Retail is stressed, but is better retail emerging?
The transformation of the American city and neighborhood through the loss of local retail stores is frequently blamed on Amazon and online retail, in general. But this is wrong. Private equity is the problem. Reflecting on a Bloomberg study, David Dayen in the New Republic suggests that, "This is a robbery in progress. Private equity firms borrow massively to buy companies, and use corporate cash reserves to pay themselves back. Workers who supply the value to the business see nothing; in fact, to service the debt, companies usually cut staff. When the retailer collapses under the borrowing weight, all workers lose their jobs. And even when sales go up, like they have by 5 percent annually in the toy sector over the past five years, dominant toy sellers like Toys“R”Us cannot compete because of the debt burden. The company’s profitability was increasing when it filed for bankruptcy." The Bloomberg piece suggests that worse is still to come. “A pall has been cast on retail. A day of reckoning is coming.”
Perhaps as a result, urban retail is getting smaller. Whether driven by financial schemes, or in response to the online experience, big name retailers are moving from mall to boutique, from mass merchandising to luxury presentation as a means to attract shoppers and sales. "In intimate salons, some the size of a cafe, shoppers can examine a limited selection of merchandise and place orders for products to be delivered or collected later. The customer service is often luxurious, but so is the time commitment for shoppers." Retailers are trying to change the shopper's experience from necessity to choice, making the store a destination for a different kind of experience. In these models, there is no inventory, you do not walk out with a product. in the least of the new retail, it's a showroom where you order things. In the more developed, it's a set of experiences aligned with the character of the brand, and a place to hang out.
In any case, the store is now a lab. In our town, Detroit, downtown streets have been transformed with temporary architecture. In that smaller is better strategy, "Winter Markets" present spaces for a significant number of local retailers and other brands to display products. Small, enclosed spaces are interspersed with outdoor cafes, bars, warming centers, and a large enclosed temporary "lodge" to move people to experience the city in a more social way.
I suppose these fall into the class of pop-ups, a class of many these days. The Atlantic, reflecting on the cost of retail as space as the generator of the type, says, "Temporary shops were once emblems of scrappy entrepreneurialism. Today they tend to be marketing efforts from giant corporations." The value comes from our tendencies to like the exclusive temporary, or "massclusivity," our tendency to prove the axiom that the tighter the time frame, the longer the lines. "It’s this more corporate sort of pop-up that has mushroomed in recent years. The goal is not so much immediate revenue as it is promotion and data collection, mapping the internet’s capacity for surveillance onto physical retail space." Intelligence outposts, they call them.
What may become fascinating in Detroit's pop-ups and others is whether they stay pop-ups. That is, The Wall Street Journal has identified a new breed of "perpetual pop-ups," arising mostly in the dining space. Intended initially as a way to test a concept and raise awareness, some pop-ups are here to stay. We like them. "'Permanent pop-ups also feed diners’ hunger for all things new. “People like to feel like they are discovering something,” said Oscar Michel, co-owner of the Bay Area’s Tacos Oscar, who got his start by plunking a propane-powered griddle on the sidewalk and serving tacos made with the kind of homemade tortillas he grew up eating in Los Angeles.'"