Earlier this evening, having just read that Gap was planning to close approximately 200 stores over the next three years, I heard from my friend Jean that Urban Outfitters had decided not to renew the downtown Ann Arbor space that they’ve held for the past several decades. While I don’t suppose it’s that terribly surprising, given trends in retail, and the fact that Urban Outfitters CEO Richard Hayne said earlier this spring that the company would be opening fewer stores, and closing some of their existing ones, but I have to imagine that this is a wake-up call to those working in Ann Arbor real estate… Here, if you’d like to open a business on State Street, and have over $53,000 a month to spend on rent, is the listing for the 11,650 square foot Urban Outfitters’ space.
While it’s true that I don’t have much love for Urban Outfitters, which has proven time and time again to be a fairly reprehensible company that wouldn’t think twice about stirring up free publicity by selling what appear to be vintage, blood-stained Kent State sweatshirts or tapestries inspired by the clothing gay men were forced to wear in Nazi concentration camps, I’m more than a little concerned about what this means for the future of the downtown community. I know that, as a nation, we’re trending away from brick and mortar retail, but I can’t help but think that our local business ecosystems, and society in general, will suffer when our downtown shops cease to exist… even shitty one’s owned by terrible, right wing assholes like Richard Hayne.
If the name Richard Hayne sounds familiar, it might be because, a few years ago, his name came up here on the blog during an interview I’d posted with Judy Wicks, the founder of the Business Alliance for Living Local Economies (BALLE), who, interestingly enough, was once Hayne’s wife and business partner. Here’s a clip from the interview, where we start talking about how their paths diverged, with Wicks, a successful restauranteur, becoming more interested in the creation of sustainable and equitable local economies, while Hayne grew more and more interested in boosting the bottom line at all costs, without any discernible concern for society in general.
MARK: I’ve read that, prior to the launch of White Dog Cafe, you were a co-founder of the Free People’s Store, which later became Urban Outfitters. I’m curious to know if the trajectory of Urban Outfitters in any way influenced your views on business. Maybe I’m reading too much into it, but, having heard a few things about the culture, ethics and politics of Urban Outfitters, I’m wondering if what you did at White Dog, and later, through BALLE, was in any way in response to that experience.
JUDY: No, it was in no way a response. I started the Free People’s Store in 1970 with my first husband (Richard Hayne), my 5th grade boyfriend. We were 23 at the time and were very aligned politically as anti-war, anti-corporate progressives. The store was a sixties kind of place with progressive books, houseplants, new and used clothing, and hip house wares – a sort of department store for the under 30 crowd. We even campaigned for George McGovern out of the store. I left the marriage and the business in 1972 because I wanted to seek my own path for a number of reasons. As I continued my progressive views and learned to use my business to express those views through the educational programs at the restaurant as well as my business practices, I was unaware that my ex-husband had changed his views until about 10 years ago, and that really had no effect on me whatsoever. We don’t talk politics or business when we do happen to run into each other.
As for Urban Outfitters, as I understand it, their stock is doing relatively well at the moment, given the fact that they exceeded the expectations of analysts this past quarter, but their sales are down considerably from what they were last year. According to their last quarterly report, which just came out two weeks ago, sales at Urban Outfitters are down 7.9%. [The company owns other retail brands as well, like the Anthropologie Group, which are also struggling. Anthropologie sales were done 4% over this same period.] Hayne, of course, has assured his shareholders that the future looks bright, but, given the shift in shopping patterns, especially among younger people, who are spending more on food and drink, and less on material goods, and increasingly opting for online alternatives over brick-and-mortar options, when they do need to purchase things, I’m not so sure.
Here’s with more on this consumer shift away from retail, and toward food, drink and travel, is a clip from a recent edition of The Atlantic.
…There have been nine retail bankruptcies in 2017—as many as all of 2016. J.C. Penney, RadioShack, Macy’s, and Sears have each announced more than 100 store closures. Sports Authority has liquidated, and Payless has filed for bankruptcy. Last week, several apparel companies’ stocks hit new multi-year lows, including Lululemon, Urban Outfitters, and American Eagle, and Ralph Lauren announced that it is closing its flagship Polo store on Fifth Avenue, one of several brands to abandon that iconic thoroughfare.
