, DANTH, Inc. 16 Consumer and Retailer Use of the Internet

A survey by Pew in 2010 found that 79% of all American adults now use the Internet, with usage correlating positively with income and negatively with age. The 2010 Pew survey also found that 66% of respondents buy products online, with relatively little variation across generations. A report issued in March 2011 by eMarketer claims that 163.1 million Americans about 85% of all Internet users -- were researching retail products and/or making purchases online. By 2015 eMarketer expects that there will be 201.1 million web shoppers, who will account for about 90.1% of all Internet users. Their projected sales growth is expected to come from veteran web shoppers. The more experienced people are with shopping on the web, the more they will e-shop and the more theyll spend on their e-commerce purchases A CB Richard Ellis 2011 survey found: Retailers are increasingly using social networks to grow online merchandise sales through brand awareness and marketing. 93% of the retailers are using social networks such as Twitter, Facebook etc. to assist with the branding and marketing of their products. N. David Milder, DANTH, Inc. 17 Trying to Benchmark E-Commerce Sales

For the four quarters of 2010 the Census Bureau found that e-commerce sales ranged from $37.1 billion to $53.2 billion per quarter, totaling about $167.3 billion for the year, and that these sales accounted for just 3.9 % to 5.1 % of the nation's retail sales But, are total retail sales the correct benchmark? Or are GAFO sales better? GAFO stores sell comparison shoppers goods and they are often highly prized and sought by downtown leaders. GAFO merchants have long been the strongest and most important attractions at major shopping malls. Included in the GAFO category are the book, music and electronics stores that have been hit hard by e-retail competitors. GAFO retail chains have gone heavily into developing their own e-commerce capabilities and many of them rank among the nations top 25 e-retailers, e.g., Apple, Walmart, Sears, Best Buy, Costco, Macys, Victorias Secret, JC Penny, Target, Gap and Williams Sonoma. It is notable that many of these national chains with strong e-commerce sales are known for their soft goods, especially apparel, and home products, merchandise lines that observers in the commercial real estate industry often wrongly see as weakly impacted by e-commerce. N. David Milder, DANTH, Inc. 18 Benchmarking E-Commerce Sales to GAFO Sales

Table 3 compares e-commerce sales to GAFO sales. It shows that, between 2001 and 2010. e-commerce sales grew significantly from equaling 3.9% of GAFO sales to 14.8% of GAFO sales, with a steady growth trajectory, save for 2008 when the Great Recession hit. But, note: The growth of e-commerce has not halted the growth of GAFO sales, despite its probable competitive impacts on several GAFO sectors such as books and electronics. This is probably because so many GAFO retailers have themselves become powerful e-commerce, multichannel players. Table 3. E-Commerce Sales as Percentage of GAFO Sales 2001-2010 Year 2001 GAFO E-Commerce E-Comm as Sales* Sales* % of GAFO $883,866 $34,593 3.9%

2002 $913,925 $45,212 4.9% 2003 $947,484 $58,157 6.1% 2004 $1,005,699 $74,175 7.4% 2005 $1,061,850 $92,804 8.7% 2006 $1,113,538 $114,912

10.3% 2007 $1,148,850 $138,145 12.0% 2008 $1,144,748 $142,281 12.4% 2009 $1,098,985 $145,214 13.2% 2010 $1,132,005 $167,339 Source; US Bureau of the Census *$ millions N. David Milder, DANTH, Inc. 14.8% 19 Benchmarking Non-store Electronic and Mail Order Sales to GAFO Sales

In 1993 non-store retailers had sales amounting to just 7.1% of the GAFO merchants sales, but by 2010 their sales were equal to 24.4% of the GAFO sales The facts that NAICS 4541 sales are now Table 5. The Growth of Electronic and the equivalent of about one quarter of Mail-Order Store Sales Compared to GAFO Sales GAFO sales and appear to be on a steady growth trajectory are quite % Electronic % Electronic impressive shopping & mail shopping & mail order of GAFO order of GAFO However, these data cannot indicate the Yrear (NAICS 4541) Yrear (NAICS 4541) degree to which the non-store electronic 1993 7.1% 2006

