Dean Barber

Our Big Fat Retail Meltdown

In Corporate Site Selection and Economic Development on April 23, 2017 at 9:08 am

About four miles from my home, demolition has begun on the very big Valley View Mall in North Dallas. And I think my wife and I are partly responsible in that we never went there.

But not a week goes by that we don’t receive multiple packages delivered to our doorstep via Amazon. Indeed, I think of my wife as the Amazon Queen, and I am her vassal.

Speick Natural Soap Bar 3.5 Ounces (Pack of 3) arrived on Friday. This German product “LEAVES YOU FEELING INVIGORATED AND REFRESHED, making it an ideal addition to your morning shower routine.” Boy howdy, I can’t wait.

Also on Friday, Bebe Stores, which models itself as a purveyor of “unique, sophisticated and timelessly sexy” clothing for women, said it plans to close its remaining 168 stores in the United States and Canada by the end of May, according to a regulatory filing.

The Latest Casualties

Bebe is the latest brick-and-mortar casualty in what some observers are starting to call a “retail apocalypse.”

Payless ShoeSource, hhgregg, The Limited, RadioShack, BCBG, Wet Seal, Gormans, Eastern Outfitters, and Gander Mountain are among the retailers that have filed for bankruptcy so far this year, and most are closing hundreds of stores as a result.

Retailers that once ruled the shopping mall roost, like Macy’s, JCPenney and Sears, while staying in business for now, are closing hundreds of stores and cutting thousands of jobs.

More than 3,500 stores are expected to close over the next several months.

The Great Disrupter

Amazon, the behemoth of online retail, is the big winner of this retail meltdown. It has been systematically dismantling retail and thereby reinventing it. In doing so, Amazon is becoming a primary shopping search engine for consumers, with 55 percent of searches beginning on the site.

That in turn could lead to continued growth in the company’s ad business, which NYU Stern School of Business professor Scott Galloway told CNBC would “put them in the league of Facebook and Google.”

“Amazon is becoming all of retail,” said Galloway, making it “the most disruptive company in the largest economy in the world.” Eventually, people will only shop at Amazon, he said.

Something’s Happening Here

Now that might be an overstatement by the good professor. I happen to believe there will always be a place for stores. But what is clear is that something very big and structural is happening to retail.

Overall retail spending is not appreciably down, so why the demise of storefronts? There are multiple trends happening, all of which are changing the face of American shopping.

The rise of e-commerce is certainly one reason, but so, too, is the oversaturation of retail space in the U.S. (there’s just way too much built out retail space), and a restaurant renaissance, which is where young people want to spend their money. I will briefly touch on all three.

Online Buying

Easy return policies have made online shopping cheap, easy, and risk-free for the Amazon Queen in my home. And this is particularly true when it comes to her purchases of apparel, which is now the largest e-commerce category.

What’s more, mobile shopping is getting easier because of apps and mobile wallets. Since 2010, mobile commerce has grown from 2 percent of digital spending to 20 percent.

People used to make several trips to a store before buying an expensive item like a couch. Now they sit on the couch to make their purchases.

Too Much Retail Space

In a conference call with analysts last month, Urban Outfitters Chief Executive Officer Richard Hayne said there are simply too many stores.

“The U.S. market is oversaturated with retail space and far too much of that space is occupied by stores selling apparel,” he said. “Retail square feet per capita in the United States is more than six times that of Europe or Japan. And this doesn’t count digital commerce.”

Too much square footage was added in the 1990s and early 2000s, with thousands of stores opening, he said.

“This created a bubble, and like housing, that bubble has now burst,” he said. “We are seeing the results: Doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate.”

There are about 1,200 malls in U.S. today. Some analysts say that number will shrink to 900 a decade from now. Mall visits declined 50 percent between 2010 and 2013, according to Cushman and Wakefield, and the numbers keep falling.

