Make no mistake, the market is tough. A dozen or more name-brand retailers have gone out of business in the last few years and more are teetering on the edge. Rents for premium locations have skyrocketed, close to doubling in the last ten years. Higher rents are one reason that generic mom-and-pop operations face more difficult times. A truth that is unpleasant for everyone but landlords is that occupancy costs will continue to increase and the smaller merchant will be squeezed the most. Larger retailers have the economies of scale to absorb these costs, and landlords will invariably continue to seek the national chains with the best credit. The nationals enable landlords to obtain better finan cing and to expect higher sales volumes. Very few landlords will turn away a national chain in the same category for a local concept, saying: “Mrs. Smith, you're a great dress designer, we believe in you.” After landlords have filled enough of their spaces with national brands, then they will be better able to gamble on smaller local concepts.

This harsh reality means that small retailers need to look at retail differently than they might have ten or 20 years ago, when a single shop in a nice location was a reasonable alternative. The fight for Grade A locations will become ever more intense. To play in Grade A space, the small retailer needs to take one of several approaches. Having a compelling differentiated offering is one way along with complementing other tenants and uses in a way that makes you attractive to landlords. Thinking in terms of a growth concept is one way— becoming a brand presence on the local level at least. Otherwise, the choices are financial: coming in with bigger deposits or paying higher rents, enough to overcome a landlord's doubts about your attractiveness.

One good bit of news for small retailers is that some mall operators are beginning to invest in startup retail concepts as a way of differentiating their malls, making them less generic. The investment can be advan tageous to both parties. The retailer gets financial resources and a good mall location, and the mall operator has an investment in a business that it can largely control through location, capital investment, and rent. Offsetting this positive development is the purchase of retail chains by mall or shopping center developers and the consolidation of major mall ownership by a handful of major companies. If a developer owns a certain concept, will it let a competing retailer into its properties? If a retailer rejects an unfavorable lease in one mall, will the retailer be locked out of other malls owned by the same company? The potential conflicts could be serious, and government intrusion into the industry is not unforeseeable.

Occupancy costs are not the only reason that margins for most concepts will continue to shrink. The “99-cent burger wars” continue among the price/value retailers in all categories. Amazon, though just beginning to show a profit, announced more price cuts as a way of stimulating business. Wal-Mart has moved aggressively online, raising an interesting scenario: Wal-Mart and Amazon may become the Clash of the Titans, or Amazon may become just another “small-town” retailer steamrolled by the Wal-Mart machine. Even before opening its online store, Wal-Mart sold more DVDs than any other company in the world, including Amazon. Is there enough room on the Web for two major discount brands? Stay tuned.

For Wal-Mart's physical stores, the question is one of growth, quality, and goodwill. Sam Walton's little country store, created to enable poor people to buy nice goods at decent prices, faces withering criticism for unrestrained growth, low wages and inadequate health care, and a host of allegations related to hiring, discrimination, and the environment. As the nation's largest employer, Wal-Mart is bound to be a lightning rod for issues related to employment, global trade, unfair competition, and growth. But the most ferocious resistance all over the country stems from its supercenters. Nearly twice the size of the already large previous stores, the supercenters take up four to five acres of space and require another twenty to twenty-five acres of parking. They are sometimes part of larger big-box developments that require as many as 60 acres, taking cinder-block-and-asphalt unsightliness to an epic scale, the epitome of the lament, “pave paradise, put up a parking lot.”

