Corporatization of Boston? (Newton, Franklin, Stow: coupons, eyeglasses, home)

[chicagoliz]

It is sad. While there is a greater to commitment to shopping locally here in the Boston area, it is still, I'm afraid, ultimately a losing battle. I see this even in the "touristy" areas -- you go to Boston, NYC, Philadelphia, Chicago, Atlanta, etc., and the same shops are there. Why bother to travel if the shopping strip is composed of all the same stores and restaurants you can go to at home? And even in the gift shops, the little tchotchkes available for sale aren't from local crafters or artists. They're stuff that's made in China and sold all over the world.

[jayrandom]

Originally Posted by timberline742

Sure it can. Individual locations don't matter near as much as the brand at large, especially when you're talking about locations of prestige (say Times Square), or a good where you're trying to get someone hooked on early and there is a good demographic for it (often true in college areas), or your competition is there (Verizon is there, ATT is there, so we, Sprint, must be there).

Do you have experience with this? I'm not in the retail industry, but in my industry every project is expected to pay for itself at some point (even if it never actually does). I can't imagine a someone in a company saying, "we're going to lose money, but we'll make it up in prestige" without someone else asking "what budget does prestige come from?".

I mean maybe I could buy some high-end luxury brand's flagship store on Newbury St., but CVS doesn't need or really make use of prestige. I think it would make much more sense that they are competitive in locations where mom-and-pop shops aren't for reasons other than "they're just losing money".

[timberline742]

Originally Posted by jayrandom

Do you have experience with this? I'm not in the retail industry, but in my industry every project is expected to pay for itself at some point (even if it never actually does). I can't imagine a someone in a company saying, "we're going to lose money, but we'll make it up in prestige" without someone else asking "what budget does prestige come from?".

I mean maybe I could buy some high-end luxury brand's flagship store on Newbury St., but CVS doesn't need or really make use of prestige. I think it would make much more sense that they are competitive in locations where mom-and-pop shops aren't for reasons other than "they're just losing money".

Yes


Then of course, even if a location doesn't make money, and will never make money, one can, um, find or create data to use a specific location as a big loss leader of sorts. People (to varying degrees depending on person and market segment) have certain levels of brand loyalty, and places with good demographics can be used to get people into your brand and while you lose money at that location, they'll not stay there (in that neighborhood) forever. They move, and hopefully continue to use your brand. So while that location loses money, the company is investing in creating a long term customer, and you can often come up with metrics to justify the continued existence of the location.

[semiurbanite]

Originally Posted by doghead

But eventually, JP and Somerville will change, don't you think? The landlords probably see opportunity ahead and the chance to raise their rents tremendously and are hoping to rent to CVS or Walgreens to make a killing. But for right now, I see what you are saying. I know this has been happening in NY for many years too but it's so glaringly obvious now. It's like global warming--you don't notice the small changes until there are superstorms and weather extremes. And then it's too late.

Possibly, but I know Somerville actually subsidizes rent for independent shop owners in Davis Square in an effort to not become the next Harvard Square.

[GeePee]

I know it's pretty much impossible that the Nike town on Newbury makes a profit at that location. I would be very surprised if it did.

[mdovell]

Kinda sorta.

I'm no quant or MBA but I have worked in retail and now in the public sector. Basically, there's razor blade theory. You sell a product at or below cost to make up with a supplemental one (i.e. razor blades). The technology works the same way. Apps have zero marginal cost but they are pure profit. Eventually, a ratio is established between the software to hardware to see how much it takes to break even. I can tell you that back in the 80's companies were willing to take a loss for a few years.

I worked for one company that wanted to buy out part of another not to actually get it but to prevent another company from getting it. Some companies simply don't have the worth of current product but patents. HP went on a spending spree over the past few decades. There is a ton of intellectual property there that could be developed that pretty much assures they'll never go bankrupt. Of course, this also brings up patent trolls. Those that make a patient and not make a product and sue the pants off of anyone that tries.

Not all products and services are rushed to market. Movies for example often times are finished but if they see a huge blockbuster coming out they'll hold off. Walking Dead on AMC actually, pauses for about six weeks due to the NFL playoffs.

As for locations you also have to remember Boston has a fair amount of non profits so they aren't making any real profit just revenue for employees (no shareholders or stock). On a side note I had a coworker long ago that worked at Walgreens. He said the one in Boston pays $30,000-$40,000 in rent A MONTH! Keep in mind that's a flagship location and two floors. It stands out vs CVS confirming what timberline said about NYC.

Malls get odd. I know of a dying one where Gap I think pays just $200. the mall begs them not to leave. Another store I heard supposedly pays a rental income tax which I think is horrible. The more the store makes the more in rent it has to pay. Not even sure if that's legal..

[doghead]

To respond to someone's post about this being a middle class gripe about aesthetics, I don't think it is. I don't have much money--I hate going into the big box stores with everything being poor quality and made in China. I always thought the cities, like NY, would have more interesting stores, even if not mom and pop, just not chains. I can't believe the number of CVSs and Walgreens in Manhattan--there seems to be no marketing strategy or putting the stores where needed.

[chicagoliz]

Originally Posted by GeePee

I know it's pretty much impossible that the Nike town on Newbury makes a profit at that location. I would be very surprised if it did.

There's a Niketown on Chicago's Mag Mile, and I always assumed it was essentially part of the marketing budget, rather than a store that was expected to generate a profit.

[jayrandom]

Originally Posted by chicagoliz

There's a Niketown on Chicago's Mag Mile, and I always assumed it was essentially part of the marketing budget, rather than a store that was expected to generate a profit.

Originally Posted by mdovell

As for locations you also have to remember Boston has a fair amount of non profits so they aren't making any real profit just revenue for employees (no shareholders or stock). On a side note I had a coworker long ago that worked at Walgreens. He said the one in Boston pays $30,000-$40,000 in rent A MONTH! Keep in mind that's a flagship location and two floors. It stands out vs CVS confirming what timberline said about NYC.

I can believe that one or two flagship brand stores are there for marketing. Nike makes most of its money selling its shoes to other stores who then sell them to people. Same for a lot of the really fancy branded stores in Newbury St. that are pushing a brand that's generally sold in other stores.

What doesn't make sense to me is something like CVS having a bunch of loss-leading entire stores. CVS is a retailer, not a retail brand. You don't look on Amazon for CVS products. There's no way that all those stores in Manhattan are there to push the brand, they have to be making money. Is it hard to believe that really high rents are correlated with really high traffic, which translates into really high sales? I guess I'll have to look at the CVS and Walgreens annual reports.

[chicagoliz]

I think the number of CVS locations in Manhattan are related to them not wanting a competitor to open up there. I remember back in one of the Chicago suburban areas, there was no Home Depot in the area because every time a space became available that was suitable, Lowe's would rent it. So there were several Lowe's locations within a fairly small geographic area but no Home Depots. I'm sure a store like CVS would do the same, although on an even bigger scale. I think a lot of people will just go to the drugstore/pharmacy that's closest to them, even above being brand loyal. It doesn't make a whole lot of difference to me if I go to a Walgreens or to a CVS, so if one of either opened up on the corner closest to my home, that's probably where I'd go.