Retailing as brand management - an example from Apple

Ira Stoll at Reason reports on a visit to an Apple store:

I was looking for a computer to replace the nine-year-old MacBook Pro on which I am writing this column. I was also considering getting a new phone and passing my three-year-old iPhone SE along to a family member.

I left without a new computer or a new phone, but with a valuable lesson—one that you wouldn't necessarily learn if you spent your time listening to the presidential candidates bashing technology companies. One of the best ways to succeed long-term in capitalism is by treating customers well rather than ripping them off.

I was eyeing one of the desktop computers with an integrated Apple screen, Apple keyboard, and Apple mouse that would have cost more than $1,000 altogether. But the employee at the Apple store advised me I'd be better off just getting a cheaper "Mac mini" and buying the mouse, monitor, and keyboard somewhere else. On the phone question, he said I should go to a Verizon store—it had better deals.

Stoll positions this response as a customer service policy for retail and maybe he's right. I suspect, however, this is part of a larger trend for big consumer brands - using the retail environment as a brand management tool. Apple's high street presence seems to serve two purposes - a place where current Apple customers can get support and a place where people (who may or may not be Apple customers) can browse the company's products with trained people to explain what all the complicated stuff does. Selling you a phone, computer or accessory is pretty much secondary to the positive impact on brand image.

I recall a similar visit to a Bose store in Liverpool. We were looking for a good wireless speaker system (it's sitting next to me as I write this) and had a long chat with the young woman serving us. They didn't have the model we wanted in store but they could get it and have it delivered, "or you might get it on Amazon or a good electronics store". This led to a conversation about how she was paid - "aren't you guys on commission?". The answer was "no", they're salaried - the company had stores primarily to promote the brand rather than as a sales outlet.

In elite retail environments - large city centres, up-market malls and some smaller high streets - this sort of retailing is becoming more evident. From Aaron Renn reporting on the mustard shop in New York's Upper East Side through to the spectacular Johnny Walker House in Shanghai we're seeing the rise of retail as brand management. This development reflects the declining effectiveness of advertising in a world of subscription TV, ad blockers and online news - large advertising budgets are being redirected into paying shop rents rather than for minutes on TV or pages in magazines. Sales don't matter next to footfall and the same principles (how many and what profile) apply to shop rental decisions as applied to TV or newspaper ad choices Whether this is a good or bad thing for the high street is moot - it maybe sustains high rents where otherwise demand would push those rents down (Renn points out that Starbucks couldn't afford the rent round the corner from that mustard shop) but perhaps acts also to push out traditional retailers from up-market environments.

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Amazon didn't kill the high street and taxing online sales won't save it

We were on Gordon Terrace at Saltaire on Monday to pay a bill, have some lunch and do a little shopping. This street is as close as you'll get anywhere these days to that idea of a 'traditional' high street. Gordon Terrace has a greengrocer, a baker, a butcher and a grocer (OK it's a Co-op) those stalwarts of that high street of old plus a shoe shop, ladies' boutiques, a great menswear store and assorted delis. Even on a Monday lunchtime when rain is promised (and delivered in spades while we were in the greengrocer) the street is buzzing and busy. OK it's not perfect but there was just the one empty shop and a distinct lack of betting shops, tanning parlours, cheque cashing agencies and other such common features of today's high streets. It demonstrates that, given the right demographic and a benign parking regime (free short term on-street parking) the high street can succeed. Let's also note here that the busiest places were the cafes and restaurants - leisure an dpleasure rules the day on the high street. Saltaire is, however, pretty much the exception not the rule when it comes to high streets. And some folk seem to think we can make everywhere like this by the action of government - those folk are wrong.

The reasons for the decline of the traditional high street are many fold and date back a very long time. The first part of the decline came as a result of the success - based on choice, convenience and price - of the supermarket. Back in the days before supermarkets (Ken Morrison opened his first at Girlington in 1961 the year I was born - so that long ago) places like Cullingworth had a myriad of shops providing all the things those supermarkets came to provide, just not with the same range or the same low prices or indeed under one roof. The supermarket with its scale, distribution chains and efficiency resulted in tens of thousands of small grocers, fishmongers, greengrocers and corner shops closing down. They didn't all close suddenly overnight but gradually as folk retired, sold up, cashed in or, sadly, went bust.

At about the same time technology hammered another nail in the high street's coffin as the fridge freezer began to spread. This meant that women didn't have to shop nearly every day (something that helped make it easier for those women to go out to work, have a career) but could stock up for days ahead and, instead, spend their time on something more pleasant than dragging a heavy bag back from the high street. And those families also began to have cars too meaning they didn't have to use the shops in the nearest high street but could scoot down to Mr Morrison's grand store for what was now their weekly shop. The little shop in the village (or on that row of suburban shops at Bywood we used as kids in Shirley) couldn't compete with the car, the freezer and the supermarket so they slowly went from the high street.

By the 1980s the supermarket was joined by other stores in big sheds - category killers they were dubbed as they targeted hardware, gardening, toys, furniture and linen (in the USA books, cars and clothing were on this list too). Instead of going to that slightly intimidating store run by the man in a brown coat to buy some screws, paint or tools, people drove out-of-town to a sharper, cleaner, friendlier (and cheaper) store offering more choice but a bit less personal service. But if what you wanted was a hammer, personal service probably got outvoted by price and choice, so you went to B&Q. And the same went for bedding plants, toys for the kids at Christmas, settees and duvets - out-of-town offered more choice and a better price.

