Trader Joe's

[Rover]

So unimaginative.

But profitable and smart.

[Urbanized]

Rooftops makes total sense and I knew about that one. Demographics don't make sense to me. It's not cheap to live downtown. Generally if you can afford to live there you can afford to shop at TJs.

It's not just the rooftops/demographics of the couple thousand who live downtown (admittedly desirable though minuscule) it's the number/incomes of people who live prescribed radii from wherever you push your thumbtack into the map. In the case of Nichols Hills, Edmond, Norman, even Moore/South OKC, you can drive for miles in any direction and find relatively concentrated wealth, or at least middle class incomes.

If you draw concentric circles around downtown - Heritage Hills and a few pockets notwithstanding - you'll discover lots and lots of poverty or near-poverty, or worse, empty, undeveloped or primarily industrial space. Hey, I don't want it to be that way. I live downtown myself. Those are just the facts, for the time being at least.

Regarding the "unimaginative" comment, I'd like to point out that I am one of a very few people to open a retail operation in downtown Oklahoma City in the past 40 years. The ONLY such person who posts on this board, I think (though there might be a recently-added shopkeep from AA or Midtown on here these days; I don't recall). I opened a retail store (not a bar, not a club, not a restaurant, not a gas station/convenience store) in Bricktown, and it is still in operation nearly seven years later. Only two others have ever succeeded in doing this, and one of them is Johnny Morris and Bass Pro Shops.

The reason we succeeded (if you want to call it success), was that we listened to the market and tried to give it what it was already asking for. In the case of Bricktown it was thousands and thousands of people, already walking around every week, asking where they could buy Oklahoma stuff. We didn't try to force a concept into a market that wasn't ready for it. Unimaginative yes, but at least the store is still open. The much-rumored CVS will be doing something very similar; moving into a market that is (now) ready for it.

In the case of a Trader Joes or [insert name], sure, there are a few thousand people within a one-mile radius begging them (or someone like them) to come downtown, but there are TENS OF THOUSANDS within a few miles of other locations who would support it in those places instead. You do the math.

If you want upscale national retailers to join the fray in downtown, you're going to have to convince them to deviate from a longstanding, proven model for such organizations. You're going to have to:

1. Convince them to do business in OKC to begin with (getting better but still no easy task)
2. Convince them to skip proven areas with reasonable densities of wealth nearby in favor of an unproven area with effectively a few thousand high-earners
3. Make them willing to give extra weight to nearby interstate traffic and regional rather than neighborhood draw (Bass Pro did this)
4. Convince them to factor transient (hotel, visitor, event) folks into their "people" numbers (not easy)
5. Convince them to consider/cater to the tens of thousands who work in downtown, OUHSC, etc. (again easier said than done)
6. Provide them with ASTOUNDING sales tax numbers from downtown and nearby ZIP codes (a great reason to RIGHT NOW support the emerging locally-owned retailers already downtown)
   
   or, finally...
   
   
7. Subsidize, a la Bass Pro

Your best bet is to grow an undeniably-successful locally-based retail cluster such as the one forming in AA while continuing residential infill, and eventually it will make spreadsheet sense for them to locate downtown. Until then, they will ALWAYS choose places like NH, Edmond, Norman, etc., first ESPECIALLY when initially entering the market.

The exception could be a true destination retailer like an Urban Outfitters or a Crate and Barrel, who already locate in places considering some of the numbered criteria above. They will want to go where there is already a high volume of foot and visitor traffic plus regional draw, so would probably (if landed today) end up in a new-construction project in or near Bricktown.

Sorry to be unimaginative; I just live in the real world.

[Plutonic Panda]

But profitable and smart.

Don't you think it would be more profitable to research cities that are growing and enter the market before others? Predicting future demographics and such...

[soonerguru]

It's not just the rooftops/demographics of the couple thousand who live downtown (admittedly desirable though minuscule) it's the number/incomes of people who live prescribed radii from wherever you push your thumbtack into the map. In the case of Nichols Hills, Edmond, Norman, even Moore/South OKC, you can drive for miles in any direction and find relatively concentrated wealth, or at least middle class incomes.

If you draw concentric circles around downtown - Heritage Hills and a few pockets notwithstanding - you'll discover lots and lots of poverty or near-poverty, or worse, empty, undeveloped or primarily industrial space. Hey, I don't want it to be that way. I live downtown myself. Those are just the facts, for the time being at least.

