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Thread: Retail recruitment during a recession

  1. #1
    Aug 2008

    Retail recruitment during a recession

    With the economy the way it is, and most companies not looking to build new stores/shops, I was curious what strategies one might use when working to recruit retailers to an area. What works/doesn't work would be super helpful.

  2. #2
    Cyburbian Cardinal's avatar
    Aug 2001
    The Cheese State
    As someone who specializes in this area, I can tell you that the answer is very complex and will vary wildly depending on local conditions. Overall, I look for people to continue to curtail their spending and to return to a cash flow model of income and expenses, even after the economy begins to pick up. The retailers that will be hurt are those that focused on luxury or non-necessity items, those that are not in a good cash position to weather a downturn, and those that have suffered from poor management and merchandising. Examples of these would include, respectively, The Sharper Image (already history), Eddie Bauer (good merchandise and a loyal customer but overly leveraged financially), and K-Sears (can't do anything right). Those that will generally do well are those that have a strongly perceived value position, those that deliver both service and an entertainment quality, and those that can offer steep discounts.

    From there it gets more difficult to answer this question. For example, is a tourist destination going to benefit or be hurt by the economy? People will still travel, but may not go as far. A destination that is a day's drive away may benefit if people go there instead of across the country. Downtown may benefit if its unique shops remain open and shopping there is seen as a pleasant diversion, especially if the mall anchors and 25 percent of its specialty stores close. It is all going to be very site-specific, but there will be winners and losers.

    A few trends bear watching:

    - First, people are cucooning intheir homes. As a result, there are indications that they are spending on their homes. Flat-screen TVs and Wiis are selling fast, although prices have been so sharply cut that the profit in selling them is pretty low. These same customers may be starting to invest in home improvements, from small things like painting a room to more extensive remodeling and redecorating. This could finally bring back some of the vitality to the home furnishings segment of the market.

    - People still shop according to their lifestyle. While fringe customers may be lost, the core appears to be remaining strong. We buy for what we value. Organic and natural products. Pets. Cosmetics.

    - Frugality is in. Walmart, Kohl's, Walgreens, Aldi, and the dollar stores may at times see declining sales as things worsen, but they are going to gain a larger share of the market.

    - We should see a new wave of retail entrepreneurs. Laid off from their jobs and unable to find other work in the field, like planners, many of the retail industry's best workers may decide it is time to open a business of their own. While credit is tight, rents are going lower than we have seen in a long, long time. Some of these people will fail. Some will become the next hot chains that are poised to explode when the economy turns around.

    Retail space is overbuilt in many markets. Maybe we should not be recruiting, but thinking instead about how some of the available properties might be re-used.

    Lastly, I will offer two more comments: that most of the incentive programs communities have for business recruitment, bad as they may be for industrial businesses, are even worse for retail businesses, and that most of the consultants who work with communities in retail development are not worth the money you spend on them.
    Anyone want to adopt a dog?

  3. #3
    Cyburbian Brocktoon's avatar
    Apr 2006
    Promoting synergies...
    I will second everything Cardinal stated. Without knowing our situation it is difficult to offer any other advice. Demographics, real estate etc are all important drivers to retail.

    If retail is a focus then you must have an entrepreneurship development strategy that works in tandem with your recruitment strategy. Many retailers from Subway to Best Buy are franchise stores, so you will need someone in the area to own and operate them.
    "You merely adopted the dark. I was born in it,..." -Bane

  4. #4
    Cyburbian Richi's avatar
    Jan 2008
    Tallahassee, FL
    I agree with Cardnal and jwr. I think the local ownership is right on - either the franchise or pure home grown. A small town I consult for rebuilt itself from a dying tobacco town to an antique and art center. Business is not really booming, but it is holding own better, it seems, than in the malls 12 miles down the road. A small franchise drugstore (home owned) just built a new larger store and moved in a week ago.

    Financing is tough, but those rare places that still have a local bank have a leg up IMHO.

    Local food is really gaining ground so I see promise for loca producers of speciality crops. But that has to be based on existing ownership of the land. You can't by land and survive attempting to farm it.

    My local feed & seed store (in business for over 60 years now) is busy every time I go in. People appear to be planning more gardening. Getting ready for the "real hard times"? If you have a market (enough rooftops to support gardens and nearby people with horses, chickens, etc) and a vacant storefront, that might be a good mix.

  5. #5
    Cyburbian DetroitPlanner's avatar
    Mar 2004
    Where the weak are killed and eaten.
    I agree with Cardinal as well, stores like Family Dollar may not be seen as the type of store everyone wants in their community, but you can get in and out of them quickly, they carry staples, and just about everyone can afford them.

    Over the last six years Detroit has gone after major retail downtown and now we are stuck with a closed Brooks Brothers, a closed Starbucks, a soon to be closed Borders. Not everyone shops at those places and these are the first to go when the economy tanks. One person tried to open a full-line independant department store downtown a few years ago. It sold everything from fur coats to $25 underwear. It flopped big-time and was open for less than a half-year. This was after he had opened and cultivated several profitable boutiques downtown. He should have stayed with the boutiques.

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