All of this decline, you might call it the decimation of the high street, took place before anyone except a few physicists had access to the Internet. For sure there was mail order but, unlike the USA where distance selling was a boon to remote places, the thing mail order companies offered that wasn't easily got in the British high street was credit - the liberalisation of finance in the 1980s bashed a huge hole in businesses based on the never-never. By the 1990s all the 'big book' mail order businesses were declining (the closing of mills and factories with female workforces didn't help as mail order relied on agents to sell through these places) while more nimble direct-to-customer mail order like Damart was thriving. But these latter weren't affecting the high street as their modus was selling niche products (thermals, outdoor clothing, plastic storage and so forth) - many of these business, Lakeland Plastics being a good example moved from mail order into high street retail.

By the time the Internet arrived most of the traditional local high streets with butcher, baker, greengrocer, grocer and hardware store had gone. Some survived by diversifying - butchers and bakers built businesses that depended as much on selling lunchtime sandwiches as on loaves of bread or gammon joints - but where this wasn't possible the businesses went. And they went most quickly in places where people benefited most from cheapness - poorer communities.

At the same time as all this, the out-of-town shopping centre arrived - Gateshead's Metro Centre, Meadowhall, the Trafford Centre, Lakeside, Bluewater. And these - again - offered a bigger range, more choice, a nicer environment and keener prices than the traditional town centre. The first to lose out here was comparison shopping on that traditional high street - ladies' wear, shoes, children's clothes all began to struggle as people found travelling to the mall more convivial, no less convenient and certainly cheaper.

All of this - and there's a lot more that could be said about how technology changed consumer behaviour, drove down prices and increased choice - is a long-winded way of explaining why Ruth Davidson and others who blame Amazon (and even more daftly, Amazon's tax bill) for the decline in high streets. In the simplest of terms high streets are dying because fewer consumers are frequenting those high streets. And, to make matters worse for small centres, the people who have deserted these high streets fastest have been the people with more money who have more ready access to transport and therefore take advantage of the bigger choice and better price offered by out-of-town shopping.

Unless the sales tax for online sales is so onerous as to force consumers to pay higher prices on the 'traditional' high street (assuming what they want to buy is available on that high street) the effect will be merely to make things a little bit more expensive for everybody without changing what consumers do in any notable way. It's good politics to talk about how it's not "fair" that Amazon doesn't pay high street rents and business rates but this is an argument for reforming business rates not an argument for taxing Amazon (I'm steering clear of the economists' point that business rates are a tax on the landlord not the tenant as it's contested and hard to explain to a retailer with a tax bill). It may also be true that we need to reform corporation taxes to make it harder for the likes of Amazon to use international trading to hide profit (again I'm staying off those pesky economist arguments about how corporation taxes fall on workers, customers and shareholders not the company itself).

Trying to blame a complicated social change like the decline of high street retail on one competitor (and a competitor that didn't even exist for most of the time the high street has been declining) is ridiculous. What we should be asking is why places like Gordon Terrace in Saltaire work so well while other places don't. Perhaps we need to think about which high streets need saving (or have the demographics and current range needed to survive) and which don't. There used to be at least 30 shops in Cullingworth covering everything you might need - there are now just twelve and three of those are hairdressers. Taxing online sales won't save the high street - asking what makes a high street work (the clue is in the second Grimsey Report where, in effect, he says the answer's leisure and pleasure not old-fashioned retail) is a much better question.

We have too many shops and probably too many high streets. I know this is a hard point to make and no comfort when we're talking about the centre of a Lincolnshire market town but it has to be said. There's a case for looking at reforming rents, at a business rates system that more directly falls on landlords, and at further changes to corporation taxes to reduce their burden on small business. There's no case for a tax on sales - over and above VAT - as this is just making things more expensive for us consumers. It may "hit" the bad boys of Amazon but it will also damage thousands of small businesses selling everything from gin and tonic marmalade to classic car parts through online methods. The result of this sales tax wouldn't be salvation for the high street but higher prices, closed businesses and another bundle of cash for government to squander on pet projects in town centres or subsidising failing businesses.

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Bradford's uniqueness comes from its Asian community - perhaps that's where economic development should begin?

“I have always been struck by how while every company tries to convince you of how different it is than every other brand, every city tries to convince you that it is exactly the same as every other city that is conventionally cool,”

You'll be familiar with this - "Shoreditch of the North" or similar is a common cry from city leaders as they scrat about for a positioning statement (Bradford and Halifax have both laid claim to this particular tag making it all the less individual). Places need to be more like Barcelona or Amsterdam or Montpelier. The result, as Aaron Renn whose quotation opens this piece, observed is that city marketing videos all seem the same:

“...pictures of the hip creative class, some startups, something about the local fashion and food scene, some people on bicycles going through the center of the city"

I recall, for work on my masters degree, reading the 'innovation strategy' of every English Regional Development Agency (RDA). They were, references to specific places or businesses aside, pretty much identical - except that is for the London and South East RDAs: they didn't have innovation strategies, just lots of innovation. Economic development has become - perhaps it was always so - something of a search for a safe sameness. Today every local or regional economic strategy stresses something called "inclusive growth" and proclaims that this is somehow new or different (without, it seems to me, ever really defining what "inclusive growth" means). Nowhere - least of all the places that struggle - is taking Aaron Renn's advice and seeking out individuality, difference, a unique selling point as us old fashioned marketers put it back in the days of big hair and nice suits.

Is any struggling city taking Michael Porters advice about branding?

“Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value."

The answer - at least from looking at the North of England, is a clear 'no'. Bradford wants to talk about 'technology', about 'levering land values', about tourism and about retaining graduates. Don't get me wrong, these are all excellent things but Doncaster and Wakefield and Hull and Salford and Gateshead and Barnsley and Sheffield say exactly the same. And, after decades of investing time and money in this ideas, what have we got to show for it all?

Much of what we do, quite understandably, is to point at what we have got that's working (in Bradford's case City Park, The Media Museum, Saltaire and high tech manufacturing in Airedale) and say things like "we're on the up". Again there's nothing wrong with this, it's just not enough. At the same time we are making strategic decisions based on the assumption that the economic fundamentals (things like land values, for example) are the same in Bradford as they are in Shoreditch.

