Posts tagged with "Retail":
Linking the shopping to Amazon accounts also places the mini-mart squarely in the boutique market, since Amazon has precluded the use of cash and food stamps. While Amazon has promised that it has no plans to replace any of the staff in Whole Foods stores, Amazon Go is stocked with the grocery chain’s signature 365 Everyday brand and their newly unveiled meal kits. The implication, that Amazon could replace the retail workers it now employs, isn’t without merit. Amazon has already reconfigured the urban fabric outside of its largest markets through the construction of enormous, automated distribution centers, and extending the practices honed in their warehouses into stores would be a logical next step. Amazon has already thrown brick-and-mortar stores into disarray and forced a re-evaluation of physical retail space once, and it may be poised to do it again. Below is a video explanation from Amazon of how the store works.
I’m in Seattle and there is currently a line to shop at the grocery store whose entire premise is that you won’t have to wait in line. pic.twitter.com/fWr80A0ZPV— Ryan Petersen (@typesfast) January 22, 2018
“The city of Leonia refashions itself every day: every morning the people wake between fresh sheets, wash with just-unwrapped cakes of soap, wear brand-new clothing, take from the latest model refrigerator still-unopened tins, listening to the last-minute jingles from the most up-to-date radio. On the sidewalks…the remains of yesterday’s Leonia await the garbage truck.” - Italo Calvino, Invisible Cities
I just learned that my underwear, my mattress, and most of my wardrobe all came from the same place. I didn’t purchase them from a one-stop, big-box retailer, but from a no-stop, small-box room—my bedroom, to be specific (from my bed to be more precise). All I had to do was open up a web page, pick, click, and then wait as my underwear, my mattress, and most of my wardrobe were shipped from a warehouse located in a Massachusetts exurb to arrive at my doorstep in two days or fewer. The maker of this mundane miracle is a company called Quiet Logistics, a third part logistics (3PL) provider that helps online retailers like Mac Weldon, Bonobos, and Tuft & Needle reach customers as quickly as possible. They and companies like them, along with online retailer behemoth Amazon, are using new technologies to redefine retail and transform the architecture of fulfillment. And if they don’t bring about the birth of Skynet and the robot apocalypse first, they might also transform cities and towns across America.
Open up any newspaper (or newspaper app) and you’re likely to read an obituary for the shopping mall. While the reports of its death may be somewhat exaggerated, malls are indeed changing as more and more people buy, well, everything online. Some are being transformed into mixed-use “town center”-style developments; others are filling vacancies with new tenants who lean into recent consumer habits like “showrooming,” an industry term for trying on clothes in one store and then buying them online from another at a lower price. While showrooming may be the bane of many a salesperson, retailers like the aforementioned Bonobos design and build stores as showrooms: comfortable environments where customers find the right-size pants and then leave empty handed; two days later they’re delivered to their home. Any longer than that and customers might not be so quick to leave without those slim-fit chinos. Thanks to the proliferation of fulfillment centers, no one has to wait for anything anymore.
Fulfillment centers are massive warehouses where the ephemera of our lives is stored until we call upon it with a wave of our hand. The typical fulfillment center is a rectangular box built from precast concrete slabs or tilt-up concrete panels that are poured on-site and lifted into place. They range in size from 300,000 square feet to more than a million, feature hundreds of loading docks, 30-to-40-foot-tall-space-frame ceilings (cubic volume is key), and towers of nearly endless shelves containing rainbow Slinkys, Swiffer Wet Jets, Hello Kitty pencil cases, and literally everything else. “The picking towers are like mini-buildings, only without mechanical systems,” said architect Greg Lynn, who has visited two Amazon facilities and has long been interested in the formal and spatial possibilities presented by new technologies. “Then there are the massive sorting areas and areas where they compress boxes. It’s like a little world. Or a theme park.”
While large distribution centers aren’t new, the growth of online direct-to-consumer shopping has prompted a building boom of the fulfillment center. For better and worse, no company is better known for these buildings than Amazon, which has built more than one hundred fulfillment centers in America alone, totaling over 77 million square feet in size. Amazon uses a few different types of these centers, each designed to accommodate a specific type of item: small sortable items, large sortable times, large non-sortable, expensive specialty items, and apparel, as well as newer facilities designed for perishable and nonperishable food. Some are conventional centers, where products are picked and packaged by human pickers who can walk up to ten miles a day; some use mechanized conveyance and sorting systems; others are automated with robots handling most of the heavy lifting.