A deep recession might explain an extinction-level event for large retailers. But GDP has been growing for eight straight years, gas prices are low, unemployment is under 5 percent, and the last 18 months have been quietly excellent years for wage growth, particularly for middle- and lower-income Americans.
So, what the heck is going on? The reality is that overall retail spending continues to grow steadily, if a little meagerly. But several trends—including the rise of e-commerce, the over-supply of malls, and the surprising effects of a restaurant renaissance—have conspired to change the face of American shopping…
What’s up? Travel is booming. Hotel occupancy is booming. Domestic airlines have flown more passengers each year since 2010, and last year U.S. airlines set a record, with 823 million passengers. The rise of restaurants is even more dramatic. Since 2005, sales at “food services and drinking places” have grown twice as fast as all other retail spending. In 2016, for the first time ever, Americans spent more money in restaurants and bars than at grocery stores…
Interestingly, a few years ago, Urban Outfitters announced the acquisition of the Philadelphia restaurant Pizzeria Vetri. From what I’ve been able to glean from my reading this evening, there are now two locations in Philadelphia, with three more scheduled to open shortly. What’s more, Pizzeria Vetri seems to be making inroads with Shake Shack… I don’t know that this, when looked at along with the news about Urban Outfitters stores closing, necessarily means that the company is making a significant shift away from retail, and into food, but it would make sense, given the numbers I shared above. And it really wouldn’t surprise me at all of we saw other retailers looking to diversify in the same way over the coming years.
But, back to the matter at hand, what happens when retail dies in our cities? Can downtowns consisting exclusively of bars and restaurants truly thrive? Or, are there perhaps new retail models that might emerge in our city centers? What do you think?
37 Comments
It didn’t really fit int he post, but here’s another interesting tidbit from the piece in The Atlantic that I mentioned.
Really, just imagine that.
Oh, and I probably should have noted it in the post itself, but here are the facts about Urban Outfitters from Wikipedia.
OK, and here’s something else on the topic… Warren Buffet on the death of retail as it currently exists, from the Business Insider this past May.
I read somewhere that food and bars were eclipsing retail as they provided more opportunities for social media content. Sad.
No doubt, many residents of Ann Arbor and Ypsilanti (including the readership of this site) are celebrating the closing of these stores. They have complained about them for years.
We will see if they will become equally passionate about empty storefronts.
On line shopping, driverless vehicles of all kinds and robotic workers will take the jobs of millions of people. Question: where will these people work and what will we do with the empty malls and storefronts? Will they become storage depots for Amazon? All storage and distribution will be handled by robots too. Things, even groceries, will be placed for delivery into driverless trucks and drones by robots. No humans. Not even in the military. Yet, with no one working and no money being earned, who will buy this stuff which was made as cheaply as possible by robotic workers Including the driverless vehicles and drones that deliver them?
CW,
More people are talking about Guaranteed Basic Income. Who knows if anything will come of it, but it’s a good conversation to have, as this shift is happening quickly. When long-haul trucks go driverless, which, I suspect will be the first big domino to fall, it will hit a lot of people hard.
Ann Arbor, and its downtown in particular, should not be used as a bellwether for anything other than the lengths rich white people will go to to maintain their self-delusion.
Guaranteed Basic Income is a good idea. National Dividend is also a concept worth exploring. It’s different in that it’s tied to production, and would vary with rises and falls in GNP. What I like about it is that it is a dividend, making each citizen a shareholder, literally invested in the success of the economy. Guaranteed Basic Income might foster a mindset of “give me my free money” instead of “we are cooperating to make this technological society work for everyone.” More info on this type of thinking can be found here: https://en.wikipedia.org/wiki/Economic_democracy
My feelings are mixed about Urban Outfitters. I like street retail. I’m under no delusion that retail offers great jobs. They do offer first jobs though. And lots of them. I’m concerned that space will become another tech office. My guess is it will become a giant restaurant/bar of some kind. That’s just the way the numbers flow. When I posted about the closing of UO, I asked where people imagined retail in the city will go. If online retail is dominant, street retail needs to have a differential. My feeling is that it will need to create an experience that is an attraction, the goods will be secondary. It’s hard to do that in a prciey show box sized space. Maybe the UO space offers some cooperative opportunity (but no Realtor in his right mind will get excited about multiple fiscally unsound lease holders v a giant corporate chain…) The Rust Belt in Ferndale works as a kind of retail incubator (many of the shops have online presence too) AND event space. But the space rent is a lot lower than UO. There would need to be community support for such an endeavor here.