Currently Bradford city centre has a few short of 2000 planning permissions for residential units yet to be built. We know (because the Council keeps bragging about it) that there are more applications in the pipeline. The problem is that in 2016/17 just 95 of these units were built out. And there's a reason - it probably costs something around £50,000 to built an apartment unit (more if we're talking about high rise buildings or heritage conversions) but you can buy a 2-bed flat in a (relatively) new build complex for £48,000. This tells me that land values in the city centre are pretty close to zero.

The classic regeneration approach is to use actions ('levers' is a favourite word) to raise those land values so it becomes viable to build speculative apartments or even offices. Those levers involve things like anchor institutions - one reason why so many places have chased Channel 4 so hard is because those 300 jobs will act to make wherever they end up "sexier" thereby raising values. If there aren't the anchor institutions, local authorities nationalise risk by using public borrowing to secure investment, either as a package of public and private funding (as with the former Bradford Odeon) or as, in effect, a straightforward commercial loan (Bradford did this successfully to secure the HQ of Provident Financial and less successfully with rugby league club, Bradford Bulls).

The thing is that this mix of funding does not seem to have made much of a difference - a listed former bank building in the best part of the city centre sold recently for a value indicating again that the land on which it stands is worth nothing. The Council has set aside (or more precisely indicated its willingness to borrow) something of the order of £87m in the transformation of the city and as part of a wider asset strategy. It should worry us that the Council is planning on buying up essentially valueless property in the hope that its involvement and investment will transform land values. I hope I am wrong in saying I really don't expect the city to get any real return from this spending nor to I anticipate that it will trigger some sort of investment boom in the city centre.

I've said, in remembering architect Will Alsop, that we should look again at his masterplan for Bradford. I described Alsop as a prophet for recognising that the city centre is too large and too dispersed. Moreover, Alsop set out an alternative - anti-development I dubbed it - approach of knocking down all the rubbish and replacing it with open space. We, almost reluctantly, did a little bit of this with City Park (where there wasn't so much to knock down) but everywhere else the plan is still to 'lever' those non-existent land values. With the emptying out of the 1960s/1970s part of the city centre we have the opportunity to do that clearance, to create new open space but instead the intention is to knock down the top of town, relocate the (admittedly struggling) John Street Market and create a site for, you've guessed it, more housing that nobody wants to build because there's no value.

The proposals are only made possible, just as is the crazed idea of building a new office block on part of that successful City Park, by the readiness of the Council and Combined Authority to bung loads of (borrowed) public money at these developments. In a city ringed with empty office blocks, surrounded by cheap rents and filled with empty flats it seems entirely the wrong strategy to build more. Yet that is what orthodox economic development tells us, all in the essentially vain hope that the result will be like Shoreditch rather than just more empty offices and poor quality flats. The problem is (and I hate to break it to Bradford's leaders) that our city centre isn't fifteen minutes walk from the City of London.

Having a city centre with zero land value is an advantage but only if we use it. Putting in parks and open space is a start but we also have the opportunity to look at creative approaches like homesteading or similar based on giving people free rent or free land in exchange for living and working there. We can learn from successful retail models in Bradford like the bazaars run by Asian entrepreneurs at Great Horton and Thornbury. The irony is that, while the traditional municipal markets are declining, these market-style bazaars (including one in what was a temporary building created during the botched relocation of Bradford's last specialist fresh food markets) are thriving. Alongside the Bradford Curry, these developments play to the city's uniqueness - the UK's biggest Kashmiri community at over 100,000 may not be without its problems but it does set the city apart from those other Northern cities. The first time I heard the term 'Bradistan' was from a Pakistani colleague in Manchester - her and her friends were frequent visitors to Bradford partly for reasons of family but also because of the offer to smart Pakistani women. Just not the city centre.

Looking at what we might call the 'old' city (Bradford pre-1974), the only thriving culture is, in the main, that Pakistani culture of bazaars, takeaways, sweet and pudding shops, grills, restaurants, cloth shops, and wedding halls. Us white residents get only occasional glimpses of this world but it's there and it's thriving. Perhaps, instead of pretty much saying "shh don't mention the Asian stuff", we should listen to what Aaron Renn said about Brooklyn's imported mid-west culture and Nashville's celebration of once-naff country music and become British Asian's capital?

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This year's stupidest policy proposal (in a crowded market)

It's annoying enough when a conservative policy response is to call for a new tax, even more annoying when it's as stupid as this one:

THE Chancellor is being urged to slap a 3 per cent sales tax on internet giants to help Britain’s ailing high streets.

Influential Tories are calling on Philip Hammond to fast-track a tax on the likes of Amazon, eBay and Google to “level the playing field” with UK business.

Tory rising star Neil O’Brien MP claims the move could raise as much as £500million a year. He told The Sun this money could be used to slash sky-high business rates blamed for pushing shops to the wall.

Let's get something clear here. What these 'influential Tories' are proposing is a tax that will make things we buy more expensive so we can reduce a tax on retail landlords:

In the medium to longer term, changes in rates paid appear to be reflected in corresponding adjustments in rental values. This relationship appears to be stronger for the retail sector than the office sector. However, there appears to be a significant relationship between the centrally set uniform business rate multiplier and rental values for the office sector.

Whether we should have a better way of taxing retail landlords is a different question to whether we should make consumers pay more for goods so we can reduce the apparent tax on retailers (and business in general). And that is exactly what the proposal from these 'influential Tories' will do - Amazon and eBay aren't going to absorb the new tax, it'll go straight on the cost of goods. Worse still, all those independent retailers who rely, in part, on sales through eBay, Amazon or Etzy will be the ones who take the biggest hit.