Even as they stay true to their core values, concepts must evolve with the times, with consumer needs, and with consumer desires and expectations. One thing consumers expect is different behavior from an industry leader than from a scrappy startup. It is one thing in 1962 for Wal-Mart to bring inexpensive shopping to a rural town. It is another thing 40 years later to bring visual blight to the open land next to a town or suburb. It is one thing to pay low salaries when you start in an impoverished region where other salaries are even lower. It is another thing 40 years later to be the largest company in the world and offer pay and benefits below the industry norm. Sadder still, Wal-Mart loses 46 percent of its 1.4 million employees every year. Someone in the company must realize that better pay and benefits would cost less than the staggering expense of replacing and training more than 640,000 people every year. Retention of experienced employees throughout the store would also improve the customer experience far more than the greeters out front, however friendly. Costco, the country's sixth largest retailer, pays its hourly employees above the industry wage. Perhaps it is only a coincidence that Costco has the greatest sales per square foot of any large format retailer and turnover of only 17 percent versus 46 percent for Wal-Mart. Costco sees long-term employee retention as one of its competitive assets.

Rather than scramble to address complaints on an ad hoc basis, Wal-Mart would be better served to go through the ideate/create/ execute process described in this book, re-examining the proper way to apply its core “heartland values” in the new age of retail. Remember that you can extend your concept only into the welcoming arms of your customers. How many communities have to fight the supercenters before Wal-Mart recognizes that customers welcome the value but not the huge, plain box in which it comes wrapped? Sam Walton went big in order to provide the first two benefits of retail: goods to customers and jobs to employees. For 50 years, that has been enough. But in giving working people good products at low prices, did Mr. Sam intend to antagonize America? When the first Wal-Marts were built, they were big and bright and spiffy—welcome additions to small towns with little economic activity. Wal-Mart's corporate size and its economic efficiencies have served its core value of improving the standard of living for its customers, but these are not the only ways of improvement, and low prices are not the only measure of the quality of community life. It is time for the company to fulfill the third role that retail plays: creating a sense of community. Wal-Mart should be a place where people want to gather, like Main Street on the old town square, as well as place they need to come for bargains. With this one change, Wal-Mart would solid ify its position as a committed local citizen instead of being perceived and resented as an uncaring absentee landlord.

Creative design, more on the notion of a village than a warehouse, can enable Wal-Mart to become in look and appeal the 21^st Century “town center” for shopping that the company already is in sales. Value engineering, the Kit-of-Parts approach, the company's buying power, and its magnificent inventory system can enable Wal-Mart to roll out the designs at a cost level in keeping with its mission. For a company that can bring to bear the scale of resources that Wal-Mart can, there is no question that community-pleasing design, scale, and execution are possible. Nor is there any question that this is the next step to improve each community's standard of living. It is a question only of imagination and will.

As Wal-Mart must change the visual and overall sensory experience of customers with its stores, every operator in the New Age of Retail must find new ways to engage the customer. The secret has to do with time—the real and perceived time experience by customers. Not too long ago, my wife wanted to redecorate our guest bath in anticipation of her mother's visit. We picked out a new mirror, a soap dispenser, a knick-knack shelf, among other items, and these selections led to us buying new linens. The store visit was high touch, and it was fun to choose the different accessories. This part of the retail experience was leisurely, as it should be. When I got home I discovered that the mirror was damaged. The problem meant another trip to the store, paperwork to fill out, and then a review of the bills in the following weeks to ensure a proper credit. This part of the experience could have been quicker.

As computer technology becomes increasingly woven into the fabric of retailing, smart operators will find ways to use new “in-store brains” to slow and improve the shopping experience while expediting the processing of payments, credits, and the like. Back-office technology will enable real-time replenishment of stock to reduce inventory costs and to ensure that customers have the products they want, customized as they need, when they want them. Front-office technology, such as virtual reality, will enable customers to “try on” more things, whether clothes or the arrangement of furniture or a home entertainment system in a room. Retailers will be able to “ping” customers away from the store on messaging devices to alert them to sales—the digital equivalent of Kmart's old in-store advertisements of a “blue-light special.” Wi-fi technology has already been a huge success for Starbucks and McDonald's and other retailers, enabling customers to connect wirelessly to their home or office computer systems while extending a break from the office. Growth opportunities exist for retailers that enable their customers to use cell phones and other digital devices to order food or drink as they approach the store and not have to wait in line. Consumers can already order takeout food online and have it waiting for them when they reach a restaurant. Soon, consumers will be able to order all of their commodities online—groceries being the most obvious category—and pick them up at a drive-through window. Established super markets are experimenting with home delivery; only technology will enable this “old-time” service to be cost effective.