We say we want community event space and we want to develop independent businesses, but it seems unlikely we’ll put our money and energy there to push for it against existing tides. Someone call Mario Batalli. My guess is even he might balk at the cost, which is comparable to Brooklyn rents. $55 square foot is very high. $40 is average now in A2 and that’s almost unsupportable in a market that only serves 150k people. Plus the build out on that space would be all on the lessee. I predict an upscale sports bar with many screens. Woot!
Empty store fronts for a time would mean lowered rents. Right now commercial vacancy rates are around 5% in A2. Retail is slower, but they do get snapped up. Some storefronts are tied up legally in situations like probate dispute. We are far from in recession here yet. There was a bubble and the groups paying $60 a square foot are losing. That’s just basic market adjustment, not collapse. UO’s model was all about extracting as much profit as possible from producers, designers, workers and guests. I guess they profited property owners. The quality of goods was horrid. Most of the designs copied. Insta-trash is what the kids call it. Something only intended to be worn 5 x and then tossed, but at a $90 price point. It’s not a model I will miss.
There is no post about any market change that will not lead someone on this blog to bring up UBI. How about we get the tyrant out of office and maybe preserve health care coverage for millions first? The progressive bubble is so real in its way. In 2020 progressive white liberals will be furious that some candidate is not talking about UBI even though 90% of the country will have no idea what that is.
Why so sad? If a storefront simply offers a space to store fungible commodity goods that is not competively priced and not convenient for me to patronize, then I’ll bypass it and buy somewhere else, or not at all. I agree with Jean that retail has to offer more than merchandise; it should be a unique experience that cannot be easily replicated.
UBI yawn yawn
Well the way people will get informed about a UBI is for people to talk about it. But why talk about the changes in retail even when we have a tyrant in office and need to preserve the healthcare of millions? Because we can do both at the same time?
I havent really heard much about a national dividend but I think that might be a good solution. Some people *hate* the idea of a UBI and I think one reason is that they dont feel invested. A national dividend sound like the payout the state of Alaska makes to their residents and I have yet to hear an Alaskan complain about it. Anyways interesting idea!
Can’t you guys come up with interesting business ideas instead?
Difficult, I know.
Ideas are easy, capitalization is very very hard. The more ‘interesting’ the idea the more resistant lenders and lessors are to back it. Even with funding, the property managers resist any new idea. They make a lot of money off of IT businesses and chain reatilers, who lease a large space, put in 200k + in renovations and then leave after a few years. The property managers profit every time a lease turns over. There is zero incentive for them to take a risk on a new idea. Sometimes the building owners are willing to take a chance, but you have to get to them. The most reasonable landlords in A2 are Republicans or other storefront biz owners. They at least understand when the numbers can not produce a profit. But there are few of those creatures left. Property investors are not business people. They do not generate wealth for anyone but themselves and property managers. They do not seem to understand the value of developing a block of long standing businesses. They want maximum annual return, just like stock holders. Joe O’Neil in Kerrytown was the exception.
The belief that government can run things more effectively than business is common among liberals. Until they actually get involved in government. To be clear, I am all for government funding essential government services that MUST be provided equitably for the well being of all, but they are really shitty at doing things like running parking structures or fixing roads all on their own. The idea that government could be run at a profit without massive extraction of resources (as in Alaska, Kuwait, etc) is laughably naive. I’m a solid liberal, but I know enough about State control to not want to give them more of it than necessary. Why does the left not understand that State-ism is a form of concentrated power as well?