The high street is not struggling because of business rates, it's struggling because consumers have decided they rather like being able to order on-line and have it delivered to the door or the post office in the village. All dropping business rates would achieve is a delay in this decline - at the cost of higher inflation, consumer spending shifted from buying goods and services to paying a tax, and a sharp brake applied to one of the fastest growing parts of our economy. Stupid or what?

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Is building new retail capacity in suburban Bradford such a good idea?

"We'll get that away," says the council officer about a proposed out-of-town retail centre on the site of a closing leisure centre in South Bradford. So the Odsal District Centre is the future of that part of town? For how long? And is this really the future?

I wonder if this is a false hope brought on by the prospect of a capital receipt (and a pig-headed refusal to consider the site for housing) rather than a genuine engagement with economic reality. And Bradford isn't alone in all this - up and down the country local councils are buying up retail centres, either in the name of regeneration or, more commonly, investment income.

Here's some reality from the US courtesy of the always excellent John Sanphillippo:

This new retail plaza on the side of a Northern California freeway isn’t adding needed capacity. It’s cannibalizing existing retail sales from older shopping centers. There’s a limit to how many shoe stores and kitchenware shops the area population can support. Online sales are cutting in to already slim margins. It won’t be long before this place is hollowed out and half vacant, not least because the chain stores will be offered special incentives to relocate to a new place a few miles away. That’s when city officials and developers will hatch a public private partnership to turn the venue into a “technology park” to lure in some other heavily subsidized scheme that will also prove economically wobbly.

Just down the road in the same town is a premium outlet mall that, not too long ago, was the guarantied-to-succeed cash cow favored by municipal planners. But these things just don’t perform well beyond the first tenant lifecycle, particularly when there’s a parade of similar establishments for a hundred miles in every direction. Meanwhile, this failing mall is in a location with a critical housing shortage. The median home price here is $700,000 and very few homes are on the market. Median rent is $2,900 if you can find a vacancy. Most people can’t.

Right now, investment in new retail capacity, other than for discount supermarkets, is a monumentally stupid idea - even if you've an end user lined up. Just look at what's happening in UK retail - not because of slow economic growth but because the market is changing fast. So far in 2018, 14 listed retailers have failed, 1,236 stores have closed their doors, and 13,176 employees have lost their jobs - in four months. And there's more to come if House of Fraser, New Look and Debenhams performance is anything to go by.

Out in the real world the change appears to be accelerating - "go to Amazon," my wife's friend tells her on a chance encounter at the garden centre searching for outdoor furniture, "they're much cheaper and they've got more choice." The triumph of mail order is almost complete, every day a stream of delivery vans comes through our little estate of thirty-odd houses and flats - clothes, food, furniture, everything a home could want delivered conveniently to the door. And all this is without counting the folk who, for their convenience, collect from Cullingworth's chemist or post office.

It's not that shopping is dead - we're shopping more than ever - but that we can shop with a glass of wine in hand from our sofa while muting the adverts on the telly or pausing the Netflix series we're watching. Why - given all this - would people want to drag themselves to a load of cheap sheds thrown up in suburban Bradford? The retail the will work is that which offers something we can't get from our sitting room - events, socialising, entertainment, reward - and that which is additional to a destination - the shop at the museum, the little boutique of handmade clothes by public square, the cheese stall or deli in some space near the popular restaurant.

What matters, given convenience is now an app on our phone, is leisure and pleasure, place and space. And, in no known universe are out-of-town retail sheds any kind of pleasure-led place, a destination for a trip out. People aren't going to say, "let's go to Odsal Distrct Centre it's so much fun there", yet because of an obsession with short-term value that is what we get. And sadly, in a decade or so, Bradford (and lots of other places) will be asking what to do with a half empty and increasingly redundant retail centre - just as we are with the crumbling district centres build in the 1970s, 1980s and 1990s.

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My speech on Bradford City centre to Politics in the Pub

For those of you who missed last night's Bradford Politics in the Pub event, here is my short speech about the regeneration of our City centre and the Council's current proposals. We were asked "how do we solve a problem like Darley Street?"

"Forgive me for not answering your question. I really do think it’s the wrong question for all that we’re rightly concerned about the future of that street.

It’s more important, I feel, that we think about the longer term, about the future of the high street and the role of City Centres like Bradford.

When big and successful centres like Leeds and Manchester are starting to question the size of their retail footprint – about shrinking the centre, as it were – it seems silly of Bradford to think in a different direction.

The idea that retail alone – or even in large part – can deliver a future city centre is, I fear, delusional. Those things in your pockets and handbags ensure you can buy stuff at the flip of a finger and have it delivered to your door – city centres will never compete with this shopping offer.

We need a different answer. One that works for Bradford.

14 years ago, Bradford asked Will Alsop to provide a city centre master plan. I posted the result – or at least the video that accompanied the plan – on the Politics in the Pub facebook page – if you’ve not seen it, it is easily googled.

Once you got past the teddy bears and blobby architecture, Alsop’s plan was genuinely radical.

So genuinely radical that we ignored it.

Alsop proposed an anti-development masterplan. A completely different take on a city centre. One that played to the uniqueness of Bradford as a place and to the city’s challenges with land values and investment.

Alsop said ‘knock down the ugly stuff, the results of Wardley’s 1960s redesign of the City Centre, and replace it with a park.’

That was pretty much it. For sure there were bits of detail. Some debate about whether there should be no planned new development or just very little.

It’s time for us to look again.

What are centres for?

Here’s a list from American ethnographers Susie Pryor and Sanford Grossbart:

“…dining; window shopping; strolling for relaxation; jogging for health reasons; pub crawls; wine tastings; book clubs; language clubs; craft guilds; charity events; art events; parades; demonstrations; mass celebrations following major sports victories; and meeting friends.”