While Amazon is the standard-bearer for this new model of retail, it’s not alone. Logistics real estate is booming. Online retailers, 3PLs, and traditional big-box retailers like Wal-Mart, Home Depot, and Target have all invested heavily in new fulfillment centers to more quickly reach online customers. Target’s online sales tripled from 2013 to 2016, and in that time it nearly doubled the amount of space dedicated to e-commerce with two new fulfillment centers totaling 1.7 million square feet. According to Colliers International, in 2016 e-commerce prompted the construction of 74 million square feet of new warehouse space in the United States, with 93 percent of that space occupied. Already this year is on track to deliver another 55 million square feet, according to research firm Reis Inc., with Dallas, Chicago, Kansas City, Central New Jersey, and San Bernardino, California, as the top markets, although warehouse construction is also booming in Atlanta and Indianapolis.
As with all things real estate, it’s about location. Many of these fulfillment centers are built on former farmlands in centralized locations with easy accessibility to highways and airports. For example, Quiet’s new facility in Hazelwood, Missouri—its first outside Massachusetts—is part of a larger development of fulfillment centers built near St. Louis, where ground shipments can reach anywhere in the United States in two or three days. Amazon initially followed a different tact, building its warehouses in locations selected to take advantage of state tax policies. But those policies have changed as the industry has grown and states have grown savvier. Since 2013, Amazon has focused on building smaller fulfillment centers closer to major urban areas—sometimes even in cities—rather than building larger fulfillment centers in farther-out, less populated areas. The ultimate goal is same-day, and even same-hour, delivery.
But fulfillment isn’t just about fast delivery; it’s also about fast packaging. And that’s increasingly done by robots. In 2012 Amazon purchased Kiva Systems, now Amazon Robotics, whose rechargeable orange robots might look like a 1970s ottoman but can find anything in any warehouse instantly, and lift up to 3,000 pounds. They’re designed to move proprietary shelving “pods” along a predefined grid to workstations where real-live humans pick, pack, and prepare the items for shipment—often working on multiple orders simultaneously. Among other benefits, the Amazon Robotics system is flexible, scalable, and it’s five to six times more productive than manual picking. Plus, without the need for human-scale aisles, a fully automated warehouse requires half as much space as a traditional warehouse, and can use purchasing data to constantly rearrange itself so that the most frequently bought products are closer to the picking stations. The downside of this robot revolution? The robots can only be used to transport relatively small items that fit in the pods, and the systems requires a large and expensive investment in infrastructure—as well as a very, very flat floor.
After purchasing Kiva, Amazon took it off the market, forcing competitors who previously used them to find a new solution. This has resulted in a robot arms race as new companies rush to fill the void. One of those companies, Locus Robotics, was founded by Quiet Logistics, which was the first 3PL to use Kiva’s technology. Locus’s robots, which look like the love child of the Jetsons’ Rosie and a hat rack, can be integrated into any standard warehouse, cutting startup costs and accommodating the unpredictable nature of e-commerce. In a Locus-equipped warehouse, human pickers work in specific areas and the robots zip around each other from zone to zone, following the most efficient path to fill an order before taking it to the shipping station. Sensors, cameras, and LIDAR (Light Detection and Ranging) help the robots map the warehouse and keep them from running into anything or anyone. Locus markets its robot as a more collaborative, worker-friendly solution that plays to the unique skill sets of both: The robot, with its infinite spatial knowledge, limitless stamina, and complete lack of self-doubt, quickly locates and delivers items, while the nearby human, with his or her prehensile hands, picks it up and puts it in the basket. For now, anyway. The robot arms race is becoming a robot hands race as companies work to develop reliable grasping mechanisms to replace human pickers who have annoying habits like going to the bathroom and going home at the end of their shift.
These two automation systems have very different implications for warehouse design, but denser solutions like Amazon’s automated ottoman seem ideally suited to the smaller fulfillment centers encroaching into our cities with carefully calculated products selected to get more people more things in less time. Lynn believes they could do a lot more than cut down shipping time on your Crest Complete Multi-Benefit Toothpaste with Whitening + Scope. “The level of spatial intelligence in these buildings is remarkable,” he said. “It’s clear that every item is being tracked at all times. In terms of localization and knowing where things are, it’s a hyperintelligent space.… [But] how do you take that kind of spatial thinking and apply it to other building types—a library or market or university?”