Regarding the "unimaginative" comment, I'd like to point out that I am one of a very few people to open a retail operation in downtown Oklahoma City in the past 40 years. The ONLY such person who posts on this board, I think (though there might be a recently-added shopkeep from AA or Midtown on here these days; I don't recall). I opened a retail store (not a bar, not a club, not a restaurant, not a gas station/convenience store) in Bricktown, and it is still in operation nearly seven years later. Only two others have ever succeeded in doing this, and one of them is Johnny Morris and Bass Pro Shops.

The reason we succeeded (if you want to call it success), was that we listened to the market and tried to give it what it was already asking for. In the case of Bricktown it was thousands and thousands of people, already walking around every week, asking where they could buy Oklahoma stuff. We didn't try to force a concept into a market that wasn't ready for it. Unimaginative yes, but at least the store is still open. The much-rumored CVS will be doing something very similar; moving into a market that is (now) ready for it.

In the case of a Trader Joes or [insert name], sure, there are a few thousand people within a one-mile radius begging them (or someone like them) to come downtown, but there are TENS OF THOUSANDS within a few miles of other locations who would support it in those places instead. You do the math.

If you want upscale national retailers to join the fray in downtown, you're going to have to convince them to deviate from a longstanding, proven model for such organizations. You're going to have to:

1. Convince them to do business in OKC to begin with (getting better but still no easy task)
2. Convince them to skip proven areas with reasonable densities of wealth nearby in favor of an unproven area with effectively a few thousand high-earners
3. Make them willing to give extra weight to nearby interstate traffic and regional rather than neighborhood draw (Bass Pro did this)
4. Convince them to factor transient (hotel, visitor, event) folks into their "people" numbers (not easy)
5. Convince them to consider/cater to the tens of thousands who work in downtown, OUHSC, etc. (again easier said than done)
6. Provide them with ASTOUNDING sales tax numbers from downtown and nearby ZIP codes (a great reason to RIGHT NOW support the emerging locally-owned retailers already downtown)
   
   or, finally...
   
   
7. Subsidize, a la Bass Pro

Your best bet is to grow an undeniably-successful locally-based retail cluster such as the one forming in AA while continuing residential infill, and eventually it will make spreadsheet sense for them to locate downtown. Until then, they will ALWAYS choose places like NH, Edmond, Norman, etc., first ESPECIALLY when initially entering the market.

The exception could be a true destination retailer like an Urban Outfitters or a Crate and Barrel, who already locate in places considering some of the numbered criteria above. They will want to go where there is already a high volume of foot and visitor traffic plus regional draw, so would probably (if landed today) end up in a new-construction project in or near Bricktown.

Sorry to be unimaginative; I just live in the real world.

Well, it is unimaginative, and you know very well a TJ would probably work, but I was just joking. Thanks for the extra explanation, though.

[soonerguru]

Don't you think it would be more profitable to research cities that are growing and enter the market before others? Predicting future demographics and such...

Yes. That's how it works in real cities. You want to be "ahead" as much as possible and select up and coming nabes. Not discounting Urbanized's incredibly detailed explanation, of course.

[Urban Pioneer]

Why in the world would they potentially locate directly next to Whole Foods in Nichols Hill's Plaza??? That just seems crazy to me and particularly unimaginative.

[ljbab728]

Why in the world would they potentially locate directly next to Whole Foods in Nichols Hill's Plaza??? That just seems crazy to me and particularly unimaginative.

Because they think it's the best location? They seem to know a little bit about what they are doing.

[Urban Pioneer]

Maybe so. Just disappointing. At least to me. And it is unimaginative.

[catch22]

Corporate America has replaced most of its management teams with accountants and bean counters. They seek efficiency through numbers, they seek profits through formulas. Long gone are the management teams who use both numbers from the right hand and their gut instincts on the left hand.

Risk is a carefully controlled tool, they are accountable to investors who want a return tomorrow, not 5 years from now. Thus, they only go for the safe option guaranteed by a formula to be profitable.

Sums up just about every industry and its line of thinking except the oil industry.

[GaryOKC6]

Why in the world would they potentially locate directly next to Whole Foods in Nichols Hill's Plaza??? That just seems crazy to me and particularly unimaginative.

They ,ay have the same philosophy as Walgreens and CVS. They are almost always across the street from each other

[David]

Great post, Urbanized.

[Pete]

In addition to Urbanized's great perspective, you need to look at this from a corporations point of view.

I was a commercial real estate broker specializing in retail properties in OKC for seven years. In fact, I was the first to bring Walgreens to the market and worked with a bunch of other chain stores.

In all cases, these are big business with well established guidelines for expansion. They all look very hard at demographics in a 1-, 3- and 5-mile radius and employ people who do nothing but scout sites and negotiate real estate deals.

