Are our town centres really dying?

Rue Mouffetard in Paris. A vibrant market street in the heart of a bustling metropolis.

Rue Mouffetard in Paris. A vibrant market street in the heart of a bustling metropolis.

by Ares Kalandides

I recently blogged two newspaper articles that dealt with retail (here and here) and promised to explain my choice soon. The first discussed the losses of the retail sector in Britain since the beginning of the recession and the second was about the growth of internet grocery shopping (also in Britain). My attention was drawn to these articles mainly because of discussions we had during the International Place Management and Place Branding Conference  13th – 17th  February in Manchester. Several researchers talked in their presentations about town centres either with a microeconomic focus on retail businesses or from a place management perspective on retail streets. I aired my doubts during the conference, but here I will try to make sense of my spontaneous reactions.

Retail is an important function of town centres, but not the only one. People work and live there, they meet other people, interact in cultural production, use public space, amenities and services. Of course all of the above is interconnected: e.g. one the advantages of living in a centre is that you can find retail, recreation and social contacts at a small distance. The other way round, retail is directly linked to density, accessibility etc., but let’s not forget that it is also dependent on the capacity (and propensity) of people to buy. The focus of much of town centre research has been on retail, for reasons that are not always very clear. The main issues are on competition between central shopping and peripheral shopping centres or outlets, product and supply differentiation, consumer experiences etc.  I see at least two problems with that: First, it reduces places to commodities (or places for commodities) and secondly, by dealing only with businesses, it draws attention from everything else that matters. In this article I intend to follow the tradition and focus exclusively on retail by testing several dominant assumptions.

If, as the above articles tell us, people have less money (e.g. because of a recession), are willing to spend less (e.g. because of insecurity) or change their shopping habits (e.g. because of the growth of the online business) how do we rethink about our town centres? This question becomes even more pressing in cities severely hit by all types of crises –political, economic or other. Now, if you judge that nobody should interfere with the market and that businesses should be left to the natural selection of competition, then you don’t need to read any further. This article is not for you. If however you believe that it is legitimate to intervene in order to improve things, then we have a common basis to discuss.

markethalle

There has recently been a lot of talk in crisis-stricken European cities about extending retail opening hours (wherever they are regulated) also including Sundays. What could be the arguments for and against it? Let’s look at it from the business point of view first. If average customer spending in retail is, let’s say, 100 Euros a day, a customer spends 600 € in a 6-day week. Adding an additional day, the Sunday, would mean that a customer spends 700€ a week, adding another 100€ to the business circuit (this also works at an aggregate level). That could mean higher profits (and ideally future investments) and/or higher salaries and/or more employment (I don’t want to talk about what businesses actually do in such cases). The economic effect could be positive. But the assumption was that people are able to and want to spend the extra 100 € a week on retail. Chances are that in a recession neither of the two conditions will apply. If we add to it the cultural and technological change of online shopping, then there may even be a decrease in the street-buying propensity even when there is no recession. We can just imagine the multiplying effect that a combination of both would bring about.

Let’s then assume that people spend the same amount of money (600€) in seven instead of six days. This has several consequences for the business, the worker and the customer. For the business it means that it either needs to employ more people to cover the extra day or have existing staff work more. In the second case it may offer more money (for additional working hours) or ask staff to work more for the same money. Remember that the business is not making a higher turnover since the customers are not spending more. Also, most probably in a recession the business’s profit has become very small if there is any left. The business has two choices: it can reduce its profit even more by either paying higher wages or by employing more people and it can also keep its profits steady by employing the same number of people for the same money, but for longer working hours. Once again, in times of recession and high unemployment it is easy for businesses to extract practically anything from workers.

Of course theoretically it has a third possibility: not to open on the seventh day. But one of the laws of competition is that nothing is a real choice that can willingly give your competitors an advantage. The customer is the only one who has a real gain, at least initially: she can spend her available 600€ on any day she chooses and will not be restricted by unpractical closing hours. For her, longer opening hours mean better service. But, she would enjoy that advantage at somebody else’s cost – the business’s (in some cases) or the worker’s (in most).  It is by no means a win-win situation. I wonder then why most retail businesses actually insist on extending opening hours? Are they so sure they can extract more from their staff to keep their own profit stable? Or are they just driven by those enterprises that have a better starting position in inter-business competition? If shops do go out of business because of increasing competition for the same market that would entail serious social costs.

lausanne

I would now like to think of the broader social consequences of such an endeavour, too. There are already many people who work on Sundays, in the evening or at night: in the catering business, in hospitals, at the police, in public transportation etc. – including workers in many retail businesses that have special permits (in places where retail remains closed on Sundays). I don’t know what percentage of the population works like that, but it would be interesting to find out. For people’s everyday lives, families, friendships or community practices it is extremely important that leisure times coincide. If they don’t, this can have serious consequences on people’s emotional lives and further, even on social cohesion. It is worth looking for that kind of evidence from places where retail opens seven days a week.

