A short excursion into the history of U.S. retailing and multifunctional design of downtowns

Downtown New York, Manhattan is one of the oldest and largest business centers in the world, captured from a bird's eye view: in 1931 and today.

Since time immemorial, people have built beautiful main streets and, as they are called in the U.S. since the 19th century - downtown. Downtown is a business, commercial, cultural, and often even historical, geographical and political center of the city. The term is believed to have originated in New York City in 1830 to refer to the southern part of the island of Manhattan. Which, when viewed on a map of the city, was accordingly its lowest part (literally, "lower city").

Historically, it was this part of the city that made New York City grow. The term quickly became synonymous with CBD (central business district) and became used to refer to business districts as such. Their characteristic difference is the multifunctional design of planning and development, with almost no residential property in favor of commercial.

This is one of a series of articles by urbanist Robert Stetville for CNU Public Square magazine. It monitors and analyzes the market, technological and cultural transformation of the retail industry and how it relates to the ongoing transition to urban life that is available for walking.

From the decimation of Downtown to the retail apocalypse, massively changing retailing has been the norm for the past seven decades. City retailers can benefit from the current transformation.

The American Downtowns of the 1950s

San Antonio, late 1950s, Texas. A typical American downtown at the time is the business, cultural and commercial center of the region.

In the 1950s, almost all Americans went to downtown for shopping. In this commercial and business center, people would visit offices, post offices, courts, and banks; watch movies and shows, or look for other entertainment. The city's showcases and mixed use of downtown real estate performed many vital functions.

"The variety of land uses created a synergistic environment for walking and social interaction; a place that was worth seeing and where there was something to see," says Sharon Woods of LandUseUSA | Urban Strategies, a market research and analysis company.

In his memoirs "The Life and Times of the Thunderbolt Kid," Bill Bryson describes the 1950s in Des Moines, Iowa. "Back then, the business center of the city was filled with great department stores, shops and restaurants. The largest retail facility in the city was the Younker Brothers, which housed a chic tea room and the first escalator in the state. The store itself occupied two buildings: you could start shopping on one side of the street and go out the other," Bryson said.

Traffic Decentralization

Monk City Business Center - Des Moines, Iowa, 1950s

Then the Downtowns changed as if in one night. By the late 1950s, many buildings had been demolished to make way for parking spaces. Shopping centres and hotels developed along the highway outside the city. By the early 1960s, people were already exchanging stories about how long it had been since they were in downtown," Bryson writes, "they found their new happiness in country malls.

Similar stories have been happening all over the country. The first regional mall in the United States was opened in 1956 in Idyne, Minnesota, a suburb of Minneapolis and St. Paul's sister cities. Soon after, several dozen more such shopping malls were built. Some downtowns and main streets worked with retailers better than others, at least for a while. But many soon became deserted due to acre-fronted country mall parking lots and anchor tenant department stores.

Ironically, cities were switching to one-way transportation systems to handle traffic in business centers, while the same traffic was leaving downtown for the suburbs. Unilateral streets were often created in the name of public safety and for the sake of more efficient movement of vehicles through downtowns. However, one-way streets did encourage higher speeds for drivers. This had a negative impact on retailers' dependence on road traffic and the number of potential buyers.

And as if that alone wasn't bad enough for city retailers, street parking lots were soon removed along public routes to make the roads even wider. Transport departments seemed to share the same belief: roads serve only for the rapid movement of large numbers of cars. Many cities followed government trends by cleaning up parking lots along their main streets. Perhaps they thought that faster traffic would lead to more customers. Unfortunately, he created highways that reduced the livability and habitability of downtowns for walks.

On horseback, the highway and the bypass roads

Cute suburban Southdale mall in Idaine, soon after opening

Meanwhile, the federal government funded interstate highways and bypass roads. The first Interstate mile opened in 1955, right in front of the first regional shopping center. To the dismay of urban retailers, the federally funded urban renewal destroyed entire neighbourhoods, fragmented communities, and drove buyers away from downtown. Retail sales for many downtown retailers fell and they gradually closed down or moved to new shopping centers outside the city.

Many of these actions were intended to save the cities, but instead they caused them enormous damage. As downtown towns collapsed, anchorages also fled from the centers, including courts, post offices, banks, colleges, hotels... And consequently, jobs were lost. When those tenants and their jobs were gone, so were the workers and residents.