18.2% shopping and mail order retailers have 1994 7.5% 2007 19.5% taken sales dollars from the GAFO 1995 8.1% 2008 20.0% merchants 1996 8.9% 2009 21.4% 1997 9.8% 2010 24.4% Nonetheless, the power of the non-store 10.6% retailers is apparent from these statistics. 1998 Source: U.S. Bureau of the Census It is nave to believe their impact on the GAFO retailers has been entirely benign N. David Milder, DANTH, Inc. 20 Under this new retail paradigm the role of the physical store may be changing, but it

will not disappear Physical stores may no longer be a retailers sole point of sale. For example, 49% of the retailers surveyed by CB Richard Ellis in 2011 and 53% of those surveyed in 2010 reported a change in the percent of total sales going to online sales compared to the prior year, with the reported shift to online ranging up to 25% Many customers also may use the Internet to research merchandise, which they then purchase in a physical store. A report issued in September 2010 by Pew found that 58% of Americans are now researching retail products and services online. According to Phillip M. Burgess, president of the Annapolis Institute, increasingly single channel brick and mortar stores that are not in on the search wont be in on the sale Internet searches by consumers can strengthen a stores stature as a destination But, shoppers may also visit physical stores to actually see, feel and perhaps operate a product and then buy it online in order to save on sales taxes or because of a better price. Either way, single channel brick and mortar stores are likely to be outside of this critical search-purchase behavioral pattern and consequently be less able to compete with brick and mortar competitors that have a multichannel capability. N. David Milder, DANTH, Inc. 21

The physical store may be changing contd 2 The physical stores showroom function may be on the increase while its sales transaction function declines. Consequently, while the multi-channel retailer still captures the sale, the single channel physical store operator is probably losing significant sales revenues The other sales/marketing channels do not entail the customer coming through a shops front door, though they can work in concert with them. Note that Apple, the third strongest Internet retailer, has opened hundreds of new stores in recent years that have had incredible annual sales of $4,406 per square foot, while Staples, Walmart, Target, Sears, Macys, JC Penny, Victorias Secret, Gap, Williams Sonoma and other chains long known for their physical stores, have developed strong and growing e-commerce capabilities. This suggests that multichannel retailing does not mean the end of brick and mortar stores, but a strong reinforcing interaction between the Internet and physical store channels. Nevertheless, it also raises such questions as: Will retailers consequently need as many stores? Will they consequently use new formats that require less space? N. David Milder, DANTH, Inc. 22

The physical store may be changing contd 3 For small merchants adopting a multichannel approach, their physical stores may increasingly take on the functions of operation centers for e-commerce and activities associated with other non-electronic sales/marketing channels, such as backdoor retailing Internet and catalog sales channels are in a sense extra physical store, they are capable of reaching and interacting with shoppers in their homes, workplaces or even when they are in transit. They provide a lot of convenience to time-stressed Americans. The non-store retailing reaches out to shoppers, not waiting for them to come in to a physical store. Reaching out to interact with consumers away from their physical stores is a very important characteristic that downtown retailers can use to develop their own assortment of unique sales/marketing channels. Because multichannel retailing is not solely dependent on the number of people walking near a physical storefront, it may be an especially appropriate strategic approach for the vast number of commercial districts that are not blessed with high volumes of pedestrian traffic. N. David Milder, DANTH, Inc. 23 Implications for Merchants

The Diluted Sales Potential From Front-Door Shoppers. For downtowns, the most important impact of the current version of multi-channel retailing is its propensity to dilute the potential of walk-in shoppers to spend their money in its physical stores, The retailers most likely to be hurt are the independent operators who rely solely on the single channel of their physical store(s). How this will impact on their space requirements and the rents they can afford remains uncertain, but declines seem likely. On the positive side: e-retail channels and the backdoor retail channels can lessen merchant dependence on the customer traffic passing near their physical stores by providing meaningful interactions with consumers in their homes, on their jobs, in their social groupings, and while they are traveling. Going to the InternetBUT. The best response to this situation is for independent merchants to develop some kind of multichannel capability and the Internet is an obvious channel that they could develop. Sadly, getting them to do so remains a real challenge. This problem may ease over time as younger merchants brought up using the Internet since

childhood appear on the scene. In the interim, many merchants will need their downtown organizations to properly scope out why they are so Internet resistant and then implement corrective programs to help them. N. David Milder, DANTH, Inc. 24 Implications for Merchants contd 2 Types of Retailing. On the down side, the sales potential dilution will likely vary by type of store. Single channel physical store retailers in the food for the home and convenience sectors will generally feel less competitive pressure from e-retailers. Consumers want to travel short distances for these products and to quickly consume them. Nevertheless, there still may be strong pressures from rival local merchants who use their websites The impact of the Internet on the auto sales has been immense, but overwhelmingly with regard to consumer searches for relevant information about