When you have the entire United States (and in some cases, the entire world) in which to expand, you set priorities based on what has proven to be successful. And the real estate people are absolutely not going to try and force through an iffy location that doesn't hold up demographically. Why would they?? They don't get a bonus if a store is a success; that is merely what is expected. But if they go out on a limb for a location that under-performs, they will get the butts fired and their boss(es) probably as well.

The people making real estate decisions for Trader Joe's, Costco, CVS, H&M, and all the others aren't entrepreneurs trying to out-fox the competition and find hidden markets. And they certainly don't give a rat's rear about a particular city. They are there to follow tried-and-true guidelines, which often means opening the 15th store in DFW and knowing they could open 5 or 10 more in the same area with predictable results. And they will often set up shop right next to their competition because they can easily find out their sales numbers and can thus extrapolate their own with great accuracy.

I once had a Burger King franchisee tell me: Find me a location next to a well-performing McDonald's and we'll do 75% of their business. I guarantee you Costco/Sam's, Walgreens/CVS and other direct competitors follow this strategy all the time, and why not? Very few sure bets in the business world so they often trade the possibility of a home run for the sureness of guaranteed revenue.


Usually, only once a successful market is fully saturated do they start looking for the next market. And I assure you, 98% of their decision process is based on population and incomes within concentric circles. And by that standard, downtowns are almost always the last location to go in, if they go in at all.

[Pete]

Another example of how restaurant and retail real estate reps are complete sheep, back in the 80's I worked a great deal with the rep from Taco Bell.

We were marketing a great property right on an I-40 & Meridian on/off ramp and she wouldn't even look at it: "People don't eat tacos in the car".

This was before they started updating all their locations with drive-thrus... And of course, that is now the majority of their business and like every other fast food place, they love highly visible sites with great freeway access.

But it goes to show these people aren't there to implement their own ideas or take any sort of risk whatsoever. They are following strict guidelines dictated from afar, and the final purchase/lease decisions are made by people who never even come to town, let alone see a specific property. It's really just a math problem and they already know the answer they want.

[bluedogok]

Why in the world would they potentially locate directly next to Whole Foods in Nichols Hill's Plaza??? That just seems crazy to me and particularly unimaginative.

Why did all the furniture stores locate by each other before Mathis Brothers owned most of them? Sometimes being by your competition helps.

They ,ay have the same philosophy as Walgreens and CVS. They are almost always across the street from each other

I find that to be a uniquely OKC thing, in Austin and here in Denver they tend to be a mile or so apart from each other. Some of that had to do with the developers but ultimately it came down to the demographics as Pete states and the desire to be in certain areas.

In addition to Urbanized's great perspective, you need to look at this from a corporations point of view.

I was a commercial real estate broker specializing in retail properties in OKC for seven years. In fact, I was the first to bring Walgreens to the market and worked with a bunch of other chain stores.

In all cases, these are big business with well established guidelines for expansion. They all look very hard at demographics in a 1-, 3- and 5-mile radius and employ people who do nothing but scout sites and negotiate real estate deals.

When you have the entire United States (and in some cases, the entire world) in which to expand, you set priorities based on what has proven to be successful. And the real estate people are absolutely not going to try and force through an iffy location that doesn't hold up demographically. Why would they?? They don't get a bonus if a store is a success; that is merely what is expected. But if they go out on a limb for a location that under-performs, they will get the butts fired and their boss(es) probably as well.

The people making real estate decisions for Trader Joe's, Costco, CVS, H&M, and all the others aren't entrepreneurs trying to out-fox the competition and find hidden markets. And they certainly don't give a rat's rear about a particular city. They are there to follow tried-and-true guidelines, which often means opening the 15th store in DFW and knowing they could open 5 or 10 more in the same area with predictable results. And they will often set up shop right next to their competition because they can easily find out their sales numbers and can thus extrapolate their own with great accuracy.

I once had a Burger King franchisee tell me: Find me a location next to a well-performing McDonald's and we'll do 75% of their business. I guarantee you Costco/Sam's, Walgreens/CVS and other direct competitors follow this strategy all the time, and why not? Very few sure bets in the business world so they often trade the possibility of a home run for the sureness of guaranteed revenue.


Usually, only once a successful market is fully saturated do they start looking for the next market. And I assure you, 98% of their decision process is based on population and incomes within concentric circles. And by that standard, downtowns are almost always the last location to go in, if they go in at all.

Going through the Walgreen's architects conference at their HQ was an eye opener for me as to why they locate where they do, it does all come down to numbers.