Dying downtowns and job cuts were one of the many reasons why by the mid 1960s people were leaving US metropolitan areas on a massive scale - a trend that continued over the next 30 years. "Traffic sprawl has accelerated the abandonment of major streets and urban centers because of their limited, personal, dissimilar retail and commercial offers. So notes "godfather of new urbanism" Stephanos Polisoides in his foreword to the book by urban planner and retail expert Robert Gibbs "Principles of planning and development of urban retailing.

The new shopping malls were centrally managed and had a coordinated set of tenants, something that city retailers could no longer match. According to Gibbs, between 1954 and 1977, the total share of retail stores in U.S. city centers decreased by 77%, and many major cities and main streets eventually lost 90% of their business - catastrophic figures for retailers.

While metropolises and downtowns simply survived, retail and commerce continued to thrive and grow. In fact, the era of ordinary country retail was just beginning. Mastodon stores such as Sears, JCPenney and Macy's were almost exclusively located in downtowns in the early 1950s. But by 1960, they had moved to regional shopping centres.

New street chains, new retail

The first Walmart store in Rogers, Arkansas

New street networks in the suburbs have concentrated traffic on highways and highways, leading customers to new retail categories. The first Walmart was opened in 1972, and the chain retailer expanded rapidly with other major discount stores such as Kmart and Price Club. Then came the so-called "category killers": Home Depot, Builder's Square, Lowe's, Circuit City, Oshman's Sporting Goods, Miller's Outpost, Wickes Furniture, Bombay Company, Linens 'n Things.

These stores were built at a feverish pace wherever there were arterial roads and access restricted highways. The 1990s were the peak era for automotive-focused retail construction in the United States. In 1990, the United States already had more retail space per capita than any other country. The U.S. population grew by 12.6% during that decade, and retail space more than doubled, according to a 2018 presentation by Kennedy Smith, a major street economy expert at CNU.

America up to its ears in retail

Los Angeles Downtown on the background of Mount Saint Gabriel, late 2016

The United States has become the most "retail" country on the planet. By the early 2000s, the United States had several times more retail sales than other countries with similar wealth. Since then, retail growth in the U.S. has slowed somewhat, but "per capita retail space in the U.S. is six times larger than in Europe or Japan," said Richard Haynes, CEO of Urban Outfitters in 2017.

"The publicly traded Fortune 500 companies that owned national retail chains helped launch a rabid store construction," said Woods, a sales specialist for new Dayton-Hudson, Federated Department Store and Kmart Corporation stores in the 1990s. "Some national chains were opening new stores to calm the nerves of non-permanent shareholders. Other chains were building entire regions with their stores to block and prevent competitors from competing with advertising campaigns that would lead to lower prices. Some chains justified overbuilding with a strategy to relieve pressure on "subsidiary" stores within a single division, or to use geographic efficiency in supply and distribution chains. All methods have contributed to the overbuilding of stores across the country".

"National retailers have been encouraged by new suburban street networks, which have attracted tens of thousands of customers daily at certain intersections and arteries. These shoppers almost always turned to physical stores before the Internet age," explains Seth Harry, an architect who has worked closely with national retailers since the 1980s. This aggregation encouraged even larger retail formats, embodied by hypermarkets and "category killers".

Urbanism and the Internet

Bethesda Row in Bethesda, Maryland is an urban mixed-use center founded in the 1990s

The era of online shopping in the U.S. began conventionally with the founding of Amazon in 1994. Americans are already used to buying from catalogs - they did it throughout the 20th century. New e-commerce firms simply used similar distribution networks. In some respects, Amazon is the new Sears, only much more powerful. "Consumer connections over the internet were much wider and more dynamic, and this technology broke a huge hole in the theory of combining consumers in physical stores because you could buy goods anywhere with the internet," Harry explains. Internet sales have been growing slowly, and even in the early 2000s they were only 1% of retail sales.

In addition, many of the American Downtowns began to recover in the 1990s. Reduced urban crime and New Urbanism changed market preferences for walking urban areas. Retailers began experimenting with urban mixed-use centers and Lifestyle centers to recreate and/or imitate major streets and downtowns.

"The idea emerged as a niche strategy, but the long, enduring force of the market shift towards urbanism became apparent in the first decade of the new millennium. It allowed retailers to shift to the mainstream of the urban approach," Harry says. "Then, in 2008, the country's economy entered a corkscrew and banks simply stopped lending to new construction. Especially anything that seemed at least remotely innovative, such as design projects for urban retailers".