You might care to add to this list but I do know that, when Bradford City are promoted to the Premiership it won’t be celebrated by buying stuff on Amazon – the flags, parades, banners and beer will be here in the city.

Imagine that in a place that’s like a park? For a fleeting moment Bradford has a glimpse of that dream.

But we put it away. Searched instead for “high value demographics”, “enhanced land values”, and “new investment profiles”. Development bollocks.

Bradford doesn’t have the values right now to deliver shiny retail, grade ‘A’ office space or high quality market housing. So simply moving bits of the city about – fixing Darley Street by shutting down the main generator of footfall in the ‘top of town’ seems to be simply robbing Peter to pay Paul.

So let’s do to the top of town what Alsop told us to do – turn it into a park. A destination. That might just work. It seems right now a better bet than waiting for millions of private investment in housing that probably isn’t going to arrive in Bradford city centre any time soon."

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Rents and the death of the high street

Aaron Renn reports on the arrival of a mustard shop in New York's Upper West Side:

Maille is a supermarket brand of dijon mustard. It’s a product of Unilever, the Anglo-Dutch food and consumer products giant. You may not know Unilever, but you know their brands, including Hellman’s, Dove, Lipton, and even Ben and Jerry’s.

This particular location provides mustard tastings, and sells dijon in a variety of flavors not typically available. I believe they also have some vinegars. I was once needed some dijon and purchased a jar of their regular flavor for $7 – which is $3 more it sells for at the grocery store a few blocks away. They apparently charge as much as $99 for a jar of black truffle mustard.

Shortly before this description Aaron had noted the departure of his local (Upper West Side) Starbucks following a rent hike to $140,555 per month. As he points out you've to sell a whole lot of coffee just to cover a $1.7m rent.

So why the mustard shop? And how is it that Unilever (fresh from scrapping with Tesco over Marmite) feel able to justify forking out something similar for a shop round the corner from that defunct Starbucks? The answer to this question is central to how we see tomorrow's high street. I've written before about the shop as part of a brand marketing strategy:

Just as Diageo wants high net worth customers in the Johnny Walker House, the future high street success wants high spending, high end customers - the every day buyer can shop from his computer and have it delivered or collect from the Post Office. In town retailing becomes an event, an orchestrated, animated marketing promotion. The customers walking into you shop are there because you've invited them - to a product launch, an anniversary, a preview. They're dressed up to party not slouching round the shops in jeans and an old t-shirt.

What Aaron Renn is saying, however, is that because the cost for the mustard shop rent is coming out of Unilever's marketing budget, it's a drop in the ocean. Moreover, that rent isn't set against sales (even though you can pay $99 for some truffle mushroom) but against the objectives set by the brand managers - measures of equity, voice and share are just as important as sales. After all the supermarket's more likely to buy the product (and maybe pay a little more for the product) if it's the mustard with the flash shop in the posh Upper West Side.

The effect of this is to push up rents and to push out actual retailers. With ever more sophisticated home or click-and-collect delivery systems the ability of real retailers to compete is diminished. The high street as we know it is already pretty ragged but what this tells us is that the future of town centres - even in wealthy places - is as a billboard rather than a shopping centre.

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So what exactly is wrong with Costa Coffee? Why national chains are important to the high street

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Some long while ago the New Economics Foundation wrote a report where they coined the term 'clone town':

The report shows how retail spaces once filled with a thriving mix of independent butchers, newsagents, tobacconists, pubs, bookshops, greengrocers and family owned general stores are fast being filled with faceless supermarket retailers, fast-food chains, mobile phone shops and global fashion outlets. 

The report has been remarkably influential - it combined our like for traditional high streets with something that pretended to be economic analysis. From out of this idea - an a host of subsequent reports - has come a new model for the high street where words like 'sustainable' and 'resilient' abound, and where jolly bunches of community activists and local 'independents' create delightful people-focused places. It is quite idyllic and, if you go to well-healed market towns in Oxfordshire or North Yorkshire you see the model in action.

One such place - in Devon as it happens - is Totnes. I wrote about how the local planning and development agenda has been captured by a group of green activists calling themselves Transition Town Totnes. There was even a petition to the town council setting out local concerns around this capture:

While no one in the Totnes has voted for TTT to dictate town policy, it has enormous influence over town planning policy and the future economic direction of the town. No one in the town voted for TTT to run policy, and it is quite wrong that Totnes Town Council took the unilateral decision to become give us the label of a Transition Town. In fact, if TTT continues to implement its damaging policies it will succeed in turning Totnes centre in a ghost town and make all our lives far more difficult. We want choice, not just TTT's choices.

The whole thing came to a head because Costa Coffee submitted an application to open a coffee shop in the town. There were petitions against signed we're told by 12% of the towns residents as well as by folk from nearby communities like "Edinburgh, Glasgow, Kent, Leeds, London, Manchester, Norfolk, and Surrey, Australia, Canada, France, Germany, Italy and even Morocco".

The upshot of all this was that, despite getting its permission (quite rightly since planning is concerned with the use not the ownership), Costa decided not to open up in Totnes. And, as a result, Totnes lacks that little bit extra choice and variety. However, my question is rather to enquire what it is that is so wrong with Costa Coffee that its very presence in a small Devon market town would drag that place down?

The main protagonist here is a chap call Rob Hopkins who believes that his rather peculiar idea of 'resilience' is more important than that pesky thing called choice:

"Choice" is one of those motherhood-and-apple-pie words which can surely only be a good thing, can't it? We all love "choice". It is, of course, ultimately your choice whether you buy your coffee from an independent local business or a chain such as Costa. But would opening a chain in a local economy introduce more choice, or ultimately lead to less? Would it lead to job creation, or to greater job losses, to job displacement? Would the chain support the local bakers, farmers and services that enable more money to cycle locally and give a local economy its robustness?