A UBI is not state-ism fwiw, which is why it has been endorsed by some prominent neoliberal economists. They actually see it as reducing the state’s influence in social welfare programs.
There are things the state does better than the private sector though and those things can and should be provided by the state. I think one of the main reasons the left doesnt see the state as being a concentration of power on par with corporate power is that few have ever lived in that kind of state. If you are a white American, you probably have little experience with excessive and harmful state control. I mean outside of the city of Ypsilanti demanding that people shovel their sidewalks instead of the city doing it ;)
BTW, One of the nice side effects of a UBI would be to allow people to implement their business ideas with less risk and with slightly more access to capital.
The challenge for brick & mortar retail is you need to either be able to provide an experience that can’t be delivered from a nearby warehouse. Bars, restaurants & coffee shops still work because they provide space for gathering and freshly prepared food that is better served immediately than boxed up and delivered elsewhere. Retail stores selling goods need to either be focused on filling urgent & immediate needs where delivery delay is inconvenient (e.g., pharmacies) or where the goods want/need to be “touched” or “tried” (e.g., fresh produce, clothing) but can’t be show-roomed (“touched/tried” at a store, ordered online for later delivery). If you’re selling the same stuff that can be easily ordered online from other, competitive retailers, your brick & mortar overhead will kill you. If you are the exclusive retailer for your item (e.g., Warby Parker) or you are the manufacturer with strict control over your retail price points (e.g., Apple), brick and mortar can work in your favor. For clothing, I don’t think designing & retailing your own labels is enough of a protection because there is too much competition (i.e., substitute goods). The barriers to entry are so low, and Zappos demonstrated the way around the “try it on” problem: free shipping both ways, allowing people to order multiple sizes & garments, try them on at home and send back what doesn’t fit.
Still, at some point, tastes and preferences change, so businesses that can’t establish a dominant brand or change quickly enough to match do poorly. Remember the boutique cupcake bakery trend? Gourmet burgers seem to be on the decline. There’s only so many people who want to go out to a microbrewery regularly. I think we are going to end up with storefront polarization, with only high end spending for those willing to pay and low end for those with very little cash flow, stable residence, or access to electronic banking. The rest of us with a credit card and a secure mailing address will be using Amazon Prime.
UBI will solve everything. No more need for ideas.
Lynne– I was referencing the dividend idea. UBI will be a tough sell to a public that is suspicious of ‘hand outs.’ It’s worth talking about. What I object to is the air of inevitability about all of it (along with end of work) in progressive circles– who also, as has been pointed out here, talk too much amongst themselves and too little outside of their own experience or belief systems. (An no, I still don’t think either HW or EOS –at least most days– add much to the conversation here. Opinions informed by belief systems and paranoia rather than facts are useless ) Progressives often seem short on the concept of democratic change, at least where it aligns with their beliefs. Conservatives too actually.
We love UBI.
We just don’t like how countries that have it pay for it, if we’ve even taken the time to read about it.
The attraction of free and effortless money from the government is too sexy for us to resist. Sanders gave us magical ideas. It was captivating because it didn’t require us to think about how to pay for them.
Leftist Americans are uninterested in what people outside their echoboX think.
JCP– the beauty of producing one’s own hard goods, along with market differentiation is that their cost should be a quarter of retail price. Even at half off, they are making double profit of products bought wholesale, which allows one more comfortably to pay for space/staff than with traditional retail. this is the model of chains. As hard good production on demand becomes more accessible to smaller businesses, it’s one of the innovations that can work. But again the product needs to be truly special. No one shops storefront retail for things they ‘need.’ They can do that more easily from home. But people spend lots more money on things they want or just to support things they want to support. The question is whether consumers will begin to understand that paying more for things that last, have larger value or meaning etc is smarter. The prevailing consumer sentiment, no matter income level, is that paying less is best… always.
There is no Ned to understand business when you have UBI.