the cars and financing, not sales transactions. Downtown and Main Street single channel GAFO type stores are where the competitive pressures of e-commerce firms are likely to be strongly felt. To comparison shop for these types of goods consumers normally have been willing to travel considerable distances, which in the recent past has meant them driving 15 to 90+minutes for the greater selections of shopping centers and malls. Shoppers long have been acclimated to looking beyond the available assortments of local shops for GAFO merchandise. N. David Milder, DANTH, Inc. 25 Implications for Merchants contd 3 GAFO merchants were badly weakened by the great recession, as the spending retrenchment of deliberate consumers was particularly strong in GAFO stores. Hardest hit were shops in the furniture and home furnishings and building materials sectors. But, many trophy apparel chains were also adversely affected, e.g., Talbots, Gap, Ann Taylor, Chicos, American Eagle, Abercrombie & Fitch. Department store chains were also unfavorably impacted and even value discounters such as Walmart and Target saw sales flatten or decline. For many years DANTH has observed and reported on the weakening of middle

market oriented downtown retailers. This trend has been very strong among the independent operators in the GAFO category, especially those operating apparel stores. Today, the vast majority of the national GAFO retail chains have strengthened themselves by adopting a multichannel strategy and having strong e-commerce capabilities. Furthermore, many of the non-brick and mortar store retailers, such as Amazon and LL Bean, sell GAFO type merchandise. Of the top 25 e-retailers listed by Internet Retailer 19 either fall into the GAFO category or are non-store operations like Amazon that sell copious amounts of GAFO type merchandise. N. David Milder, DANTH, Inc. 26 Implications for Merchants contd 4 Size of the District. Because the existing retailers in most small downtowns and Main Street districts have never had really strong pedestrian traffic and are predominantly involved with groceries and convenience items, they are less vulnerable to e-commerce competition than those in larger districts. A very interesting study by Ryan, Stencel and Jin covering 310 downtowns in WI demonstrates that the downtown GAFO stores in communities with less than 25,000 residents account for relatively small shares, 9% to 21%, of their downtowns total store sales. However, since the few GAFO shops that they do have are likely to be small and relatively poor competitors, they may be very

vulnerable to the very long reaches of e-commerce. For the small and medium-sized commercial districts the opportunities offered by a multichannel strategy are greater than its challenges. Multichannel retailing can allow their merchants to effectively reach out and have customer interactions and sales transactions well beyond the confines of their individual brick and mortar stores and the borders of their commercial districts. N. David Milder, DANTH, Inc. 27 Implications for Merchants contd 5 In our largest cities, downtown pedestrian traffic is so robust and so strongly based on people engaging in activities other than shopping going to work, visiting professional and government offices, attending entertainment and cultural events, etc. -- that it is unlikely to substantially decline In these districts, the motivations for shoppers entering a store and what they do while in it are where their behavioral changes will likely be manifested. The independent single channel physical store GAFO operators in these districts are likely to feel strong pressures from their multi-channel and non-store competitors. Recent reports indicate that high rents in these districts already are forcing many independents out of business, especially if they are oriented to the middle customer

market. However, the survivors are probably able to pay these high rents and they also are probably big enough in terms of sales and employees to afford to develop multiple sales channels, including an e-commerce component. It is probably in the downtowns of medium sized towns and cities, especially in the suburbs, where the pedestrian flows are accordingly marginal and that lack strong destination stores, that independent merchants, especially those with GAFO stores, will most strongly feel the competitive pressures from multichannel retailing. Their best response will be to implement their own multichannel operations. N. David Milder, DANTH, Inc. 28 Implications for Merchants contd 6 Retail Chains The vast majority of national retail chains are adopting a multi-channel strategy that includes physical stores, a website and social media such as Facebook and Twitter. Some also have catalog operations. Evidence suggests that while some mastery has been achieved, they are still experimenting to find the best ways of using e-commerce and