Lynn has been exploring that question with architecture students at Yale and UCLA, but we may not have to wait long to find out. Amazon is already experimenting with brick-and-mortar bookstores and grocery stores. Could Amazon U really be that far out? Could logistics save the shopping mall? Should more architects and planners consider these interconnected systems and design for robots as well as people? It may only be a matter of time before automation becomes integrated into our daily lives outside the warehouse and the architecture of fulfillment becomes the architecture of the city. Beyond packing and shipping, could fleets of autonomous vehicles transform cities by making parking garages and parking lots obsolete—creating new space for fulfillment centers, perhaps, or putting a new premium on curb space for drop-offs and pick-ups? I haven’t even mentioned drones yet. As technology evolves to meet the demands of our on-demand lifestyle, what else will change? Perhaps all cities will come to resemble Calvino’s fictional Leonia, whose opulence was measured “not so much by the things that each day are manufactured, sold, [and] bought…but rather by the things that each day are thrown out to make room for the new.” Ultimately, Leonia was threatened by a looming mountain of its own leftovers. But I bet they could get new underwear delivered in less than an hour.
We are living in the Golden Age of restaurants. According to the United States Department of Agriculture, Americans spend nearly half of their food budget eating at restaurants, rather than shopping at grocery stores. This fact stands in stark contrast to the greater trend in retail, which shows brick-and-mortar storefronts struggling against online competition and skyrocketing rent. Yet, success in the restaurant business is far from guaranteed. With more options for high quality food than ever before, restaurants new and old are rethinking their place in urban settings.
Though Chicago may be best known for deep-dish pizza and hotdogs, the food scene in the past decade has been defined more by several highly experimental restaurants such as the Michelin three-star micro-gastronomy restaurant Alinea. While such award-winning establishments have changed the culinary scene, it is the extreme flux of fast-casual eateries, such as Chipotle Mexican Grill and Freshii, that has saturated neighborhoods to the point of bursting.
Just as Chicago has been a testing ground for some of the world’s most unusual cooking techniques, it would seem the city is now becoming the site of an uncanny fast food resurgence. As McDonald’s moves its headquarters from its Dirk Lohan–designed modernist campus in Chicago’s Oak Brook suburb to downtown, other chains are also rethinking their spaces to appeal to the urban set. McDonald’s, Burger King, and Taco Bell all have redesigned or launched new restaurants specifically for urban settings. In particular, Taco Bell has launched a new line of storefronts that are hardly recognizable as the affordable “Mexican” chain.
With the first of its kind opening in Wicker Park, Chicago, the Taco Bell Cantina takes a step toward the fast-casual market and away from its drive-through and suburban-mall food court roots. Most noticeably, the Cantina doesn’t have a drive-through, or even a parking lot. Situated in a small storefront—which once housed a short-lived high-end sex toy shop—the fast food giant takes advantage of the heavily pedestrian-trafficked Milwaukee Avenue retail district. Once pocked with numerous vacant storefronts, the street is now filling with local and national chains looking to cash in on the popularity of the walkable neighborhood.
As such, this Taco Bell is specifically designed for pedestrians. This carries into the interior with nonslip tile floors that guard against the slush and snow of Chicago winters. The dining area is somewhere between a fast-casual restaurant, an internet cafe, and a sports bar. Yes, a sports bar. When the Cantina opened, most stories revolved around the fact that this is the first Taco Bell to serve alcohol. Hard liquor can be mixed with Taco Bell’s proprietary Mountain Dew flavors, and beer is served in bottles. Large flat-screen TVs along one wall play sports, news, and, late at night (it is open 24 hours), the Syfy channel. During the day, it is not uncommon to see people sitting at the highly finished plywood furniture working on laptops. Airport terminals should take note of the number of outlets at this Taco Bell. With at least one for every seat, it is ironically more convenient to work there than at the trendy coffee shop down the street. All of this is part of a carefully planned shift by Yum! Brands, Inc., Taco Bell’s parent company. Since the opening of the Wicker Park Cantina in late 2015, 11 other “urban inline stores” have opened around the country. Along with the Cantina, Taco Bell has opened four other models in California, ostensibly referencing their specific locations. Those models have names like Heritage, Modern Explorer, California Sol, and Urban Edge. Of the 2,500 more Taco Bell locations Yum! plans to open around the world in the next five years, at least 300 of them are planned to be the urban iterations.