It relieves everyone of having to know anything at all. We are simply vessels for money
Jean, I dont fully understand the difference between a national dividend and a UBI except that the first is indexed to GDP. I have been reading about it a little on my short lunch break and so far have read stuff that makes it sound a lot like UBI in that there seems to be many variations on how it would work but especially how it would be funded. That makes sense as we are talking about a pretty major program.
I tend to think that there is a certain inevitability to labor being less needed as technology advances mostly because we have been losing jobs to technology for decades without seeing any thing that is likely to stop it. Yes technology creates jobs but usually skilled jobs and fewer than the unskilled jobs lost. Right now, this has made things pretty good for those in even the top two quintiles of income (anyone with a household income of around $60k or above). Indeed, that is a lot of people who have benefitted with higher incomes brought by technology. But things arent as rosey for those in the other three quintiles and especially those at the bottom.
Their decent factory jobs are gone either to robots directly or to foreign labor due to better shipping and communications technology. The jobs former factory workers have flocked to are the very ones which are most at risk of being eliminated now. Something is going to have to be done about it.
Luckily none of this is going to happen overnight which means that the solutions dont have to come to overnight and can be approached in small ways. For instance, our country already gives many citizens a basic income in the form of Social Security and one way to make a small step towards a UBI is to expand Social Security by lowering the retirement age. Even one year would get tons of people out of the labor pool which would raise wages for those who are left. Then, we could examine how well it worked.
Another form of UBI we could implement would be a negative income tax. That would only apply to the poorest households but could be a pretty good safety net with low admin costs and fewer people falling through the cracks. Again a small change that can be evaluated before taking bigger steps if they are still seenas necessary which they might not be.
oh well, none of this is more important than getting Trump out of office and I assure you, as passionate as I am about this, I would vote for someone with different ideas as long as they come from a place of trying to help the least privileged among us
“In general, I predict a continuing shift to services and experiences, the kind of things you can’t get in a box that comes tomorrow from Amazon — though I still think a little Target store will come here eventually, for students who enjoy the shopping experience as well as the unprepared who can’t wait for Prime.”
http://a2retail.space/2017/09/07/mahalo-to-urban-outfitters-or-a2retail-scoopedbymark-maynard/
i noticed that Shaman Drum was rented by a FB friend, asstudio space for a photographer and a wedding planner. that puzzled me.
that’ll make you long for the bookstore.
Five Guys couldn’t make enough money in that space to be viable. How in the hell is a wedding planner going to make it there?
exactly.
Shaman drum paid like $15/square foot. Current state street leases are $60-70/square foot for ground floor Assuming they got a deal ($50/sq foot) and only leased the ground floor, that’s a $6000/mo tab. You can make that back in high volume/high margin retail, but… Guess the wedding business is still booming. I’ll never understand why people spend so much money to get married. I’ll be interested to see their model. Or… if they rented the upper floor, which would make so much more sense, it should be relatively affordable…. thinking out loud.
The *average* cost of a wedding these days in the USA is $35,000 but that place is clearly there to cater to rich Ann Arborites and UM students so I’ll bet they are dealing in weddings with above average costs. They may be charging more because they need the space but if they have enough clients willing to pay, I could see how it could work for them.
“Or… if they rented the upper floor, which would make so much more sense, it should be relatively affordable…. thinking out loud.”
something like this i think. i couldn’t tell from her pics. she said “this is the old shaman drum space” but perhaps meant only the upstairs.
Maybe seeking clients willing to pay a premium for upscale services?
At any rate:
KJC likes books + unprofitable $6 hamburgers= Wedding-planning-Facebook-friend-failure.
“KJC likes books + unprofitable $6 hamburgers= Wedding-planning-Facebook-friend-failure.”
huh? i do like books. don’t overly think about what’s in that space. didn’t even remember it was five guys. no failure to speak of etc. i hope they succeed.
if you want to hate on me, try harder. yawn. banal as ever.
Reading is cool.
anonymous
Posted September 14, 2017 at 8:50 am | Permalink
Five Guys couldn’t make enough money in that space to be viable. How in the hell is a wedding planner going to make it there?
“Exactly” –kjc
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