integrating it with the operations of their physical stores. That they are in this situation, even with their IT and marketing staffs, lends some perspective to the challenge e-commerce poses for small retailers. According CB Richard Ellis the growth of online shopping has had an observable impact on the demand for retail space: A final factor driving up retail availability rates is the increasing use of online and Internet shopping sites. Demand for bricks and mortar retail has been falling with the rise of online shopping. Initially this hurt the popularity of big box stores but is now extending its influence across all types of retail goods. Since the recession, growth of online shopping has accelerated, leading many retail chains to slow store openings and invest instead in websites and iphone/ipad applications. Of course, recession associated factors also had strong adverse impacts on the retail availability rates. N. David Milder, DANTH, Inc. 29 Implications for Merchants contd 7 A number of major retailers such as Ann Taylor and Williams Sonoma responded to the recession by reducing their space

requirements for new stores and renewed leases. That trend is being continued by a significant minority of retailers: the 2011 report CB Richard Ellis notes that about 59% of retail respondents will continue with the same store layouts, while 23% are considering smaller store layouts and only 10% are considering increasing square footage. But, some very strong retail players are keenly interested in smaller formats. Walmart is developing a new format that requires substantially smaller spaces, that can consequently be squeezed easily into many mature suburban downtowns and big city neighborhood business districts. Staples and Office Depot are opening 4,000 SF and 5,000 SF stores respectively While there are no reports indicating that their strong e-commerce capabilities had any influence on their small format inclinations, there are reasons to believe that may have been the case. For example, their strong Internet capabilities, if properly integrated into their stores operations, could allow these retailers to effectively target their smaller stores reduced inventories to the tastes of local customers, while still providing the shoppers with relatively easy access to the chains complete assortment of merchandise N. David Milder, DANTH, Inc. 30 Implications for Merchants contd 8 Location, Location, Location?

One of the unexplored issues is if and how multichannel retailing will alter these merchants needs for downtown spaces and the criteria they will use to evaluate potential downtown locations. A trend toward smaller store formats has obvious implications. Another reasonable hypothesis is that as the walk-in the front door customer sales become less significant, then a retailers need for locations that provide access to strong pedestrian and auto counts will in some measure decline. But, the need for showroom space might remain constant or perhaps even rise. How the merchants react may have a big impact on the spaces they need and the rents they are willing to pay. These are questions that are just asking to be properly researched N. David Milder, DANTH, Inc. 31 Implications for Merchants contd 9 Phil Burgess and Joel Kotkin have shown one possible variant of this new locational decision-making. They independently described business operators who can take such strong advantage of the Internet and telecommunications that they are free to locate their firms in communities that maximize the quality of life attributes they most prize. Burgess also believes that the Internet should be a boon to small retailers precisely because it makes them independent of the front door customer. As long as they have a good broadband connection, sufficient merchandise storage and access to a company for shipping their packages, e.g., FedEx and UPS, they can do business with shoppers anywhere in the USA or even the world. That means that small

independent retailers can also be Lone Eagles and locate in the quality of life Valhalla of their choice. Such a scenario may be the extreme on a spectrum of possibilities, but it may not be all that fanciful: DANTH, Inc has found several retailers in recent years who have relocated their stores to other communities simply because that was where the merchants wanted to live N. David Milder, DANTH, Inc. 32 Backdoor Retailing: Downtown independent store operators who reach out electronically or face-aface -- and interact with customers away from their stores are engaging in multichannel retailing This is exactly what backdoor retail operators do While they sell to traditional walk-in the front door shoppers they draw from the downtowns pool of visitors and residents, they also sell to:

Local businesses, organizations and even municipal agencies Bill Ryan: A very small city with a population of 2,500 will, on the average, have close to 1,000 employees within a half mile of the middle of downtown. Consumers, but out of their stores, and independent of the pure walk-in traffic Backdoor retailing is not dependent on the pedestrian traffic near a retailers physical store Consequently, it is potentially useful in any situation where pedestrian traffic is problematical They reach out and connect with the customer in other locations where they can deliver information, show and deliver merchandise and conduct sales transactions. Merchants in food related retail and hospitality sectors are where non-electronic backdoor retail techniques have been most frequently adopted. These types of shops are often found in small and medium sized districts N. David Milder, DANTH, Inc. 33 Examples of non-electronic backdoor retail Eateries that deliver food to homes, businesses, hotels, etc. Enjou Chocolat Morristown, NJ:

A website focused not only on the normal customer wanting a box of chocolate or a gift box, but also on corporate gifts and wedding favors. For a product launch of one major corporation, the shop created chocolate versions of the companys logo. The owner often speaks about the health benefits of chocolate at meetings convened by the company that runs local hospitals She also has display booths at many bridal shows in the NY-NJ region Some signs of this success are that it has 11 fulltime employees, walk-in shoppers are still its most important revenue stream, and yet it has a side street location. N. David Milder, DANTH, Inc. 34 Examples of non-electronic backdoor retail contd 2 Table7. BelmontDrawsALotof RevenueandShoppers FromBeyondtheImmediateNeighborhood %Sales to InfoFromMerchantSurvey Business Outside Belmont SpecialtyFoods 20.63% Full ServiceRestaurants

0.00% Other 0% InfoFromLocal Observer Number Numberof identifiedspecialty Foodshopssellingtofirms outsideBelmont 13 %Salesto Consumers Not Belmont Residents 59.38% Total % %of Firms Sales inNAICS Outside Codein Belmont N= Survey 80.0% 16 32.7% 87.50% 87.5%

4 16.7% 34% Percent 33.8% 5 NA 27% N. David Milder, DANTH, Inc. 35 Examples of non-electronic backdoor retail contd 3 Belmont BID: A small survey revealed that on average they estimated about 21% of

their sales come from their backdoor operations Four merchants reported a significantly bigger between 40% to 80%, are to firms located outside of Belmont Backdoor retailing plays another vital role for this district: this Little Italy is very dependent on drawing most of its customers from far distances. 49% live 20+ miles away. The breads that appear on distant grocery shelves and the cheeses that are listed on distant fine restaurant menus or displayed in distant supermarket coolers help publicize the districts authenticity and product quality. They help generate the flow of day tourists into BBID N. David Milder, DANTH, Inc. 36 Examples of non-electronic backdoor retail contd 4 Artists and craftspeople are often located in sparsely populated areas. For them a vital retail channel is the crafts shows that are frequently held in our nations large metropolitan areas Guss Tobacco Shop in downtown Rutland, VT, also is a distributor of tobacco products to merchants in Rutland and the surrounding region. Manta estimates it has annual sales in the range of $1

million to $2.5 million and employees 1 to 4 people. A vitamin shop on Bergenline Avenue in West New York, NJ manufactured and distributed vitamins to merchants in the region Eagle Paints in Englewood, NJ for decades has had a very large building contractor clientele A womens clothing shop that took its wares to model and sell at local womens clubs, PTAs, etc. N. David Milder, DANTH, Inc. 37 Examples of non-electronic backdoor retail contd 5 All the different downtown businesses - dress shops, jewelers, printers, caterers, limo services, travel agencies, shoe shops, etc.--- in towns such as Rutland, VT and Morristown, NJ that have displayed in bridal shows Those involved in crafts fairs, arts shows, home decorating shows, etc. N. David Milder, DANTH, Inc. 38

Examples of non-electronic backdoor retail contd 6 Sporting goods shops that sell equipment to sports teams and leagues run by various local social groups as well as to schools and companies The Carvels that sell desserts to local school cafeterias and to social clubs for fund raisers and other meetings, etc. Sugarush, a cupcake bakery in Red Bank, NJ that caters desserts to local parties. Their backdoor business has helped keep sales level as purchases by students dropped off over the summer vacation Freemans, a well-known fish market in Maplewood, NJ that supplies over 40 restaurants N. David Milder, DANTH, Inc. 39 Concierge Services

The Concierge Service in the Maplewood, NJ train station that supplies a dry cleaning service and coffee for local commuters. Original plans for the service called for a larger array of goods and services to be provided, which would have facilitated more shops in the Village to participate in backdoor activities Concierge services also are now appearing in: Hospitals Large downtown office buildings High-end residential complexes N. David Milder, DANTH, Inc. 40 Organizations and Groups: The Veins and Arteries of Backdoor Retailing Businesses, civic organizations and social groups, both local and distant, are often the critical connections for backdoor retail operations They are analogous to our bodies veins and arteries, linking the

retailer to backdoor customers The ability to network with these organizations and groups is an essential part of the skill set of a successful backdoor retailer Connecting to these organizations and groups will usually require reaching out to them Sit on their duff retailers, who just wait for customers to come to them, even those paying handsome rents for a physical store close to high pedestrian traffic, can not benefit from this networking N. David Milder, DANTH, Inc. 41 Online Backdoor Operations: Where help is needed Many small merchants are: Not capable of innovating Too old and set in their ways to innovate Fearful or feel uncomfortable

about using the Internet Too busy to themselves: Learn how to use the Internet Mount and maintain an Internet presence Without the staff or resources to hire staff to do the Internet work The easy stuff simple, directory entry like webpages may not be worth the effort How can small merchants: N. David Milder, DANTH, Inc. Tell their stories? Have access to an e-store? Effectively and efficiently use online social media? 42 Implications for Downtown and Main Street Organizations Downtown and Main Street organizations need to ask themselves: are our programs and our allocations of staff and money appropriately responsive to this situation? There are two broad areas this assessment might cover:

How to facilitate their small merchants involvement in backdoor retailing - - both electronic and nonelectronic Business recruitment N. David Milder, DANTH, Inc. 43 Facilitating Backdoor Retailing Helping Retailers Grow Their Veins and Arteries to Organizations and Groups Disseminating information about backdoor retailing so merchants understand what it is all about Assembling information on local civic and social groups and making it available to district merchants Most important will be the fostering of networking opportunities between retailers interested in growing backdoor operations with the executives of other local businesses and the leaders of local civic and social

organizations Niche Events Niche events, such as bridal shows, crafts fairs and model decorator homes produced by downtown organizations can generate a lot of backdoor business The business operators participating in such events should also be encouraged to participate in other bridal shows, crafts fairs, etc., alone or even as part of a niche contingent N. David Milder, DANTH, Inc. 44 Facilitating Backdoor Retailing contd 2 Concierge Services Downtown organizations should become involved in their creation because they are Janus-faced: they can be extremely important backdoor links between consumers and downtown retailers or they can link local consumers to retailers in other cities A downtown organization can impact on how a concierge service sets itself up:

By establishing close ties to the client organization, be it an office building, residential building or hospital and perhaps even introducing them to the idea of a concierge program By aggregating supply, i.e., having a list of local merchants in key NAICS categories who want to participate in a concierge program and who are willing to base their prices on volume and to provide special services as incentives. N. David Milder, DANTH, Inc. 45 Facilitating Backdoor Retailing contd 3 Electronic Department Stores. Given the persistent and widespread reports about how difficult it is to get small merchants to establish viable online presences, some out-of-the-box thinking may be required DANTHs experiences on consulting projects and managing BIDs strongly suggest that significantly more independent business operators can be induced to innovate if local change agents are present who can make it easy for them to innovate Acting alone, many small merchants may never be able to develop that capacity

N. David Milder, DANTH, Inc. 46 Facilitating Backdoor Retailing contd 4 The establishment of a district e-department store might be one approach and have the following attributes: Each participating district merchant would be a department and have the opportunity to sell five to ten of their strongest merchandise items This limited product inventory would keep the maintenance of their online inventory information simple and easy to update. They would just need to provide the information to the e-department store management, who would do the actual updating on the website The e-department store would be managed by an entity that is capable of creating and maintaining a proper e-store operation. Participating merchants would not have to do anything directly on the website. They and their employees would not need to have Internet skills N. David Milder, DANTH, Inc. 47 Facilitating Backdoor Retailing contd 5

The e-department store also would need to develop a way of easing the burden of packaging and shipping the sold merchandise. For example, it might put together a list of part-time workers who are available, know how to package merchandise for shipping and could be called upon as needed Obviously such an e-department store would have to sort out difficult issues about: How payments for merchandise would be made and distributed, Product packaging and shipment The fees that its management would charge. However, unless downtown merchants and commercial district leaders start thinking about such issues, the online presence of many small merchants will languish N. David Milder, DANTH, Inc. 48 Facilitating Backdoor Retailing contd 6 Downtown Organization Websites

Print media have lost audience and their ability to effectively enable downtown organizations to tell their stories Downtown organizations are quickly shifting their attention to emarketing and their websites, e-newsletters and Facebook pages, but our web visits indicated that few are storytelling One reason: the easiest, cheapest and quickest ways to present information about local businesses on websites are in list/directory formats Today, even smartphones provide very functional camcorder capabilities and it is relatively easy to tell stories through short movies that can be posted to a website The Morristown Partnerships Morristowns Treasured Businesses is a terrific example of what can be accomplished, and many other downtown and Main Street organizations should consider emulating it N. David Milder, DANTH, Inc. 49 Business Recruitment: Retail Chains. The retail chains growing Internet capabilities may reduce the amount of space they need and consequently may: Translate into an important positive factor for many middle-sized downtowns that previously lacked spaces large enough to attract GAFO type retail chains Reduce their need for significant mixed-use redevelopment projects. Given todays frequent lack of political support for these projects and the difficulty in financing them, this could be very beneficial for

