After the Apocalypse: Understanding the challenges and opportunities of downtown
retail in a digital world

May 2018 Main Street Matters

Written by Alan Cox, Economic Development Specialist, Texas Main Street Program

The decline of America’s downtowns is a well-known story. In the halcyon years following the end of World War II, the nation was brimming with optimism and looking forward to a future filled with technological progress in telecommunications and transportation. Regarding the latter, a path was literally put in place to allow for Americans to easily travel about the country in their sparkling new automobiles. In 1956, President Dwight D. Eisenhower signed the Federal Aid Highway Act, which authorized the construction of the Interstate Highway System. This act, coupled with the previously passed GI Bill which provided hefty government housing subsidies for military veterans, opened vast swaths of new land for development on the periphery of American cities. Thus began the great suburban land rush, leading to disinvestment in the core of communities and the inspiration for the new American Dream.

As Americans moved to the suburbs, commerce swiftly followed and adapted to a whole new set of single-use zoning rules that changed development patterns forever. The familiar walkable downtown retail experience was replaced by car-oriented shopping centers surrounded by a sea of parking. In the same year as the passage of the highway act, the Southdale Center in Edina, Minnesota, opened its doors, becoming America’s first climate-controlled indoor shopping mall. This development model was replicated across the country and dominated the retail
landscape for the next 40 years. During the 1990s, however, Wal-Mart Supercenters and other big box retailers emerged, which commenced the slow decline of the American mall. Today, even these retailers are beginning to struggle due to the emergence of yet another new retail model: online shopping and home delivery. As a result, last year became known as the year of the “retail apocalypse,” when dozens of wellknown
chains shuttered stores by the hundreds.

As Main Street supporters, this raises an intriguing question: If online retail leads to the deterioration of the suburban retail model, does this then provide an opportunity for the reemergence of downtown shopping?

The correct answer is probably that it is too soon to know. That said, there are already some tantalizing signs that the answer might be “yes.” Over the last few years, several national and regional retailers, including Wal-Mart and Target, have begun experimenting with downtown locations, making significant modifications and shrinking their formats to fit smaller urban sites with restricted parking. Other retailers are beginning to treat
their brick and mortar spaces more as showrooms where products are displayed for the customer to experience the product in person and giving her the option to either place an order on-site or at home online. For example, brands such as Macy’s and Sephora have begun to offer instore
pickup for items bought online, as well as supporting home delivery of products purchased in-store. In many ways, this blending of digital and physical shopping mirrors a similar model used on the American frontier at the turn of the last century, where customers could order goods through a catalog or at the local dry goods store.

If this back-to-the-future approach materializes and becomes the predominate retail model, Main Street managers, urban planners, and downtown boosters will be required to create new strategies for promoting downtown retail in a digital world. These could be complementary extensions of existing ones, such as encouraging local retailers to embrace social media for reaching their customers. Other actions, however, might be more
demanding and could require technical assistance. For example, an increasing number of Americans are turning to their phones to meet their online shopping demands, and according to a Google research study, 71 percent of shoppers now use smartphones to research while shopping. The study also found that three out of four shoppers who find local product results through their web-browsing are more likely to visit that local brick and mortar business. Recognizing the benefit of having a strong digital and mobile presence, many retailers have responded by creating
apps that allow customers to find their closest location, browse merchandise inventory, comparison price, and place direct orders. Main Street responses might include identifying local developer talent to create customized apps for downtown retailers, or creation of a common app for all Main Street businesses. Obviously, this creates the challenge of relying on small business owners to continuously update their products and prices, but it could be a powerful tool for placing local retailers on more level playing ground in the digital sphere.

Another opportunity might include identifying local entrepreneurs who are already conducting business online. The popularity of websites such
as Etsy, eBay, Amazon Handmade, and Artfire has provided an alternative to flea and trade markets for “makers” to reach a wide audience and deliver merchandise worldwide. Unfortunately, many of these small business owners must create and store all their merchandise at home and could benefit from an outside physical location. One strategy a Main Street manager could adopt is creating a recruitment program to identify local online retailers and offering an incentives policy that enables them to locate into a downtown space, allowing them to have a brick and mortar presence and higher local visibility. Such incentives could take the form of cash grants, subsidized rent, or marketing assistance. Part of this
strategy might also include a test phase that a popup venture would allow. Another approach might be establishing a shared space for craftspeople to create and/or display their merchandise. Regardless, this type of local online business could present a previously untapped user of downtown space.

While it is still too soon to understand what the full array of strategies and tactics might be, the time is indeed ripe for beginning to ask questions to help explore this unfamiliar retail environment, such as:

• Does my downtown have sufficient broadband capacity to support online retailers?
• Do I need to create a parking policy for FedEx, UPS, and other delivery services?
• Should I establish a makerspace for local craftspeople?
• Is there local expertise available to provide technical assistance for mom and pop retailers?
• What kind of impact will online retail have on local sales taxes?

These questions, however, are just a start, and we are still in the initial stages of this retail revolution. But what we do know is that information technology has already altered the way we do business, communicate, and shop in innumerable ways. We also know that these trends are accelerating. In the very near future, a customer will be able to order a coffee mug from Amazon for next day delivery, which will be communicated to a robot in a warehouse and will be transported to her town by an autonomous truck and brought to her doorstep by a flying drone. This represents a near pinnacle of convenience and efficiency. Given that much of their business model is built on those principles, it appears suburban chains and discount merchants are most at threat, which provides an opening for downtown merchants to partially recapture some of their lost sales. But Main Street store owners must be willing to be nimble and adapt to this new marketplace by maximizing their digital presence while also leveraging what has always been their greatest advantage: providing extraordinary personal service and offering high-quality merchandise to well-known local customers.