Less Stuff, More Meals Out

In our zeal to downsize and simplify, my wife and I recently gave a local auction house a lot of furniture and 48 boxes of books to be sold. Even if she is the Amazon Queen, we don’t buy nearly as much stuff as we used to. Materialism is not high on our agenda.

But we do like to eat out, and we do enjoy travel.

We are not so unique in that regard. Consumers have shifted their spending away from clothes (it has declined 20 percent since 2000) toward travel and dining out.

Travel is booming. Despite treating its customers like livestock, U.S. airlines last year set a record, with 823 million passengers. But the rise of restaurants has been even more dramatic.

Since 2005, sales at “food services and drinking places” have grown twice as fast as all other retail spending. With more options, shoppers are eating out at restaurants and bars, ordering in on their phones or snagging groceries at convenience stores.

In 2016, for the first time ever, Americans spent more money in restaurants and bars than at grocery stores.

In essence, what these all these trends show is that our behavior as shoppers is fundamentally changing. Some retailers, particularly those with large fleets of brick-and-mortar stores, will not be able to adapt and survive in the new retail environment.

A Slow-Rolling Crisis

Since October, about 89,000 workers in general merchandise stores have lost their jobs, which is more than the number of people employed in the entire US coal industry, The New York Times reported.

The effects of these job losses will hit some local economies hard, according to Mark Cohen, the director of retail studies at Columbia Business School.

“This is creating a slow-rolling crisis,” Cohen told Business Insider. “The people that work in retail stores will lose their jobs, then spend less money in retail stores because they are no longer employed. That creates a cascade of economic challenges.”

Like coal miners, retail workers don’t typically have a set of skills that’s easily transferable to another industry, according to Cohen.

The retail industry typically pays low wages and employs about one out of every 10 American workers. It provides employment to people in every age bracket, as well as those who are relatively low-skilled.

The Economic Development Angle

I have run across many communities that have an economic development retail strategy. I don’t necessarily fault that, especially when it comes to creating a vibrancy on Main Street downtown. You want that. You don’t want a boarded up Main Street.

But when you place too much emphasis on retail, and this is particularly true in the suburban areas, you might be setting yourself up for a fall. Better to think mixed use.

I know of suburban communities here in the Dallas-Fort Worth Metroplex that see retail to the exclusion of everything else as The Golden Goose to funding local government via sales tax dollars. With the structural changes now taking place, they may want to rethink that.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com.

For Business Development, Think Customer and Process

In Corporate Site Selection and Economic Development on April 16, 2017 at 12:06 pm

The well-known phrase “first, do no harm” is actually not in the Hippocratic Oath historically taken by physicians, but the purpose and the meaning certainly is.

Based on the fiasco created by United Airlines this past week with the literal beating of a passenger that it wanted to “re-accommodate,” I think most businesses, big and small, should consider taking an oath to putting their customers first.

Jeff Bezos, CEO and founder of Amazon, credits his company’s focus on customer service for its success. The e-commerce giant’s shares hit an all-time high this month and are up nearly 50 percent over the past year alone.

In his latest annual shareholder letter released last week, Bezos wrote:

“There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality.

“Why? There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf.”

A company’s desire to delight customers can truly differentiate it from the competition.

First, Do Not Annoy (Or Offend)

Economic development organizations, those entities charged with  sparking economic change and vitality in communities via capital investment and job creation, should be obsessed with customer service. And that goes for serving existing businesses, entrepreneurial startups, or in the recruitment of new companies to their respective communities.

It is in that latter category that I have been the recipient of some ham-fisted attempts at business development by economic development organizations. To put it bluntly, they have annoyed me with nonsensical emails that they should never have been sent to me.

Email, while incredibly important, is already an annoying necessity by virtue of the fact that every day I must wade through it to delete those messages that have absolute zero bearing on my business or what I do. And that is after employing spam filters.

Mind you, most emails that I get from economic development organizations are good and informative and worth keeping. And for that, I am appreciative.

But I continue to get emails from EDOs inviting me to one-day events that should have only been sent to community stakeholders and not to a consultant (me) 1,000 miles away. (The exception is if you are paying me to speak at your event, to which I may spend several days in your community.)