In-store processing of purchases will become ever faster, a matter of great importance for volume retailers. Most people with a full shopping cart want to get out of the store and home as soon as possible. For hundreds of years, customers have had to bring their wares to a counter to be rung up for payment. More and more stores are going to self-scanning checkout, but most people use self-scanners only when they have to, to avoid long lines in front of human cashiers. Because the idea of self-scanners is to reduce labor costs as well as to improve service, retailers should consider offering a small discount to customers using the devices. The approach, which would be no more costly than coupons or a club card, would attract older customers on fixed incomes who otherwise might be disinclined to try new technology. Retailers might also consider redirecting some of the labor savings from self-scanners into improved customer service.

Efforts to ease customers into using self-scanners illustrate the difficulty that comes with attempts to change consumer behavior. Successful new concepts will build on existing behavior or expand on it in some way, and any concept rooted in the idea of changing existing behavior has a strong likelihood of failure. The change could involve location, hoping customers will drive out of their way to your shop; or time, hoping customers will try a category in a new day-part; or culture, hoping customers will try something totally outside their existing norm. Asking customers to drive in the opposite direction of their normal traffic flow is not a winning strategy. Developing an egg-based dinner concept, as opposed to a breakfast concept, would be tough. So would trying to convince people to eat quiche for dinner on a regular basis. American coffee shops can expand their concepts to include tea and scones, but it is highly unlikely that a U.S. retailer could create a stand-alone, tea-and-scones concept here. Americans simply do not drink much tea, in comparison to the United Kingdom and Canada, where tea is a tradition. In being original, you have to be sure that you are not the only one to whom your concept appeals.

One behavior that the small retailer wants to be sure to retain is the close interaction with customers. For a smaller, more intimate retail experience, the proprietor does not necessarily want to use technology to whisk the customer out the door. The communication at the counter is part of the intended experience, the way to say good-bye in a meaningful, brand-reinforcing way. The challenge becomes how retailers expedite the mechanics of purchase without short-circuiting the social interchange. The scanning and tallying of the purchase will become invisible. One day soon, typical retail customers will simply walk out of the store, and a scanner will identify all their purchase items, tally the cost, and automatically debit the person's store account or a specially identified credit or debit card on their person. However, the insta-scan scenario also means that retailers have to become more creative and more attentive (but not intrusive) during the sales process. In other businesses, salespeople freed of paperwork quickly shift to more value-added services and analysis. The same will happen with retail employees who are no longer trapped behind the counter. Functioning as consultants instead of cashiers, sales staff in the future will need to be better trained and to be more polished to provide more personal service. More human touch will need to occur during the sales process, rather than at the end of it, to seal the deal and encourage a return. The stop at the counter will not be needed to make a personal connection unless the stop includes additional services, such as gift wrapping. Every retailer will need to grapple with how technology fits into the vision and values of what the brand can deliver. The dynamic is to under stand how to connect technology directly to sales in a way that speeds transactions, or indirectly by strengthening the communal aspect of your establishment. Technology should not be considered strictly in terms of efficiency but in terms of how it will shape the customer experience.

Technology will be a small but important part of retail's future. The greater part will come from a redefinition of mission, or from a return to retail's original mission. Retail, in the form of merchants selling to individuals, is as old as human settlements. The bazaars of many cities—recreated in the U.S. as farmers' markets and “Saturday markets”—are little different today from those of the Middle Ages; and those of the Middle Ages were little different from those beneath the walls of the earliest Stone Age towns. You would be hard-pressed, in fact, to state with any certainty whether the retail stalls sprang up around the city walls, or the city rose around retail activity at humanity's earliest trading route intersections or river landings. No doubt a department store in some form was doing a bustling business in Babylon or Beijing thousands of years before the Bon Marché, the first modern one, began operation in Paris in the mid-1860s. Retail plays a large part in the economic activity of every nation. Consumer spending has been 70 percent of the U.S. Gross Domestic Product every year since 2000, and was never lower than 66 percent in the 1990s. Most of that spending is at retail.