For those who remember Sirloin Stockade think of all their old locations and look around at what was in the area, there was almost always a McDonald's within sight of a Sirloin Stockade. Their thinking was someone who frequents McDonald's back then would be interested in a steak at other times and if they remembered seeing one it would help them attract that customer. It was also because of the demographic studies that McDonald's put into their locations back then when there weren't near as many stores. Why pay for a demographic study when McDonald's paid for one.

[Pete]

Yes, several of these chains (like McDonald's) are famous for their research and analytics. Competitors merely piggy-back off them all the time.

And as I mentioned, it's surprisingly easy to get a pretty good idea of what a retailer or restaurant is doing in terms of revenues. And once you know that, you pretty much know how much your particular business will do very nearby.


Similarly, I used to be a consultant for Paramount Pictures and it's the same type of philosophy for movie sequels. They can almost guarantee making at least 75% of the revenues as the previous movie, not matter how good or bad it may be. It's why there are so darn many sequels and sit-com spinoffs; a complete new movie or show is a very expensive crapshoot.

And it's the same when it comes to adapting comic books, old TV shows or even novels.... The built-in name recognition is money in the bank in the entertainment biz.


All this is not only important from a revenue-generation perspective, but also the ability to get financing. You can go in with some sort of basis for your projections which results in a much great likelihood of getting a loan or investors.

[soonerguru]

This discussion is nauseating. No wonder so many areas of OKC look like a dump and we spend hours and hours here begging for modest improvements in planning.

It's also patently absurd that conventional wisdom is that an area of the city that is soon to be home to literally thousands of new residents paying premium housing costs is not a good location for a small urban grocery store chain to locate.

I understand the holiness of spreadsheet logic, but this is sad and says so much about what is wrong with America. Catch22's post about the bean counters occupying every industry is spot on.

[Pete]

^

Generally speaking in big corporations, there is a lot of risk and very little reward for those who try and do things outside the mainstream.

And that's almost all big businesses, not just retail.

[soonerguru]

^

Generally speaking in big corporations, there is a lot of risk and very little reward for those who try and do things outside the mainstream.

And that's almost all big businesses, not just retail.

I understand. And to my point, one of the things that is ruining this country is every business turning into publicly traded mega-corporations. It's absurd that thousands of professional, affluent residents will be wondering if the spreadsheet shows them to be profitable enough to shop at a grocery store.

[bchris02]

This discussion is nauseating. No wonder so many areas of OKC look like a dump and we spend hours and hours hear begging for modest improvements in planning.

It's also patently absurd that conventional wisdom is that an area of the city that is soon to be home to literally thousands of new residents paying premium housing costs is not a good location for a small urban grocery store chain to locate.

I understand the holiness of spreadsheet logic, but this is sad and says so much about what is wrong with America. Catch22's post about the bean counters occupying every industry is spot on.

Agreed.

This is why OKC, as a whole, is somewhat of a retail desert depending on who you ask and where you compare it to. To those that oppose having exclusively upscale neighborhoods in the city, without a great concentration of wealth, OKC will never have the retail that it could/should have simply because of the way locations are selected. The OKC Chamber of Commerce can try to sell them all they want based off of projected growth, disposable income, and commute patterns that differ here from most other cities, but without incentives (Whole Foods, Bass Pro), there is no convincing most retailers to locate in an area that doesn't meet a specific criteria on paper. It's not right, it's not logical, but its the way it works and is a fact of life.

[bluedogok]

This discussion is nauseating. No wonder so many areas of OKC look like a dump and we spend hours and hours here begging for modest improvements in planning.

It's also patently absurd that conventional wisdom is that an area of the city that is soon to be home to literally thousands of new residents paying premium housing costs is not a good location for a small urban grocery store chain to locate.

I understand the holiness of spreadsheet logic, but this is sad and says so much about what is wrong with America. Catch22's post about the bean counters occupying every industry is spot on.

Trade Joe's isn't an "urban grocery store chain", it is a grocery store chain with some urban locations. The "urban" location here in Denver is not in downtown, it is in the Capitol Hill neighborhood. The only other one that is close to downtown is further east on the former CU Medical School Campus at 8th & Colorado which is a few miles east of downtown. All the rest of the locations under construction are very suburban. The same thing in Austin, the only urban location is in the Seaholm development that is more than a year away from opening, the rest are all suburban. Whole Foods probably wouldn't be in Downtown Austin if it wasn't their HQ.

No one really stated that Downtown OKC wouldn't be a good location, it's just that most understand the logic businesses use whether we like it or not. I do think that not everything can be quantified on a spreadsheet but to paraphrase what Pete stated, corporate minions rarely go out on their own because it threatens their continued employment.

[Pete]

I understand. And to my point, one of the things that is ruining this country is every business turning into publicly traded mega-corporations. It's absurd that thousands of professional, affluent residents will be wondering if the spreadsheet shows them to be profitable enough to shop at a grocery store.