Another major brand that believes Chicago may be a perfect pilot site is the coffee giant Starbucks. After a major remodel of the tiny Wicker Park Starbucks, the space was rebranded as a higher-end offering that the Seattle-based company is calling Starbucks Reserve. Reserve locations serve small batch specialty coffees, and the design of the space has been rethought. Following a larger trend in retail, companies are looking to provide more differentiated environments, rather than the repetitious brand enforcing model companies like Starbucks are known for. Finer finishes, graphic and object references to the coffee harvesting process, and LEED compliant construction methods all add to this new “experience.” Doubling down in the windy city, Starbucks will also open its largest retail space to date downtown along Michigan Avenue. The third of its kind, the Starbucks Reserve Roastery will be a four-story, 43,000-square-foot coffee palace. Along with roasting the brand’s special Reserve coffees, the new space will include cafes and rooftop terraces.
While fast-casual chains continue to grow, that growth has begun to show signs of slowing in the past few years. The casual dining market on the other hand, typified by restaurants such as Applebee’s and TGI Fridays, has not only slowed to a stop—it has begun to lose ground. Analysts are now saying millennials, in particular, are just not interested in the chains that were so popular in the 1990s and early 2000s. With large numbers of twenty- and thirty-somethings moving to urban centers and preferring fast, generally healthier food, the restaurant industry is rushing to figure out how to keep up.
While Michelin-starred restaurants concoct fantastic dishes in spaces often difficult to find, let alone get reservations to, and fast casual brands continue to pump out quinoa wraps, a handful of large brands are trying to figure out what it means to have an urban presence. Rather than importing suburban drive-throughs, they’re mimicking urban coffee joints and neighborhood bars. Chicago, with its seemingly insatiable appetite for new and interesting restaurants, also seems to have room for some familiar faces that are willing to cater to its particular taste.
Broadway, Manhattan’s longest street and a main commercial drag, spans the length of the island from hilly Inwood to Lower Manhattan’s breezy Bowling Green. There are shops from nose to tail, but a recent survey found that Broadway is also home to almost 200 vacant storefronts, dead zones on one of Gotham’s liveliest thoroughfares.
Glaring vacancies aren’t limited to Broadway though. From Madison and Fifth Avenue to Broadway in Soho and Bleeker Street in the West Village, high-end commercial strips in Manhattan are having trouble attracting commercial tenants. A healthy vacancy rate is 5 percent, but some fancy areas are in the midst of high-rent blight, with one in five (20 percent) storefronts vacant.
Further north, in Washington Heights, a whole block of immigrant-owned businesses were essentially evicted after new landlords proposed a 100 percent rent increase and declined to renew their leases.
Why is this happening?
The causes are predictable, but the solutions are not.
High rent, high taxes, regulations that favor owners over tenants, and plain old capitalism—the incentive for owners to seek their property’s maximum value, and the consumer’s desire to acquire goods at the lowest price—all contribute to the twin plagues of vacancy and the mall-ification (national chains displacing small, local businesses) of Manhattan. Stakeholders, though, disagree on what should be done to solve a growing crisis at street level.
This spring, the Manhattan Borough President’s Office (MBPO) recruited volunteers to count all the vacant storefronts along Broadway, citing a dearth of information on how many vacancies exist, and where. The survey follows an effort from two years ago where the office reached out to small businesses and offered potential policy solutions to businesses’ problems.
But first the report had to determine what a small business is, a question that is not as obvious as it seems.
The federal government’s Small Business Administration (SBA) measures business size by number of employees or the company’s value, depending on the sector. The Small Business Act, though, uses a measure that doesn’t exactly conjure visions of mom-and-pops: It says small businesses have fewer than 500 employees. Under the same rules, a microbusiness has fewer than five employees and requires $35,000 in capital or less to get going.
In New York State, small businesses are companies that employ fewer than one hundred people, while New York City’s Department of Small Business Services doesn’t set a number. Instead, it encourages any self-identifying businesses to seek out its resources.