There can however be possible positive effects for cities, too. We all know how lively cities are when shops are open and how boring they sometimes seem when everything is closed down. Keeping shops open every day may liven cities up. But here again I have two doubts: a) Are we sure that we do not like the quiet of a Sunday in our own city? I mean, is this maybe just the eye of the visitor? I personally find it very relaxing knowing that few people are working around me on my free day. Saturday is quite an interesting mix of both. b) Of course cities are livelier when shops are open, but that is because we have turned them into open-air shopping centres. There are so many places now where the only available space is commodified, i.e. where there is no or little public space outside consumption. It is obvious then that if you exclude consumption because of restricted opening hours, these places will be dead. But the latter is a planning choice, not a natural phenomenon.

That being said there are a couple of other things that we need to consider seriously which I have not talked about here. I started from the assumption that people in a recession are not able or willing to spend more. This is generally true, but some retail segments may indeed profit from those who can and want to spend more even in a recession. The retail market may work differently in its different submarkets, but that opens up a totally new discussion. Also, the assumption was that places are closed systems, which of course they aren’t. Money moves back and forth, from and to places and that needs to be considered too. We need to look at value chains (and particular into value capture in places) to understand what really stays in the local economy. I think tourism is a particularly important issue here, as tourists may offer important money injections in a stagnating economy. That is why areas and shops that mostly cater to tourists do indeed have exceptional opening hours. Unfortunately the discussion does not stop there. How much of the value created by the spending capacity of a tourist is captured in the place? In the commodity chain of each good, how much of production, distribution etc. takes place in other places? And even in retail: how much of it is dominated by international chains that transfer the produced value somewhere else? Of course they create jobs and may (or may not) be contributing to local income through taxes, but that has a limited effect on local economies. There are also two main weaknesses in the above account: First of all, things are much more place-specific that the abstract analysis of the article. I must admit that I had the British, German and Greek cities when I was writing it and that is a huge overgeneralization. How exactly the different players and institutions in retail interact will be very different from place to place. Secondly,  shopping is a strongly gendered identity-formation practice, that adds one more complex dimension to the whole discussion.

Although I have worked in retail street management schemes before, I am far from being an expert in retail economics. I was just trying to think of what these radical changes we experience around us mean for town centres. In particular I would like to challenge the notion that towns are just retail locations or even that they are mainly that. What this type of thinking finally does is to reduce human activity to production and consumption.

____________

Here you can find a short commentary by Simon Quinn from the Institute of Place Management with some interesting facts on retail in the UK.

Also in the “Berlin update” of 9th February you can find figures on retail and income in Germany.

About Ares

Ares Kalandides holds a PhD in Urban and Regional Studies from the National Technical University of Athens. He is the founder and CEO of Inpolis, an international consultancy based in Berlin, Germany and has implement several projects around the world. Ares teaches Urban Economics at the Technical University in Berlin and Metropolitan Studies at NYU Berlin.
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7 Responses to Are our town centres really dying?

  1. webloyaltyuk says:

    Thank you for sharing Webloyalty’s research into retail trends, you have made an interesting blog around this subject. You can find the full report here: http://webloyalty.co.uk/news-a-research/33-press-releases-2013/124-research-reveals-recession-cost-retail-sector-p23bn-since-2008

    ~ Webloyalty UK

  2. Tilman says:

    In my eyes, one also has to consider the effect, which this change in the heart of the cities has or will have on rents and the real estate sector. I am not sure, if there will be growing retails rents and prices in the inner city, if the internet trade grows in future as it does now. This might create vacancies and can furthermore be a risk for “conventional” city development.

    From my point of view, it is a frightening scenario, if there will be a further growth of online business, especially if you look at city transport. Young, badly paid men in yellow, blue, white suits and cars rushing from block to block and door to door and handing out cardboard boxes, which were packed by badly paid workers in bigger boxes called logistic centers.

    I think, there are several options to stop or slow the growth of this development. For Germany, the cost for sending internet bought commodities back, might be put on the buyers side. Also, a minimum wage in the post sector and a higher price for oil/energy may have an effect.

  3. nice blog..i got a lot of important information from this blog…thanks for sharing information…keep it up..

  4. Retail SHOULD be given the most consideration as we manage our cities, Ares – but not because we all must spend more, but because retailers are the principal place managers in our cities.

    We must ‘tool up’ to attract the best retailers – the best city builders – not because we want our people to spend more, but because we want our city to develop, culturally, more.

    Cities with ‘bad’ retail enter into cycles of blight because the PLACE becomes ruined through high vacancy and abandonment.

    • Ares says:

      I do not agree. We have MADE retailers the principal place managers in our cities, that is not a natural phenomenon. Why not stress other urban functions?

      • Whatever occupies the ground floors of our cites must be managed well.
        Retail management – like in a shopping centre – has been done pretty poorly across the world, leaving us with ugly city landscapes led by boring retail.

        If the owners of these buildings choose to put in other uses – that’s absolutely fine. Will they have community participation as a high a good retail district?

      • Ares says:

        I think we agree on this. It has certainly been done poorly. But of course some space owners can only think of the usual solutions. It could be the job of a place management partnership to think of alternative uses that will be useful for everybody.

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