Inappropriate Emails

Last week alone, I got at least a half dozen of wholly inappropriate emails from EDOs. One was a survey for business owners in a town in Minnesota. Being that I’m in Dallas, there was no reason to junk up my email with that.

Then I got another one for a one-day event in Michigan, in which it was obvious that it was not directed to me per se, but sent en masse to virtually anyone with a pulse. Delete.

I got three emails, two from ED groups in Florida and another from one in Louisiana, all of which addressed me as if I were some muckety muck in an aerospace company. They asked to meet with me at the upcoming MRO Americas trade show in Orlando about moving my company to their respective communities.

And the crazy part is that I actually know two of the economic developers who sent me this nonsense. I responded to their off-the-mark emails with, “Really?”

Crazier still, I am not even registered to attend this particular trade show.

Talk About Crazy

True story. When I was an economic developer some years back, I attended a big manufacturing trade show in Chicago. I recall that it was a pretty productive event, and that I had some good meetings with companies.

A couple of weeks later, I got a phone call from a sales rep with a company that manufactures conveyer belts. I kid you not, the sales rep asked about my interest in buying industrial conveyer belts from his company.

My response was something like this: “Do you have any idea who you are calling? Had you simply looked up my organization’s name on the internet, you would immediately see that I work for an economic development organization. We don’t buy industrial belts.”

Having been in their shoes, I try to cut most sales people a break and be respectful, but that particular phone call was beyond stupid.

Business Development 101

Before you make that call or send that email, it’s always best to know who you are communicating with. Have at least a basic knowledge of who that person is, what they do, who they work for, and what that company or organization does.

In short, a little due diligence can go a long way. Folks, this is basic blocking and tackling, which I see too many companies and economic development organizations failing to do.

It has me wondering, “What were they thinking?” More often than not, they weren’t.

For business development to be effective, and I am talking essentially about sales, it should be process-driven. But here is the key — the process needs to be smart and right. It cannot be unthinking.

As Bezos wrote to shareholders last week, “It’s not that rare to hear a junior leader defend a bad outcome with something like, ‘Well, we followed the process. A more experienced leader will use it as an opportunity to investigate and improve the process.”

To my economic development friends who send me junk emails, I would say this is opportunity to learn and improve your process. If you even have one.

A Teaching Moment

My purpose is not to pick on or embarrass anyone. For that reason, I have named no names. My purpose is simply to impart some things that I have learned, often through making my own embarrassing errors.

Of the three economic developers who sent me recruiting emails last week, one blamed it on his IT department, while another didn’t respond at all to my “Really?” comeback. The third apologized, saying he would remove me from all future outgoing emails, which is NOT the right solution.

The fact is that I DO want to stay apprised of what is happening in communities when it is relevant to me as a site selection/economic development consultant. But his response is actually a common one, to which I wrote two years ago in a blog entitled Sort That Database and Everything Will Be Gravy.

In a series of back and forth emails, which prompted that particular blog, I was trying to explain to an economic developer in Kansas that it should not be too hard to differentiate email communications between internal and external stakeholders.

Soon thereafter, I got an email from her boss, as she must have shared our conversation with him: “Thank you for your constructive feedback. Thanks to you, we have now started a ‘site selection consultant’ list which we will target for when we have project announcements.”

Bingo. They got it. They understood that the right solution was to sort their database of contacts in order to ensure that the right messages were going out to the right people.

Executing on the Right Process

The nuts and bolts of business development, which I can teach to economic development organizations, is an exercise in effective outreach. It entails putting in the time and hard work.

It means a never-ending mining of sources, ideally decision-makers and those who can influence decisions. (See Seek and Ye Shall Find: Connecting in a Connected World)

It means crafting an effective message aimed at a specific customer group. It more often than not means adding humanity, developing relationships and trust. In short, it means being smart, diligent and executing on the right process. (See A Rocky Road to Travel: Making Business Development Work)

The process should never be one-size-fits all. Mistakes invariably will happen, but if you recognize and correct your bad decisions and keep your customers’ needs foremost in your mind, good things will happen. The process becomes the solution.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com.