Consequently, the MBPO’s March 2015 report called for a standardized measure of “small,” and the recommendations in its report are geared toward firms with 15 or fewer employees.
No matter how you define them, it’s clear that the not-so-invisible hand of the market is driving these firms out of business on Manhattan’s main streets. One problem? Stratospheric commercial rent increases. In 2014, the average asking rent in Manhattan was $65.14 per square foot. With ever-more high-income individuals flooding Manhattan, landlords are reluctant to offer 10- or 15-year commercial leases lest they get stuck with a lower-paying tenant as commercial land values in the neighborhood skyrocket.
Other problems, the report found, include businesses not having enough insurance, delaying tax payment, and under-budgeting for utilities. On the city side, some business owners in the report cited punitive agency inspectors who, instead of working with the owner to correct an issue, slapped the business with a fine.
Additional solutions don’t seem politically viable or aren’t effected at a scale that works.
A special tax for businesses in most of Manhattan eats into viability, too. In June, Mayor Bill de Blasio rejected the city council's proposal to alter commercial rent tax, an almost four percent surcharge on annual rent of $250,000 or more on businesses below 96th Street. As rents have risen, the tax threshold has stayed the same, and more businesses have become impacted. A bill (sponsored by Councilmember Dan Garodnick) that would raise the ceiling to $500,000 in annual rent didn’t make it into the final 2018 budget, though the item could be considered at a later date. If that limit were approved, the city would lose $52 million in revenue annually.
Zoning regulations encourage new development with huge storefronts that work for Chase and CVS but not for their independent counterparts. On the Upper West Side, though, neighbors are seeing mixed success from initiatives like a 2012 zoning change that limited storefronts to 25 feet, but don’t limit store size, as businesses are free to expand up or down as space permits.
But some advocates say these reforms don’t go far enough to stop business closures and the encroachment of chain stores.
“There is a crisis,” said Kirsten Theodos, cofounder of TakeBackNYC, an advocacy group for New York City small businesses. New York is losing 1,000 small businesses and 8,000 jobs per month. Theodos, who lives near the East Village, said all of this “fuels the hyper-gentrification and whitewashing of the city, a process that’s really accelerated over the past six years.”
Her group supports the Small Business Jobs Survival Act (SBJSA), a piece of local legislation that would set new rules around renewing commercial leases. Among other provisions, SBJSA would give commercial tenants, at minimum, a ten-year lease plus right to renewal and the option of arbitration to come to a new rent. The legislation is designed to slow, not stop, the rate of change in neighborhoods, and level the playing field for florists and bakeries competing for storefronts with Starbucks and Pottery Barn.
When the bill was first introduced in 2014, it had the support of 17 councilmembers—now it has the support of 26, or half the council. But in a city dominated by real estate interests, the bill is a nonstarter, Theodos explained. REBNY, the city’s largest real estate trade association, opposes the proposed rules, rallying around the idea that land values are subject to the “free market” and (incorrectly) deeming the rules “rent control.”
Even real estate boosters, though, acknowledge the downtrends in the market. According to REBNY, average asking rents in Manhattan this past spring fell in 14 of 17 of the borough’s top shopping strips compared with 2016 and record highs in 2014 and 2015. But the group maintains that a variety of factors set Manhattan apart from the suburbs, and grant the city a degree of immunity from experts’ dire predictions about the death of retail. In New York, REBNY says there are “strong market fundamentals,” including diverse food tenants, online retailers opening storefronts, and the eternal cache of a New York, NY address.
But to REBNY, doing well means collecting more rent. Fifth Avenue between 14th and 23rd streets (the Flatiron Fifth Avenue corridor) and Broadway between Battery Park and Chambers Street (the Lower Manhattan corridor) did the best, with ground floor rents rising by 18 percent to $456 per square foot in the Flatiron and 11 percent to $362 per square foot along the Lower Manhattan corridor. The report only looks at rents along main strips. Rents on side streets, according to the report, could diverge from the main drag; conversely, a gorgeous space on a prime corner may command greater asking rent and affect averages all along the strip.
It’s not only high rents and taxes that are driving businesses to close. Online shopping is slaying retailers big and small, in Manhattan and the suburbs and beyond. Right now, unchecked real estate speculation and limited protections for small-business owners mean that there is little protection against ultimately having a national bank and pharmacy on every corner.