Starboard Commercial Real Estate

Hans Hansson | January 14, 2008

The movement to restrict national and large regional retailers from expanding into neighborhood retail areas is gaining advocates throughout the United States. These activists believe that national and franchise retailers kill local and small businesses while eroding the fabric of local neighborhood communities.

In San Francisco, Supervisor Tom Ammiano recently proposed a ban on national and franchise retailers from entering the Mission District. Last year, the city voted on restrictive measurements that require a retailer with more than 11 stores to go through a public review process before it can sign a lease in any shopping center or neighborhood outside of the Financial District. This measure has created such uncertainty for retailers that they are now re-evaluating San Francisco as a potential marketplace. Most retailers require multiple stores in order to be cost-effective; without neighborhood stores, retailers find it difficult to make a profit in a market like San Francisco.

Why do these advocates want to keep large retailers out of neighborhoods? Their theory is that by deterring large retailers like Starbucks, the integrity of a neighborhood is maintained. The reality is that the very opposite could occur. By keeping large retailers out of our neighborhoods, we will effectively begin the process of creating slums in those same neighborhoods.

Small businesses need foot traffic to survive. This traffic is generated largely by advertising. Advertising is paid for with money earned from sales. Any business needs to generate a certain amount of sales to survive each month. Take the Mission District as an example: With the exception of restaurants, few customers spend money in most of the stores in the Mission. Thus, these retailers have little to spend on advertising or to upgrade their stores.

Without a national chain in the neighborhood that can draw traffic based on its name, what will draw traffic to the Mission District? If a customer is looking for clothes, for example, will he or she fight congestion and a lack of parking in the Mission to make a purchase in a dilapidated building if the same item is available in a modern store with convenient parking and other nearby shopping choices?

Government officials such as Tom Ammiano believe that by eliminating competition, local businesses will have more of a chance to survive. I think he is wrong: Competition creates better stores, which means better products offered to customers, which means more interest in these products and therefore the stores that sell them.

Small retailers can effectively compete with large retailers simply by offering an alternative. When Starbucks brings several hundred customers who would not otherwise be there to the neighborhood's Main Street, the local coffee house now has several hundred potential customers to vie for. Many independent coffee houses do a better job of making and selling coffee than Starbucks does; customers who have the freedom to visit both will notice the difference.

I grew up in the Sunset District; Taraval Street was my family's shopping block. Taraval Street today has virtually no large retailers, and because of that, it is a failing commercial area. It is no longer supported by its local residents; the lack of support shows.

Large retailers can work with the city to incorporate their stores and save the integrity of the neighborhoods. Instead of viewing large retailers as the enemy, city officials should regard them as saviors. Government officials and neighborhood leaders should work with chain retailers to protect existing neighborhood businesses while welcoming the big guys.
Posted 11 years, 9 months ago on January 14, 2008
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Comments on this post:

Re: Restricting National and Franchise Retailers
In 2006, SF passed Prop G, which required all chain stores that want to open up in San Francisco to go through a special permitting process that involves a public hearing at the Planning Commission and allows any permit issued to be appealed and voted on by the Board of Supervisors.

The Conditional Use currently used city-wide is sufficient and no extra special restrictions should be invoked.

A problem is that people understand what "ban" means, but few understand what "conditional use" is, so when asked, they say they want a ban. Also, this ban would apply to all Formula Retail, not just the Starbucks that folks are so fond of invoking. This ban would apply to the SF Soup Companies of the retail market as well. The ceiling for the term "Formula Retail" is only 11 stores worldwide.

Without the appropriate "Retail Mix" of larger and smaller retailers for shopping areas, they cannot remain vibrant.

Less than 10% of the businesses on Mission Street between 19th and 29th Street qualify as Formula Retail. Vacancies increase the further away from the Formula Retail businesses that are established. Conventional wisdom in the retail trade indicated that 20 to 25% of a "Retail Mix" should be regional/national anchor-type tenants.

The Formula Retail in these mixes actually helps the smaller business.

You may recall (if you or your family have lived here for a while) the economic disaster which occurred when the large chain stores of Sears and Hale's left the Mission. These historically strong chains (Hale's and Sears) anchored the "Mission Miracle Mile." When they left, there was no longer a "magnet store" to pull customers in to the area, and the smaller stores suffered.

Without the prospect to attract these larger, more stable players, it has been problematic to find adaptive re-use for many key buildings that were previously utilized as movie theaters, furniture stores, factories and warehouses on important corridors of the Mission.

If a ban on Formula Retail is adopted it will result in negating the City's intention of "transit corridor" housing/commercial build up.

2008/01/15 by CRS • • Reply
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Re: Restricting National and Franchise Retailers
How true. The limiting of commerce in any form usually is a formula for disaster. There are examples of this in almost any city. Wal-Mart is a good example. “Everyone” is afraid that they will lead to the demise of the mom and pop store. I can think of one area that has around 250k metro populating and now has 4 Wal-Mart super stores. They have large strip malls that are tied with them and usually have another large store like Lowell’s with them. All the retail help is paid the same for same experience. You have to compete. You get the pricing of the big store plus the personal service of the many small shops that survive off the large store traffic. One area lost one grocery store that was already struggling with its competition. There are 2 large malls in the area and they are almost at full occupancy.

2008/02/07 by NIGHTWATCH wwwReply
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