Yet, we have awesome little gems like Native Roots that go begging for business while everyone stampedes to Walmart.

People bemoan the loss of mom & pop and smaller stores yet if all those complainers (don't mean you, guru) actually patronized these local businesses, there would be tons more.


And I get the irony of making this point on a thread where we are all foaming at the mouth to get this particular national chain.

[bchris02]

Yet, we have awesome little gems like Native Roots that go begging for business while everyone stampedes to Walmart.

People bemoan the lost of mom & pop and smaller stores yet if all those complainers (don't mean you, guru) actually patronized these local businesses, there would be tons more.


And I get the irony of making this point on a thread where we are all foaming at the mouth to get this particular national chain.

Agreed. Many people don't put their money where their mouth is when it comes to supporting the local guy. This Southpark episode about Wal-Mart is definitely worth a watch to anyone who hasn't seen it. It deals with this very thing.

[Urbanized]

This is a fascinating discussion, really. I enjoyed hearing about Sirloin Stockade and Taco Bell. The SS story confirmed something I already knew about other businesses forgoing some real estate research in favor of piggybacking McDonalds, with a new wrinkle; that they actually saw the location as a type of passive advertising.

But in both cases I see a glimmer of hope for downtown. Especially in the Taco Bell story. That story illustrates a paradigm shift, and reminds me of a personal experience.

When I was maybe 18 or 19 I worked at Builders Square (RIP) and my dad encouraged me to interview with a friend of his who was general manager for the soon-to-open Lowe's near NW 10th and MacArthur. Wait...don't remember that one? Probably not, because it only lasted a very short while. Anyway, the GM wanted to hire me, and pointed out that Lowe's was (at the time...maybe still?) the largest home improvement center company in the world. I was unimpressed. Because...it was an old-school lumberyard with a hardware store slapped on the front, much like Payless Cashways (RIP), if you remember them.

Even though they were BIG, something just didn't seem right. And that is because, as young and dumb as I was, I had seen what turned out to be the future of that industry, which was big boxes like Home Depot and (now) Lowes. I even told him as much, which in retrospect I'm sure pissed him off greatly. He laughed it off, like whistling past the graveyard. But the fact of the matter is as a 19-or-whatever-year-old I had recognized a trend in that business that apparently Lowe's senior management hadn't, or at least was unwilling to respond to. In the end, that store (and all of their stores in the market) failed, and Lowe's left the metro. When they returned years later...they were a big box.

My point is that, just like Pete's Taco Bell story, those companies had to recognize and adapt to a paradigm shift in their industry, driven by consumers. Now, in those cases the shift was driven in large part by increased vehicle-dependence and suburbanization.

However, in the 25 years since there has been perceptible movement by a significant population segment in the other direction, which only seems to be gaining momentum. In some cases retailers have been recognizing and responding to the urban trend by - although perhaps not outright rejecting the site selection model - coming out with parallel product designed to appeal to emerging urban markets and obviously adopting some other criteria for site selection. Maybe that paradigm shift will ultimately allow/force a retailer to consider non-traditional (urban) locations, including downtown OKC.

[Pete]

^

And think about the huge list of retailers and restaurants that weren't able to adapt just in the last 10-15 years and are now history.

However, change is still driven at the top; almost zero larger organizations have any sort of legitimate bottom-up planning process. I've worked for a bunch that claimed that, but it was just all BS to placate the rank and file.

The truth is, the young and young-minded often see trends long before the 60 year-old white men in the board room. Unless a good number of those dudes are truly visionary, those big businesses are destined for multiple ill-fated reinventions because the decision makers have little connection to the customer and the ever-changing wider world.

At least now, some big companies are actually run by the progressive-minded; usually the founders who started off at the top in the first place.

[bluedogok]

^

And think about the huge list of retailers and restaurants that weren't able to adapt just in the last 10-15 years and are now history.

However, change is still driven at the top; almost zero larger organizations have any sort of legitimate bottom-up planning process. I've worked for a bunch that claimed that, but it was just all BS to placate the rank and file.

The truth is, the young and young-minded often see trends long before the 60 year-old white men in the board room. Unless a good number of those dudes are truly visionary, those big businesses are destined for multiple ill-fated reinventions because the decision makers have little connection to the customer and the ever-changing wider world.

At least now, some big companies are actually run by the progressive-minded; usually the founders who started off at the top in the first place.

The companies that usually stagnate are the ones that no longer have the founders running them and in most cases no family who were around during the building of the company running things. They go from an entrepreneurial style of management to business school grad type of management.