"As with most other industries, the global economic crisis has had a major impact on retail development," Woods explains. "The crisis has changed the attitude of buyers to all their expenses, and value-oriented shopping has become the new norm, not the exception. Shoppers of all income levels, including the wealthy ones, have found new pride in finding good deals and savings, and paying a full retail price was no longer considered a status symbol. This shift in relationships has severely hit high-end brands and well-known department stores such as Macy's, Nordstrom, Saks Fifth Avenue and Neiman Marcus. Many new brands have entered the scene at affordable prices, especially among dollar stores, warehouse clubs, discounters and outlet stores.

In search of authenticity

CityTarget in Portland, Oregon

"Millenials, and to some extent Baby Boomers, along with Generation X, have recently begun to ask for a more authentic, authentic shopping experience," Harry says. "They need local products and locations that are directly related to product creation. Artisanal breweries, homemade cafes and coffee recipes, local food and farm-to-table restaurants. And the trend towards "creator" symbolizes this demand. This is another trend in the style of "back to the future" - until the mid 20th century, almost all shopping in the U.S. was local and unique to accommodate.

At the same time, young professionals, along with retiring baby boomers, continue to inhabit megacities in large numbers. Housing in pedestrian areas tends to have less storage space for anything. Each household in the United States has approximately 300,000 items. Millenials and the latest generation of Homelanders are environmentally conscious and may simply want to buy fewer new things in the future. We will see a decline in mass production, and this will affect shopping malls that are rapidly becoming obsolete, except for large regional shopping malls. But now would be a good time for retailers in downtowns as a whole.

According to forecasts of Foot Traffic Ahead from "Rating of pedestrian urbanism in major urban areas of America" for 2019, the urban shopping network is growing and receives significant rental payments. Retail trade in pedestrian urban areas (WalkUPs) requires significant rental bonuses in each subway area. Since 2016, WalkUP retail has grown as a percentage of the total market in 21 of 30 metro districts. It has remained at the same level of five and decreased in four, according to Foot Traffic Ahead.

This shift has led to the success of small city-format stores such as CityTarget, which in recent years have opened in pedestrian urban areas. People with purchasing power are returning to metropolitan downtowns and suburban business centres. Retailers not only follow the market, but also change shape according to the urban context.

Downtown and main streets are home to multifunctional properties, while city retail will be accompanied by many other businesses such as: professional offices, salons and other services, restaurants and cafes, entertainment facilities and even public non-profit facilities. Retail has never been a major component of a healthy downtown - no more than 15-20% of the area. Independent business is a big part of this trend. The share of national retailers in "hot" business centers does not exceed 10%, although they are more prominent because they are located in the most prominent corners.

Meanwhile, the share of e-commerce in retail is steadily growing. In 2019, it reached about 14% of total US retail sales. All this has had a negative impact on traditional brands that built everything up with their stores in the 20th century.

Difficulties or opportunities?

Main Street in Belfast, Maine. Many major streets have reborn in recent years, especially if they retain their unique character and strong history

The Washington Post recently reported a "retail apocalypse" as major retailers have announced massive store closures in recent years. Payless ShoeSource, which filed for bankruptcy under Article 11 in February, is closing all 2,100 of its stores in the United States and Gymboree is closing 800 stores. Sears, which has closed 1,300 Kmart and Sears stores since 2013, will close 80 more stores. A number of other retailers, including Gap, have hinted that their store closures are also on the horizon. One analyst, UBS, predicts that 75,000 U.S. retail stores will close by 2026, and 25 percent of retail sales will be online. Provided that e-commerce continues to grow at the same rapid pace.

While the cleaning of brand stores is real, these stores continue to open steadily throughout the United States. Many of them are dollar stores, but they also include new brands that combine online commerce with traditional sales. The reasons for retail store closures and mall declines are complex and go well beyond the growth of e-commerce. Payback for traditional American retailing will be long, and many chains suffer from too much Wall Street debt.

Every major change opens new opportunities, especially for new and independent retailers who use the Internet. Well-known brand companies in car-oriented shopping malls and suburban areas are looking for mixed-use facilities in pedestrian urban areas to gain market share. "I keep telling my customers that retailers are not dead, but rather need to adapt and incorporate some of their activities into e-commerce," says Woods. "Shoppers are building brand loyalty on the Internet, resulting in more visits to traditional stores. Now that hypermarket retailing is shrinking and getting the right size, it's an ideal time for downtown retailers to regain market share.