Saturday, May 2, 2015

The New Face of Retail

By Evan D. Robertson

It’s an interesting time to be in economic development to say the least. Across the country metropolitan areas and states are implementing widely different policies to grow their economies, from developing innovation districts to drastically revising their tax code, it is my personal opinion that over the course of my lifetime (say another 50 to 60 years) we’ll finally get to see which economic development theories worked out and those that got left by the way side. Is a low tax environment the way to go? Or is heavily investing in research and development? Did the focus on entrepreneurs work out? Did those metro areas that heavily invested in talent attraction and quality of place outperform those metro areas that forewent that investment? And while we’ll have a better idea for what truly makes a local economy blossom, one question at the forefront of my mind will be: did any of these policies lead to equitable economic development? In our line of work, we tend to say a rising tide lifts all boats; however, recent research suggests that this rising tide may lift some boats much higher than others. To an extent, I wonder how much the economic development practices that we as economic and community development professionals espouse contribute to rising inequality. 

We in the economic development business, rightly, tailor our economic development recruiting, retention, and expansion practices to companies and businesses that will create high value jobs for our local community. At the core of these practices is economic base theory, which wholly advocates for the attraction, retention, and expansion of export-oriented companies. As the theory dictates, these newly created export oriented jobs will have the most impact on the regional economy, supporting additional jobs as the increase in economic activity ripples throughout the local economy. What economic base theory assumes and what we generally take for granted, is that export-oriented jobs will directly support growth in lower wage jobs. While these businesses range from consumer banking to legal services, it almost always includes retail. Put more simply, as we in the economic development profession support export oriented growth in our local economies, we are at the same time supporting growth in business sectors that are at the heart of our growing inequality. 

This isn’t, again, to admonish the profession for its proven practices of increasing the wealth and prosperity of our local community, but to say that as we heavily focus on attracting, retaining, and expanding export-oriented firms our attention is turned away from the simultaneous growth in lower wage employment sectors as our economy expands. We tend to place less emphasis on strategies that focus on local serving sectors, unless there is a distinct community need. If we assume the responsibility to support not only job growth and wealth creation but also economic inequality, then it may necessitate a shift in how we approach economic growth – it is as our CEO Mac Holladay often says a “both and” situation. Assuming we adopt economic inequality as the responsibility of the economic development professional, than it dictates that at the same time we focus on building our community’s export base, we must, at the same time, contribute attention to wage growth and wealth creation in our local serving sectors. How do we do that? Well, let me tell you about my new pair of running shoes.

Of the two big purchases I made in the month of April, I am particularly enamored with two: my new I-Phone 6 and a pair of Mizuno Wave Running Shoes. We’ll skip over the I-Phone since everyone, their mother, and their mother’s mother has written about how revolutionary Apple is to the retail sector. Instead, let’s focus on the shoes, or rather the company that sells the shoes: Atlanta-based Big Peach Running Co (BPRC). 

After walking past BPRC for the better part of a year, I decided to finally take the plunge and get a new pair. My experience can be summarized in four convenient, if lengthy, bullet points: 

1. Technology is key: Let’s face it despite the fact that technology surrounds us constantly, we are continually impressed by new technology. Technology in a retail situation can, and in my case did, influence the sale of merchandise. In terms of running shoes, the “fitting” process was technology driven – each step was equally amazing. The first part of the fitting process involved a machine reading the length of my foot, my arch, and the general distribution of my weight. This data was the sole driving force behind the shoes that I would later try on. At this step, the retail associate is going into great depth about my arch and my weight distribution, recommending shoes specific to my foot. The next step was to jog around a bit while a tablet device recorded the run. After the retail associate went into great detail about all this data: my arch, my stride, the angle at which my foot touched the ground, we were ready to try on some shoes. 

2. Deep product knowledge is a must: As I’m trying on shoes, the associate is going through each shoe with fantastic detail. How the shoe is made, how it supports the foot, a brief explanation of the company that makes them, where their headquarters is located. My entire selection choice hinged on two things: 1) the Wave Runner is made by a Japanese company headquarter here in Norcross, GA 2) the shoe’s support system wasn’t built using foam support in a typical running shoe, instead it uses a plastic plate that offers different (I’d argue better) support to the foot. Without this knowledge, I probably wouldn’t have cared at all about the selection process, and would have suffered significant sticker shock once I got to the cash register. But, combined with the whole technology-driven fitting process and the deep product knowledge, I wasn’t even thinking about price, nor did I care all that much when I made the purchase even though it ended up being about $40 dollars more than I expected. Key point: The value I derived from the technology and deep product knowledge significantly outweighed the actual cost of the item.

3. Build a Community: This is perhaps something Apple is best known for. The technology giant has created what Guy Kawasaki would call a culture of evangelism. Evangelism works so well because once one customer is hooked a particular product or service they will advocate on behalf of the product or service – it’s an influential, and more importantly, free version of advertising. BPRC embraces the evangelism part of retail; it is mindfully focused of creating a culture and community of seasoned and unseasoned runners and joggers. How do they accomplish this? Every Monday night they hold a Run Health Class, free and open to the public. It is a 45 minute workout that is focused on workout drills to improve core strength, flexibility, and balance. Along with the free Monday workout, they are a nexus of information to Atlanta’s running scene. In fact, the store has a huge binder filled with upcoming running events throughout the Atlanta area along with a calendar of upcoming events posted on the wall. Point being, after the purchase of my shoe I had absolutely no reason to come back until my shoes clocked around 400 to 500 miles. This equates to about a year, for another year I had absolutely no reason to walk into the store again unless I needed to return my shoes. Since my initial purchase, I’ve been back three times. These return visits increase the likelihood that I’ll buy something between now and when my shoes need to be replaced. 

4. Employee Investment is essential: I didn’t exactly witness this, but I imagine extensive employee training was behind my experience. Either way, the depth of knowledge about not only the product, but also every facet of the running from optimal body angle to how often your feet should be hitting the ground (about 180 steps per minute for those counting), demonstrated a degree of investment within the employee. It was clear the associate knew how to diagnosis a runner’s needs, operate the technology, and, most importantly, translate the results into the best shoe for the customer. This doesn’t happen in a void, the employee needs investment and empowerment. 

Businesses across the retail sector are making significant commitment to raising the wages they pay their employees. Wal-Mart just this year announced that it was raising the minimum wage it pays to its hourly employees, impacting 500,000 of its part and full time workers. As firms such as Wal-Mart raise their minimum wages, these efforts must continually be supported by higher customer satisfaction, raising same store sales, and increased consumer spending. Wal-Mart is making the investment in its workers, again this is a business decision, because it bets that it can get a return on this investment. An employee who simply points you in the direction of the product you’re looking doesn’t justify the increased labor costs. In order to support pay increases, and ongoing pay raises, it necessitates that the retail sector become staffed with empowered employees, one which leaves the customer with an immense degree of satisfaction. 

As we move forward with our economic development efforts, it is critical pay greater attention to the low wage sectors created by our attraction, retention, and expansion practices. We don’t necessarily need to solve the problem right away, but if we are to add the additional burden of income inequality to our workload, we must focus on creating high-value, high-wage service sector jobs. Small business support and development efforts are likely the frontline to these efforts along with the embrace of the new face of retail.