The sixth annual Franklin County Retail Summit presented by the county and the Columbus Chamber of Commerce highlighted the important role retail plays in Columbus’ economy.
“Retailers are the pulse of the community’s economic vitality and strength,” says Franklin County Development Director Jim Schimmer.
Sales tax generated by the county’s retailers help fund projects that lead to a better quality of life for Columbus’ residents.
During the Summit, Franklin County Commissioner John O’Grady took to the stage to discuss the findings in the 2016 Franklin County Retail Report.
“The 2016 Retail Report shows that competition from e-commerce is not slowing, but that the local retail sector is resilient; businesses are hiring and investing, and consumers are spending,” the report states. “We know that supporting innovation and even risk-taking in retail will continue to be important to supporting the Central Ohio economy.”
Highlights from the report include:
- Retail-based sales tax revenue grew by 7.3 percent from 2014-2015, from $145 million to $156 million.
- Accommodation & food and other sectors are shifting to larger portions of the Franklin County tax base, with revenue from retail trade falling to 54 perfect of the total, which is down 14 points from 2006.
- From a peak of 13.2 percent in Q2 2009, retail vacancy rates have steadily decreased to 6.6 percent in Q1 2016, while rates have hovered in the $11-$12/square foot range since mid-2011.
- E-commerce continues to rise, steadily increasing from 0.9 percent in 2000 to 7.3 percent in 2015 according to the U.S. Census Bureau.
- Despite an economic recovery, retail employment in Franklin County remains flat, and a quarter below its peak in the early 2000s, however, reflecting the boom in e-commerce, employment in transportation and warehousing continues to grow to nearly pre-precession highs.
E-commerce continues to remain a changing force, but, “I remain convinced that local retailers will continue to find ways to compete in the changing digital marketplace,” O’Grady says. “Online sellers cannot match the expertise and level of service found at a local shop.”
The increased density of retail is expected, a point reflected in the following speaker, Yaromir Steiner’s presentation, with areas like Downtown and Clintonville continuing to grow, and Franklinton and King-Lincoln poised for explosive growth.
Steiner, founder & CEO of Steiner + Associations and chairperson for Insight2050, discussed how the predictions in Insight2050’s report are already changing. Instead of adding 500,000 residents to Columbus by that mark, new estimates reach 750,000 – 1,000,000.
Insight2050 ran four growth scenarios for how Columbus could handle the influx in population, spanning continuing to grow as it has been, to focusing on more urban infill.
As for land consumption, “If we did it like in the past, for half a million people we are adding, we will need to use 495 square miles of greenland,” Steiner says.
By focusing more on urban infill, that number could be squeezed down to as little as 15 square miles. Filling in versus sprawling would also save money and taxes and lower cumulative transportation.
“All the variables are much more favorable if we can contain our growth close in rather than sprawling out,” Steiner says.
But what does it all mean for retail?
Steiner outlined three factors impacting retail from a national to local level, straying away from the oft-discussed rise of e-commerce, and instead focusing on income inequality, millennial spending and the quest for placemaking.
Income Distribution Shifts
A topic that elicits many discussions, income inequality is on the rise. Steiner explains that from after the war until about 1980, the top 10 percent earned 35 percent of the income. Today, the top 10 percent are earning about half of the American income – that’s a 15 percent shift in GDP from the bottom 90 to the top 10.
“We are moving from that era of the mall – the Macys, the Gaps, the quintessential places for middle-class Americans spending their paychecks – to a more efficient distribution format,” Steiner says.
It’s the Gap’s creation of Old Navy, a shopper heading to Marshall’s instead of Macy’s and options like Nordstrom Rack. Steiner explains that the top 10 percent can only buy so many things, while the other 90 percent are going to find a way to get the goods they need – and do it at a lower price. And so the market responds.
“A 30 year-old millennial in 2015, today, has a very different expenditure pattern that a 30-year-old baby boomer in 1985,” Steiner says.
Phones, school debt and the witnessing of tough economic times form a different mentality – and availability – when it comes to spending.
“About $1,100 a year automatically goes to that phone,” Steiner says.
While millennial are one of the best educated generations, that’s a group of 18-35 year-olds responsible for paying back $1.2 trillion in student loan debt. Coupled with today’s necessary electronics, that’s thousands of dollars removed from a millennial’s yearly budget.
“The millennial generation is a mirror image of the baby boomers, that is they witnessed tough economic times,” Steiner adds.
Millennials saw parents worry about losing jobs, losing houses and more, making them a frugal generation.
Steiner says there’s good news though – as their income grows, that more luxury, want-based spending will catch up. However what defines luxury for a millennial is also changing. They can’t afford the luxuries a baby boomer did, but are willing to spend serious dollars on things like craft beer.
The Quest for Placemaking
Retail has two formats – need-based shopping and want-based shopping.
“Need-based shopping comes from the first dollars in the household,” Steiner says. “They are the basic dollar. Every household has need-based shopping. Want-based shopping, on the other hand, comes from the discretionary dollars, and some homes don’t have discretionary spending.”
Need-based shopping is characterized by rational criteria – like getting the most bang for a buck, local access and cost. Want-based shopping is based on aspirational criteria like objectively justifying a purchase, regional access and sales.
Retail developments need to decide what they are going to be. Are they a location to serve the basic needs of the surrounding community, or a spot that adds value and promotes a lifestyle within the community?
Locally, regionally and nationally, “There is an increased demand for urban retail environments that provide a sense of place to the community – want-based environments,” Steiner says.
What does it mean?
Steiner says that as the demand increases to form a sense of place, communities can leverage their zoning practices to create such environments.
“You are going to see ways of converting it into more dense environments,” he says. “Many of these projects are going to become mixed-use.”
And if any word has described development as of late in Columbus, it’s mixed-use.
Read more from the Franklin County Retail Report here.
Visit getinsight2050.org for additional information on Columbus’ growth scenarios.
Photo via Columbus Chamber Facebook page.