Get Off My Lawn is Not the Best Message

In Corporate Site Selection and Economic Development on April 2, 2017 at 10:21 am

My friend, Andy Levine, president of Development Counsellors International, got me thinking when I read an article that he wrote for Forbes entitled, “Is Brand America Tanking?”

Levine points to U.S. News and World Report’s 2017 “Best Countries Ranking,” showing that the United States slipped from #4 in the previous ranking to #7 in the current report. The report is based on a survey of 21,362 people from 36 countries, who rank countries on 65 attributes ranging from “most business friendly” to “best to visit” to “richest traditions.”

My first thought was to hell with this. I don’t care what these people say or think. Keep in mind that I am an older guy.

Human Resources Manager during a job interview: What is your biggest weakness?

Old Man: Honesty.

Human Resources Manager: I don’t think honesty is a weakness.

Old Man: I don’t give a s**t what you think.

And that’s why a lot of old men don’t get hired.

But being that I want to get hired as an open-minded (if not honest) consultant, I grudgingly posed the question to myself, sort of: Should we care what the rest of the world thinks of us, meaning the U.S.?

Almost regretfully, I came to the conclusion that, yes, we should care, especially if we want to lead and influence events in the world to our benefit.

The Top Choice

To that end, it is very much in our interest that the U.S. remains the No. 1 recipient of foreign direct investment, which has a big economic impact on many communities, large and small, in this country.

European and Asian countries, as well as our two neighbors to the north and south, have demonstrated for a long time now their faith in the U.S. economy through high levels of FDI.

And while the U.S. remains the top choice for international investment, its share of worldwide investment has dropped to 21 percent in 2014 from 39 percent in 2000 because of increased competition from other countries, according to a 2016 report by the Organization for International Investment.

World’s Largest Consumer Market

Whether the U.S. retains its status as the world’s most attractive investment location depends largely on world macroeconomics and how we behave. When I say “we,” I’m referring to policies of the federal government. More on that later.

Most countries want to attract foreign investment, but the U.S. has a distinct advantage by having the world’s largest consumer market with a GDP of $18 trillion and 325 million people.

FDI into the U.S. in 2015 totaled a record $348 billion, led by the United Kingdom, Japan, and Germany, according to the U.S. Commerce Department. Some more factoids:

  • Majority-owned U.S. affiliates of foreign entities produced $360 billion in goods exports in 2013.
  • Majority-owned U.S. affiliates of foreign entities employed 6.1 million U.S. workers in 2013, up from 5.8 million in 2011. These firms generally provide compensation at higher levels than the U.S. average, at nearly $80,000 per U.S. employee in 2013, as compared to average earnings of $60,000 for workers in the economy as a whole.
  •  “Greenfield” investment expenditures by foreigners totaled $16.6 billion in 2014, with expenditures on establishing new businesses totaling $13.8 billion and expenditures on expanding existing businesses totaling $2.8 billion.
  • In 2014, foreign investors spent $224.7 billion acquiring U.S. companies; therefore, total first-year expenditures by foreign entities (acquisitions plus expansions plus establishment of new businesses) were $241.3 billion.

China Watch

According to the consulting firm Baker McKenzie, Chinese investments in the U.S. rose by almost 200 percent from 2015 to 2016 to $45.6 billion.

The main recipients of Chinese investment in 2016 were real estate and hospitality ($17.4 billion); transport, utilities and infrastructure ($6.0 billion); consumer products and services ($5.7 billion); and entertainment ($4.8 billion).

Together these accounted for nearly 70 percent of Chinese investment in the region. California received the most Chinese capital, with more than $16 billion in 2016.

But a slowdown in Chinese investment in the U.S. in 2017 could be in the works, according to Baker McKenzie, largely because of the political uncertainties posed by the Trump administration regarding trade.