Further, trade has always been an inextricable part of the human adventure. Cinnamon, at one time the rarest of spices, made its way from Malaysia to the courts of Persia more than 3,500 years ago, eventually reaching Greece and Rome. Two millennia later, the great Age of Exploration was not a scientific exercise, but a search for faster, cheaper, safer trade routes. When Columbus sailed West instead of East, he did not seek the New World, but a direct route to the Old World, unencumbered by the taxes and duties imposed by other nations and the baksheesh (“tips”) required by pirates, gangs, and other “entrepreneurs” along the way. The relationship between commerce and national power brings up another point. When clans, tribes, or cultures meet, one of two things happen: They exchange goods or bullets. Mutually beneficial trade has always been a pleasing alternative to war.

Commerce is as old as civilization, perhaps the main impetus for civilization, and its benefits are both simple and profound. At its heart, retail is about three things: to provide a product or service to people; to provide jobs; and to build a community or create a new community from two disparate ones. This is where the future of retail lies.

Whether someone is buying eggs in a dusty village on the edge of nowhere or a silk dress in the most expensive store in a major city, retail is the fundamental way people obtain goods. Retail is also one of the ways many people are introduced to the work world. Whether it is emptying boxes and restocking greeting cards for Mr. Levy on the weekends, surviving the rush hour at McDonald's, or taking an entry-level job on the floor of a clothing shop, retail has always been a way for new workers to develop a work ethic, increase interpersonal skills, and learn the value of money. A few years ago, a young man got a job with a local retailer. He was personable and responsible once he got there, but he was not always punctual. He could not understand what the big deal was about being a few minutes late, or missing part of his shift. When he was promoted, his world changed. Having to find replacements or cover for the missing employees, he could not believe that employees showed up late—and sometimes not at all. For the first time in his life he got some perspective on personal responsibility, on how the actions of an individual affected those around him. It is an age-old lesson that each of us has to learn. A training ground for most other professions, retail is also a wonderful career in itself, whether your interests are in selling, operations, finance, design, or the creation and development of an entirely new concept.

Retail is also one of the primary ways people interact socially, which is why retail must do more than move merchandise. The first Roman forum, a shop-lined marketplace, evolved into a major city center with areas for games, political and religious gatherings, and eventually civic functions. Other market towns served as the Wal-Mart of their era, drawing people from miles around to obtain the goods they needed and increasing the social cohesion of the region. Coffee houses were the gathering places for the American revolutionists and, in different coffee shops, their Loyalist opponents. The idea of retail creating a sense of place, of becoming a gathering spot, a way to bring people together, is neither modern nor a marketing shtick. It is the essence of the retail experience. At a time of many artificial concepts, the creation of a sense of place is an important way to differentiate your brand from others because it is integral to the human experience.

It is no stretch to say that every retailer's vision should be to improve community life. Offering a deli sandwich on a street corner or enabling a family to buy a DVD or a gallon of milk without driving 20 miles helps make life a little more pleasurable for the people of the neighborhood. When you sell things that people need, at a fair price, you change the world for the better, just a little bit. Other human touches build on these positives. Your act can be as simple as an array of flowers by the front door that brightens the day of customers. It can be as complex as support for community concerts or education programs. Ben & Jerry's Homemade, Inc., the socially conscious purveyor of frozen desserts, operates a dozen PartnerShops around the country that hire disadvantaged teens. The chain waives its $30,000 franchise fee for the nonprofit organizations that run the stores. PartnerShops retain their profits to support their other programs. Profits tend to be somewhat less than the usual franchise because of added training costs, but the value of gainful employment to the teens and their cities is immeasurable.

