Retail: It’s a New Reality
As municipalities all across Arizona have seen their general funds strongly impacted over the last several years due in part to significant drops in sales tax revenue, the importance of a vibrant/strong retail sector has once again taken on a prominent role.
With Arizona cities in some instances relying on retail sales taxes for up to one-third of their general fund revenue, there is today a quiet, but forceful emphasis – particularly in rural areas – being placed on economic development professionals to make sure their programs help retain and attract new retail businesses to their communities, with the progressive municipalities leading the way.
In addition to the general fund ramifications of retail sales tax collection, another significant new reality of the retail sector has been recognized. Todd Sergi, co-chair of the AZ/New Mexico Alliance for the International Council of Shopping Centers (ICSC), said the stigma of retail jobs being associated only with unattractive, part-time or low-paying jobs is changing.
“With bankers, pharmacists, medical professionals and other non-traditional retail businesses more commonly becoming a part of the new, redefined mainstream shopping environment, the retail sector is now creating well-paid jobs not traditionally seen before,” Sergi said.
The recession in Arizona provided examples in many instances of what a well-designed, well planned center does, or does not, look like. Successful retail centers have common themes. Municipalities have realized what it takes for retailers to have success in their cities, including ample parking, un-obscured visibility and easy access from the surrounding streets and easy-to-see signage. These elements are routinely found in the more highly occupied centers that fared better through the economic down cycle.
Sergi said, “Everyone realizes that a hard-to-get-to retail center hidden behind large over grown landscaped settings with bad signage and limited parking is a lose-lose. We don’t need more empty buildings.”
Fortunately, the design and planning barriers for retailers to enter a market have been noted. Lessons were learned. Statewide, both elected leaders and municipality staff have seen first-hand examples where dated or onerous policy cost their communities opportunities for new sales tax revenue. The demand and competition to attract those businesses, in some instances, sent potential new entrants to neighboring communities viewed as more reasonable and forward thinking.
The retail industry has been adapting, as well.
Garrett Newland, vice president of development for Macerich, said we are seeing these adaptations every day with continuing anchor changes and new retail concepts.
“Retail is reinventing itself right before our eyes,” he said. “What malls look like today is vastly different than what we saw in the ‘80s and ‘90s and it doesn’t matter if it’s a super-regional mall or a corner strip center.”
With empty stores and some poorly designed centers dotting Arizona’s retail landscape, a number of existing centers will have to be retrofitted, or possibly redeveloped, to make them assets to the community that can be counted on to generate needed sales and/or real estate tax revenue.
The evolution of retail e-commerce is also changing the face of retail.
An ICSC report recently indicated that retail e-commerce has grown seven-fold since 2000 and at its current growth rate will double again by 2016. Legislation that requires e-commerce retailers to capture sales tax dollars for government coffers to some degree may level the playing field for the bricks and mortar retailers.
But even so, to remain competitive the storefront of tomorrow is changing. Retailers now understand the need to integrate their physical and on-line presence, how to balance the product search, selection, transaction and delivery processes desired by today’s consumer and the ability to offer a variety of delivery and return options.
Michael P. Niemira, vice president, chief economist and director of research for ICSC, said the partnerships being established between the private and public sectors, the ability of retail to adapt and meet the needs of today’s customers and the willingness of economic developers to embrace retail bode well for the future economic success of each of our communities.
Eric Larson is president-elect of the Arizona Association for Economic Development (AAED) and board chair for the Scottsdale area Chamber of Commerce. AAED and ICSC will co-present a retail symposium Jan. 8 in which these topics will be discussed in detail by those quoted and others, as well as presentations made by representatives of new/expanding Arizona retailers. For information, call (602) 240-2233 or visit www.aaed.com.