Here we have the essential argument of the transition town people - that businesses like Costa Coffee don't create jobs and use low cost suppliers from some place other than the 'local' economy (however defined). The idea of resilience - robustness in the quote above - is, for Rob and his pals, predicated on limiting choice through a model of local protectionism. And, of course, as with any form of protectionism, this model results in higher prices and less choice. For high income residents of these market towns such things are affordable but for the poor or unemployed the supposed resilience comes at a cost since they are less able to afford what is on display in the stores as a result of the transition town policies.

I'm not so sure that this argument is right. It rests on two beliefs - that the local multiplier is significant and that substantially more of the money spent in an independent retailer 'cycles locally' as Rob Hopkins puts it. Both of these arguments are open to challenge. Firstly the multiplier, while an important concept in economics, is challenged as a measure in local economics because of leakages and the difficulty of measurement.

There is, however, a more fundamental objection - this is that any benefits from more money staying locally are more than wiped out by the higher prices that results from excluding chain retailers. The New Economics Foundation multiplier model (LM3) doesn't take account of higher prices as it only measures spending downstream. And these higher prices represent an opportunity cost - the consumers' money isn't going into other local spending as they are having to pay those higher prices. A complete assessment would subtact this opportunity cost from the calculated benefits from the LM3 calculation.

The second objection is to the idea that substantially more money remains in the 'local economy' where it is dominated by independents. After cost-of-goods the biggest costs for a retailer are the premises and the employees. We can't assume that the rent is recycled, energy costs certainly leave the local economy as do any repayments on business loans, and there is a significant chunk of taxation (VAT and business rates in the UK). There's nothing to indicate that the employee in a Costa is less likely to spend locally but again most of that employee's costs - tax, rent, energy - leave the local economy.

Finally we need to challenge the idea that "the reweaving of local food webs, community-owned enterprises, a culture of entrepreneurship focused around community resilience" is somehow a stronger local economy than one which is linked with the wider national and international economy. When disaster strikes distributed and networked chains are better able to respond. Here's the example of Wal-Mart after Hurricane Katrina:

It is no accident that Wal-Mart had a strong, measured response in the aftermath of Katrina. Numerous local and state government and law enforcement officials credit the company with providing the first relief efforts in the devastated region, days before Federal Emergency Management Agency (FEMA) and Red Cross relief operations began.

“Wal-Mart was a lifesaver here in the city of Kenner,” says Phil Capitano, mayor of the New Orleans suburb. “They mobilized and brought food and water when others couldn’t or didn’t know how to get through. They provided anything we asked for when FEMA or no other federal or private organization did. And for that, we are deeply grateful.”

This large business with an international distribution network could respond - had there only been independents such a response simply wouldn't have occurred. And while coffee shops are less important in a disaster than grocery stores, this is a reminder that the approach to 'resilience' promoted by the Transition Towns movement is a false one - not only is it less able to respond to crisis but it is also predicated on higher prices and less choice.

There may be many reasons why Rob Hopkins and his friends don't want to drink in Costa Coffee (although beyond under-strength coffee and bad biscuits I can't think of one) but there is no reason for them to gang together so as to prevent people who might want to drink their coffee in big white cups on an off-centre saucer from doing just that. And suggesting that tourists wandering into Totnes will head to Costa rather than one of the delicious little independent cafes the town is so proud of says very little about those businesses' marketing and service offering (probably unjustifiably).

The 'clone towns' report was important and influential. But we have taken the wrong message away from it especially in a changing retail environment. Since 2005 we've had a massive recession tracked by the explosive growth of on-line buying. As the economy recovers it's unlikely that we will see a return to the sort of high street we saw before 2005. In some ways this is a good thing because we get to treat the town centre as a destination, as a place for events rather than as merely somewhere where we go shopping. But chain restaurants, bars and cafes are just as much part of the future mix as are a variety of creative independents.

Right now the only places that can sustain the sort of retail mix that Totnes is celebrating are either wealthy market towns, posh suburbs or places with a large visitor footfall (and the right sort of visitors). Most places are a very long way from being able to indulge in the slightly snobbish exclusivity that is implied by the Transition Towns idea - indeed many high streets and town centres are more challenged by what to do with a growing number of empty shops (not to mention proliferating betting and borrowing establishments).

Instead of the negative, Stop Costa, Stop Tesco, Stop Wetherspoons, approach places should look to the barriers to new initiatives - setting up bazaars and markets, encouraging busking and peddling, promoting street food and pop-up bars and using the public spaces as a stage for events that help attract people into the town. What we must stop doing is arguing that national businesses damage local economies when there is precious little evidence to make that claim.

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Rags, swag and pet food - Gentrification, markets and the grocery store...

Scott Beyer writes about gentrification:

If you’re an urban pioneer who settled in downtown Cleveland sometime in the past decade, you’re probably happy with the neighborhood’s progress. Even as the city as a whole has continued to lose population, the central area has revived thanks to an influx of young and educated newcomers. Downtown Cleveland right now has its highest-ever population, with more than 13,000 residents and lots of new housing developments on the way. There are more than 4,000 hotel rooms, with another thousand expected by 2016. And residents today enjoy a more walkable neighborhood, as new restaurants and bars open around old cultural institutions like the theater district. If you are looking for a large grocery store, however, you’re still out of luck.

Partly this reflects the high income of those gentrifying folk plus their preference for eating out - not so much at fancy sit down restaurants but at those street food places, coffee shops and bars that sell slices of cured pig. But it also raises a question about the economics of food retailing and the truth that retailers (especially convenience retailers) are entirely driven by 'counting chimneys' - or whatever the urban high rise equivalent of 'counting chimneys' might be. If there aren't enough people living in the area, there won't be a grocery store.