these downtowns Lower retail rents Ignite strong political debates about the desirability of having chains like Staples, Office Depot, Walmart, Best Buy, etc., in these downtowns and what their entry would mean to small independent merchants. N. David Milder, DANTH, Inc. 50 Business Recruitment: Independent Retailers Is it still worthwhile to actively try to recruit small single channel GAFO retail operators? The space requirements of small backdoor merchants may differ considerably from their single-channel colleagues: Since front door shoppers are less important to them, they may prefer lower rent side street locations Less shelf space may be needed for displaying merchandise, but more for storage, parcel packaging and shipment

Some may also want production space e.g., candy makers, cigar makers, craftspeople, dressmakers Access to a T1 or bigger internet pipes may be desired N. David Milder, DANTH, Inc. 51 Business Recruitment: Pitch and Materials If the recruitment program targets independent backdoor retailers, then the value statement for the district as a business location has to be expanded accordingly In addition to the traditional trade area demographics, downtown traffic and pedestrian counts, etc., the recruitment program should also make available: Information on the organizations backdoor support activities The data on local organizations and groups discussed above Information on local shipping and package delivery companies Information about the availability, cost, speed, etc. of Internet connections Information about other backdoor retailers in the downtown N. David Milder, DANTH, Inc.

52

Recently Viewed Presentations

  • The Great Staff Student Debate

    The Great Staff Student Debate

    Blackboard statistics tracking. Jigsaws : 117 views between (and including) 3rd December - 3rd January (37 individual students) Crossword puzzles : 126 views between (and including) 3rd December - 4th January (36 individual students) Student feedback. Module evaluations. Comments in...
  • Workforce Outcomes: Job-Based Perspective George W. Putnam Illinois

    Workforce Outcomes: Job-Based Perspective George W. Putnam Illinois

    First year post-graduation, earnings for Hlth Grads is equal to All HlthWorkers age 25-34; second year post-graduation, earnings growth is 15% Hlth Grads and only 4.8% for All HlthWorkers age 25-34. Example 1- healthcare grads from county in central Illinois.
  • Cysts in the Kidneys - Feliciano Comm

    Cysts in the Kidneys - Feliciano Comm

    Simple renal cyst, Bosniak category I. Axial contrast-enhanced CT shows a smooth homogeneous simple cyst in the left kidney with no septations and an imperceptible wall. Aquítenemos un CT con un quistecategoría I de Bosniakyaque no se percibe la pared...
  • Learning Objectives… - sabraz | Just another WordPress.com site

    Learning Objectives… - sabraz | Just another WordPress.com site

    Personal Finance Online. Online Billing and Bill Paying. Taxes. ISM 41113. Images of checks, invoices, and other related online correspondence bank of America, citybank. ... E - tailers using postal system to deliver product FedEx, DHL.
  • Accounting Principles 8th Edition - Grantham University

    Accounting Principles 8th Edition - Grantham University

    Margin (income) measure. Controllable margin, income from operations, or net income. Only controllable margin is a valid basis for evaluating performance of investment center manager. Judgmental Factors in ROI. LO 4
  • Rosas Danst Rosas - Meden School

    Rosas Danst Rosas - Meden School

    Rosas Danst Rosas (1983 & 1997) Choreographer - Anne Teresa De Keersmaeker ... The dance takes place in the corridors and rooms of a large, austere, empty school in Belgium. Windows, doors and walls frame the action. ... Key actions...
  • We present a statistical procedure for systematically ...

    We present a statistical procedure for systematically ...

    Entropy and location of transmembrane helices are also indicated. Reference positions are taken from the Rhodopsin PDB structure. Validation Method We compared our predictions for the GPCRA family to current knowledge about the structure, function, and dynamics of GPCR.
  • A Burning Question . . . Propane? Or

    A Burning Question . . . Propane? Or

    Slide 3 In contrast, God usually works in months, years, decades, centuries, or millennia. Consider . . . *Jonah *Israel *Jesus Waiting for the Lord . . . Slide 7 Slide 8 Slide 9 Quite unlike waiting for charcoal to...