A Great Revival?

President Donald Trump on Friday directed his administration to review U.S. trade deficits and clamp down on countries that abuse trade rules in two executive orders he said would start a new chapter for U.S. workers and businesses.

“Today I’m signing two executive orders that send this message loud and clear, and that set the stage for a great revival of American manufacturing,” Trump said in the Oval Office. “We’re going to get these bad trade deals straightened out.”

My guess is the president’s remarks, while they will play just fine in Akron and Birmingham, creates distinct nervousness in capital cities around the world. Will that necessarily come back to bite us?

Heck, I don’t know. (Take note this is the second week in a row that you have seen a consultant, this consultant, say he doesn’t know. That should be a record.)

Not Open for Business?

But it is clear the president has much of the world wondering about the U.S. role in the world, as he is parting greatly from past administrations on matters of trade, immigration, and defense.

These policy changes and America first rhetoric has created a growing perception that the U.S. is less welcoming to foreigners, according to the World Travel and Tourism Council. Some of this is based on President Trump’s revised executive order banning citizens from six Muslim-majority nations from traveling to the United States.

“The travel ban is not having a material impact yet. But we are seeing the unintended consequences of this now because the message has gone around the world that the U.S. is not open for business,” the WTTC’s President David Scowsill told Reuters.

Precipitous declines in airline bookings followed the Jan. 27 and March 6 travel ban announcements, and hotels reported less traffic in February.

An Unwelcome Mat?

Tourism Economics of Wayne, Pa., estimates that about 4.3 million fewer international travelers will visit the U.S. this year because of the bans, creating a revenue loss of $7.4 billion. Another 6.3 million visitors and $10.8 billion that they would have spent will be lost in 2018, it said.

“The U.S. has put an unwelcome mat at our front door,” Henry Harteveldt, president of Atmosphere Research Group, told USA Today.

Enhanced vetting procedures for all foreign visitors could further discourage not only foreign tourists but people coming to the U.S. for business and school.

Discouraging Students?

Nearly 600 colleges and universities wrote Feb. 3 to Homeland Security Secretary John Kelly to express concerns about discouraging international students, a major revenue source for universities.

About 1 million international students spend $32 billion a year in the U.S., according to the American Council on Education. And while only about 15,000 students are affected by the travel ban, critics contend that the Trump administration policies are having a chilling effect on foreign students coming to the U.S.

“Anecdotal evidence shows that many schools are seeing declines in international applications for the coming year, and other countries are seeing increases,” Terry Hartle, a senior vice president for the American Council on Education, told USA Today.

Many Silicon Valley companies, including Apple, Microsoft, Google, Facebook, Twitter, Yelp and Netflix, contend in lawsuits against the government that Trump’s travel ban would make it more difficult to “attract talent, business and investment to the United States.”

No Hard Evidence But …

I have really offered no evidence that Trump administration policies will in fact discourage FDI in this country, or will discourage foreign tourists from coming here, or from foreign students studying here.

But there are a litany of voices, industry voices, saying that these things might actually happen. If their warnings are correct, this could have meaningful economic impact on companies, institutions of higher learning, and communities as a whole and not in a good way.

Let’s Keep the Mat Out and the Light On

I have never liked or cared for this notion of “brand.” Maybe for corn flakes and deodorant. Rather, what matters to me, is reputation, sometimes deserved, sometimes not, of a place, of a person, of a company and its products or services.

I truly hope that our reputation as a country does not suffer because of poorly thought out, “Get Off My Lawn” policies that are perceived to be unwelcoming to foreign people. That’s not what America is or has been about.

Security and trade are important to the American people, as they should be. Indeed, there is convincing evidence, which I wrote about in an earlier blog, that enacted trade policies with China did in fact destroy U.S. manufacturing jobs, more so than even automation (although that train is clearly out of the station.)

But that doesn’t mean we shut ourselves off and snub the rest of the world. That’s not who we are. The welcome mat needs to stay on the front porch and the light needs to stay on.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com.