The response has been subsidy or financial incentive (or even worse - and UK planners are very guilty here - use class constraint). The problem with this approach is that it doesn't change the economic reality - if there aren't enough customers spending enough money then the store will close once the incentive dries up.

The answer - rather than chasing national retail chains or hoping for some hipsterish spin on the corner shop - may lie with something that can be great but is too often neglected by local authorities: the market. The problem is how to strike the balance between the municipal market's traditional customer base and the wealthier, trendier folk following in the wake of gentrification.

The commodification of the shopping experience, with its attendant fetishization of taste and provenance, is still in its early phase in Kirkgate Market, as indeed it is in other British markets. In this sense, Kirkgate and other similar markets are on the gentrification frontier.

Part of the irony here is that the 'hipster' is searching for authenticity, for the sense of discovery and difference, yet doesn't realise what is the authentic and genuine in an English municipal market (swag, rag and pet food as one trader described it to me a few years ago).  I have criticised Leeds Council's approach to Kirkgate - preferring long leases and high rents in the Grade I listed part of the market buildings thereby creating something of a false environment. This is not because I'm against long leases or higher rents per se but because it is very clear that this strategy doesn't work.

Given that markets are in publicly-owned spaces (whether open air or covered) and not operated for profit, there is the opportunity to both support the traditional low income customer base (who want swag, rag and pet food) and also to encourage new customers - whether from new immigrant groups or from those trendy gentrifying sorts. In and around Bradford's Oastler Centre (I still think I was wrong to agree to changing its name from John Street Market) we can see this mix in play as the old mix of stalls (meat, fish, greengrocery, clothing and cafes) is supplemented by stalls serving the new immigrant communities - the spice stall, the stalls catering for African, Philipino and middle-eastern communities. What has yet to happen is for new places to open that complement the customers served by the bars and cafes opening in adjacent streets.

But I'm not here to talk about Bradford's regeneration but to look more generally at how gentrification delivers both benefits and problems. The benefits come from the investment and from the spending power of a wealthier customer base -- no-one can deny that this can, and does, transform places. But the downside is that the improvements are all kecky-pooky. We get nice bars, cafes and specialist food or clothing retailers but the everyday stuff of the high street - grocery, hardware and so forth - doesn't arrive or at least doesn't arrive so quickly.

As Scott Beyer concludes (after two decades of gentrification) in Cleveland where the first general grocery, Heinen's, has opened:

Retail options are now focused around a few scattered nodes, namely the East Fourth Street pedestrian mall, the 5th Street Arcades and the Warehouse District. For the neighborhood to be truly livable, say Starinsky and others, the city will need to fill in the gaps with additional retail options. Attracting the right mix of stores will require continued focus by public officials and private groups alike. But downtown residents will no doubt look at the opening of Heinen’s as a crucial step in the right direction.

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What to do next? Is Sheffield City Council making the wrong decision?

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Town and City centre developments are looking pretty fragile as business propositions, us folk in Bradford still sit, fingers crossed, awaiting action from Westfield over the Broadway site. And meanwhile in Sheffield:

Developer Hammerson today announced it was pulling out of long-awaited plans for a new retail quarter in Sheffield.

 The company said it has agreed with Sheffield City Council that it "would end its development agreement" on proposals for the Sevenstone scheme.

The scheme - just cracking open the egg when I was in Sheffield doing my Masters - has been stalled since 2008 "because of the recession" (no mention of the longer-term trends in retail here). It seems to me that this decision from Hammerson reflects the reality of retail investment - other than in exceptional circumstances it's simply not viable right now.

However, Sheffield City Council, wedded to the 'shiny regeneration' model like most big city councils has this to say:

Leigh Bramall, the city council’s cabinet member for business, skills and development, said the authority was still committed to developing Sevenstone.

He said: "The people of Sheffield have waited long enough for a new retail quarter.

"We have the land assembled, utilities in place, have established the level of funding available, and methodology to inject the funding to undertake supporting public works.

"We have confirmed a scheme is viable and so we will now be seeking a new development partner to move the project forward in the shortest time possible."

I wish the city luck with this approach and, knowing the politics and institutional myopia that so restricts regeneration, hope they find a new development partner.

My question is this. If Hammerson - not exactly a small or insignificant developer - can't make the development stack up with an anchor like John Lewis and the promise of £45 million in public subsidy, what makes the Council think another developer will fill the void?

Perhaps a different approach would help us all rethink the regeneration of City centres?

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I'd love for the Women's Institute to save the high street but it won't

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The Women’s Institute is a great organisation – not just because it (somewhat childishly) slow-hand clapped Tony Blair or because of those ladies in the Dales who took their clothes off. No, the WI is important because is encapsulates the importance of doing things rather than calling for other people to do things.

Those ‘things done’ might not be earth-changing and indeed might be the ideal target for ever-so-slightly smug comedians (usually the ones who are, you know, faintly embarrassed at being middle-class or worse still posh). But they are ‘things done’ which makes them vastly more valuable than either ‘things discussed’ or ‘things we want someone else – usually the government – to do’.

Which brings us to saving the high street:

The group’s 212,000 strong membership will turn its attention to boosting local town centres, small retailers and communities. There will be a lobbying campaign on a local and national level and it hopes to use its strength to influence Government policy.

It seems a shame that the WI – at least nationally – have slipped from the idea of ‘things done’ and into becoming just another lobbying organisation. One hopes that there is a little more to this campaign than just bothering MPs or trying to ‘influence government policy’. There is a little hope in that the aim is for WI members to do something – or so says Marylyn Haines Evans, chair of the public affairs committee:

“We are not calling on our members to boycott online shopping or to stop using out-of-town shopping centres and major supermarkets. What we are asking is that they go first to their local shops.”