Small retailers can give back to the community in big and small ways—offering time, in-kind goods, or money to civic projects, supporting community events, or sponsoring a kids' baseball or soccer team. Especially for the small entrepreneur, the best way to separate yourself from regional or national competitors is to bind with local causes in some form, shape, or manner. It's good for the community. It's good for business. It's good for the heart.

Improving community comes with improved designs that replace the generic, ho-hum looks of so many retail concepts. We know that the population will continue to grow, to infill, to expand. We as retailers have a tremendous opportunity to reshape the urban and suburban landscape through just a small application of creativity. Urban areas already have many interesting architectural features. The issue is to take advantage of them. Inner cities, the most blighted areas, have the most economic and aesthetic potential, if only we look. Suburban areas should be a fresh canvas for interesting retail design, but they almost never are. It is not clear who decided that suburbs should be featureless, or that sophisticated suburban residents would prefer their neighborhood businesses to be lacking in visual and architectural character. A major intersection in Woodinville, a suburb of Bellevue, Washington, makes the point. An architect can come up with a typical mini-center design without much thought or variation on what has come before. The conventional design has buildings on three sides and a large, visually unpleasant parking lot in the middle. It would be convenient for cars but not pedestrians. It would look no different than a thousand other small strip centers. And it would sail through the planning pro cess. A slightly altered design put a functional street through the center, encouraged people to walk, and created gathering places, such as the amphi theater. Voila, a strip center becomes a village. See Figure 17-1 . However, the people-friendly design would have more trouble getting through the planning process than a people-averse design. As we saw in San Francisco, the reason is that zoning rules that restrict tacky development are written in a way that also restrict artful development. The result is the safe, cheap, cookie-cutter look we all know so well and unfortunately have grown to accept. In a perfect world, planners would welcome innovative design. In the real world, developers need to work with—and sometimes challenge—planning commissions, politicians, and local citizens. These obstacles can be considerable. It is hard to blame developers for usually taking the path of least resistance.

Figure 17-1. A typical site plan (top) for a small shopping center in Woodinville, Washington, creates disconnected buildings separated by parking lots. The design encourages quick visits by automobile. A more thoughtful design for the same center (bottom) includes 150 residences as well as retail shops. Pedestrian access throughout the entire property, an amphitheater, a commons (bottom right), and other gathering spots create a unique sense of place that will increase sales because the village-like atmosphere encourages people to walk, mingle, and linger.

Change begins with the retailers and their designers pushing for something better and opting to lease space in well-designed, pedestrian-friendly centers. The extra time and investment is worth it, evidenced by the success of mixed-use urban developments that promote pedestrian-friendly open spaces, compatible retail concepts, and supportive residential use, which might be condominiums, town homes, or single-family housing. Mixed-use developments are highly adaptable to local environments. Some have retail and light commercial use on the first and sometimes second floor and residential use on the upper floors of a single complex, or in a remodeled building originally built for another use. Others have residential units adjacent to commercial and retail complexes. Parks or greenbelts are common. Such designs reduce parking needs and vehicle travel, contribute to the local economic base, develop a close-knit community, and encourage development in existing areas over vacant property on the edge of urban areas. Mixed-use development has turned a grungy and largely vacant industrial district into the vibrant Pearl District in Portland, Oregon. Minneapolis has created mixed-use developments near two light-rail stations, in an entire city block near the railroad depot, in an historic district, and along the Mississippi River. The river development features 53 rental units, of which 12 are affordable housing; three town homes for sale to private individuals; and about 8,000 square feet of commercial space including a restaurant, a coffee shop, and one small retail shop—a project that is human in scale. Other favorites of mine include Mizner Park, an early example of mixed use in Boca Raton, Florida; Santana Row in San Jose, California, a development across from a major mall; and The District, in Henderson, Nevada, a higher-density area from which residents can walk out to a shopping street. Such examples are still uncommon, and most require some sort of municipal support in the form of tax breaks or development dollars. However, all of these ventures add to the livability of the city while creating unique locations for retail activity. City planners—please wake up!

Creating a compelling brand begins with a founder's vision. “So bitchin' it hurts” is how Oakley phrases it. The core personal values translate into company values. (For Oakley, the vision began with Jim Jannard's desire to create functional, wearable art combining cutting-edge technology and design. The vision has led to a range of outdoor-related products that have garnered more than 800 patents.) Seldom do those values involve money, or at least not the quick buck. Of the many successful companies in the world, almost none mention profit as part of their mission statement. They understand that profit flows naturally from fulfilling the mission. A reasonable return is implicit in all business, including retail activity, and this book underscores the importance of honing a profitable economic model. But if profit is your raison d'être instead of being the reward that comes from providing a value to customers, then you are in the wrong career. If all you want is a big paycheck, other jobs are far less aggravating than running a retail business. You have to love what you sell—dresses, bikes, plants, medicine, cars, boats, watches, chocolate sundaes, holiday ornaments, and so on. The product doesn't matter, only that you love the concept. If you don't love retail, stay out of it. Good retail is high touch, high energy, high involvement. Without your commitment, you, your employees, and your customers will all end up feeling empty.

Retailers who treat this business as a job instead of a mission can discourage others who see a richer meaning in its activities. But then you meet some of the creative people who have graced these pages, people who have the imagination and courage to do something new and the willingness to bring in the right talent to accomplish it. Such people reinforce my belief that retail is exciting, fun—fresh! The choice for the retail industry is the death spiral of commoditization and price wars or the life spiral of creativity, quality, and differentiation. To push the envelope, you have to actually pilot the ship and engage, to embark on bold but eminently achievable steps that will bring in the New Age of Retail. Retail has always been detail, but the New Age is about innovation and execution, with attention to detail in both.

Values in mind, the would-be retailer must make no little plans, must go long, must own Main & Main, and must push the envelope when it comes to innovation. The retailer must ideate the concept in as large a way as possible, both in terms of defining the concept and defining the size and location of the market. Early on the retailer must create the strategic plans and bring in the strategic leaders who can create and execute on the concept. Entrepreneurial zeal cannot overcome a sloppy approach to building a business; the retailer must have a solid economic model and a disciplined growth strategy. Part of the strategy includes a locationing process built on the most up-to-date scientific analysis, beginning with the national market and working down through major metropolitan areas, the trade zones within those areas, and finally to the one physical location that best maps to the concept.

The retailer for the New Age is the one who can create a gathering place, an emotional touchstone for an increasingly impersonal world. The New Retailer can create or redefine a concept, give it high-touch element, an intimate experience that takes retail back to its origins and also propels it into the future. The New Retailer can engage customers with physical design and visual appeal, increase the entertainment level, use technology to humanize service as well as to expedite transactions, and take shopping to a higher level of personal satisfaction. The New Retailer can constantly turn inward to refresh the core values while turning outward to find new ways to express those values. The New Retailer can create an enduring brand by seeing through the eyes of the customer and building the brand presentation—and everything that supports that presentation—in response to what the customer sees. All of these steps are necessary for the retailer to create and sustain a brand. In today's world, brand is paradoxically one of the most fleeting values and one of the most permanent values in the marketplace. Well-informed consumers have no qualms in rapidly switching from one brand to another, whenever products become similar in quality. At the same time, the company that shows its willingness to constantly innovate and to properly treat its customers can maintain market leadership and brand position. A direct, personal connection with the customer—a meaningful engagement—is the kind of differentiation that few retail competitors will be able to match.

Retail has never been an easier business to enter or a tougher business in which to succeed. Only people with core values and a strong sense of mission need apply. But for retailers with a passion for the business, the desire to take on a challenge, and a sincere willingness to improve their communities, only one choice is possible, and that's Goethe's: “Boldness has genius, power, and magic in it. Begin it now.”