This is admirable. And of course will make absolutely no difference at all to the prospects for the town centre, the high street or the local parade of shops. Not just because there aren’t enough WI members (many of who are already the sorts who use their local shops anyway) but because the high street – even the little local centre simply isn’t about shopping any more. Don’t get me wrong, there will still be shops including those treasured (but underused butchers, bakers and greengrocers) but we’ll head for the centre as a result of other appeals and interests – mostly because of leisure and pleasure.

The little parade of shops might work because it has a little coffee shop and deli or a child care centre. Maybe the presence of specialist housing for older people might help as they prefer the short walk to the shops over the bus ride to Tesco. And it will work even better if there's a little park where folk can sit or a playground for the children. The new mini-supermarkets that cause such consternation will help too as on-line customers pop in for their ‘click and collect’ groceries. The old ‘secondary’ retail location has a good future – it may look a little different from the parade we remember from our childhood but it will work.

It’s the next level up – the town centre – that there’s a worry. The comparison bit of comparison shopping is increasingly done on-line. Even in the malls and centres shoppers are checking goods they fancy against prices on-line – either to give them a bargaining tool in the store or, more likely, to click, buy and have delivered. Town centre retail will be more about things you can’t get online so easily, things like care and beauty where you need to person to provide the attention and titivation. Plus places that are more about brand or event than about sales – the idea of a book shop where rather than to buy a book people go to meet authors, to hear readings or simply to sit and chill isn’t so far away, and we’ve already got shops and spaces from Disney, Panasonic and (in the Far East at least) big spirits brands such as Johnny Walker.

This is retailing as entertainment, a distance away from the everyday task of getting things we need – the weeks shopping, clothes for work or school, things to mend and fix. And for town centres it is part of the mix – not everything but important as retail changes. Alongside this will be the ever changing mix of junk, tat and the unique that is the market – not merely the municipal market but the flea market, the farmers market, the concession store and the bazaar. When rents fall in town centres (and they will) these uses will flood into where we once had department stores and shoe shops.

The town centres that win will be those that embrace these changes not the ones who try to use regulation, planning or taxation to prevent the change. Some of them will be surprising places where local sensibility (and the WI) didn’t get in the way and where different uses were encouraged. Various folk have been talking about this change, of the move from the workaday to the pleasurable, of town centres as stages for events – from the birthday celebration or the stag do to formal organised and promoted occasions, from the spontaneous celebration of a win at football to the Scouts St George’s Day Parade.

Town centres and local councils that try to manage this stage the wrong way – through outdoor drinking bans, herding people away from events or stopping busking and peddling – will find quickly that places with a more open attitude, prepared to tolerate a little more noise, late nights and fun, will get the footfall and the businesses that live off that footfall.

So perhaps the WI, rather than lobbying government, should set up stall in the town centre – sell some jam, play some music, hire a clown and contribute to making local centres lively again!

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Can we now stop saying town centres are for shopping?

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‘She kept an antique shop – or it kept her.
Among Apostle spoons and Bristol glass,
The faded silks, the heavy furniture…’

I've felt like something of a lone voice in all this - bashing away at the shiny regeneration on the one hand while pointing out to locovoracious folk that their dream of twee high streets filled with organic independent shops (probably workers co-ops or some other form of trendy model) is just as daft.

Indeed these people - epitomised by Julian Dobson - still bash away at the idea that there's some magical system of common ownership that will change the high street:

What’s broken isn’t just the retail model of HMV or Jessops, or the business rates system, or city centre parking, or any of the individual bugbears blamed for the demise of the high street. What’s broken is our own ability as citizens to share in the ownership, management and use of the spaces we occupy. It’s about the whole place, not just the shops.

 

I agree that it's about the whole place. I agree that it isn't just the shops. But this idea of us "sharing" the ownership is just so much wiffle. I'm not interested in some sort of 'commons' system where I sort of own it but not really and where we get endless rows and scraps about who should be allowed to do what on that common land. Up here in Cullingworth, the council stopped fifty years of moto-cross and scrambling on the Flappit because it wasn't the right sort of use for that particular 'urban common'.

If you want things to work, they have to be owned. And right now the only bits of the town centre that are 'owned' are the shops, which is why we're still talking about retail rather than about town centres as the stage on which we perform. In the Portas Review we read how the high street needs to be run more like a business - more like the out-of-town malls in fact:

 

“High streets should be run more like businesses. And businesses are run on the basis of strategic vision. However, unlike the sophisticated shopping malls or large retailers, high streets aren’t overseen by a single landlord or professional management body.”

 

The retail establishment - the shiny regenerationist - view is that we carry on more-or-less as before - rather as we see in Bradford where the council uses its own funds and Regional Growth Fund to subsidise the business rates of new or relocating businesses. A straightforward bung to businesses will do the trick. Except they don't appear to be flocking to the city.

 

As we see, the trendy place-maker view is all around 'commons' or, as Julian Dobson now seems to want, a public corporation approach. I don't think this will work - either we get the tradedy of the commons revisited or we get another pseudo-political corporation that can be captured by the very town centre interests Julian so dislikes.

 

My view is that we need to be far more radical:

A radical approach would be to transfer all that council owned land – the streets, the pavements, the market halls, the offices and the parks – into a for-profit company. Where, as in many places, the council owns freeholds of retail premises these can be added to the pot. And use that asset to create the excitement, the events and the environment – the “21^st Century urban entertainment centre” that Ms Portas describes. That would be a radical approach rather than the rewarmed versions of existing – and mostly unsuccessful – strategies presented by Ms Portas.

The ownership of the company could vary – maybe co-operative or mutual, perhaps the local council or possibly a combination of these approaches. But it is essential – if the town centre is to be run like a business – the company is for profit. For it is the search for profit that makes the shopping malls and supermarkets creative, innovative and focused on getting the experience right for the customer.

 

Most importantly this approach isn't founded in shopping - for there is no future in retail as the main determinant of the town centre environment.

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