26 November, 2018 0 Comments

Amazon & Main Street

November 26, 2018 By Leave a Comment

Is Amazon gunning for Main Street?

So I’ve been doing a lot of thinking lately about Amazon.com.

The e-commerce giant has been all over the news lately finally naming two winners to share the spoils of its H2 Headquarters quest and dominating Black Friday and Cyber Monday sales.

I’ve long wondered about the pros and cons of incentives but my reading about the deal and Amazon’s business model led me to wonder and worry.

What are we doing?
 Is Amazon growing too big for our own good?

Has Jeff Bezos created a monster that taxpayers in Virginia and New York are subsidizing?

What does this mean for Main Street?

Then I read an interview with Starwood Group CEO Barry Sternlicht on Bisnow Media and my gravest concerns were verified.

Here’s a quote that ought to make us think.

“I was super disappointed in the cities they chose. Neither city needed them. And the fact that New York is in an opportunity zone and they got $5.5B of credits for the $5B of investment. I’m not a fan of the gifts. I mean, really? Amazon, a $1 trillion company doesn’t have the resources to build a plant? They need inducements? A $1 trillion company. And by the way, Amazon’s job these days is to put most everyone else out of business. So you’re facilitating that. Mom and dad can’t get a $5B tax break to expand their dry cleaners.

 

If you’re Amazon and you want to be a responsible corporate citizen just say, ‘No. We can do this on our own. We’re big boys. We’re worth $1 trillion. We’ll build these plants on our own.’ Why not go to a city like Atlanta or Miami, and why pick some place that doesn’t really need you? And those are congested cities, particularly New York, and the fact that it’s in an opportunity zone so they’ll never pay taxes on the building and land. I find it abhorrent. I think it’s just awful. It’s like a free headquarters. Why doesn’t somebody give me a free headquarters?”

Here’s another one that ought to give you pause or maybe hives.

“Amazon was fine when they helped little businesses survive, now they’re actually going after little businesses. And that’s not healthy for this country. You’re creating a monster. Now you’re funding the monster to destroy mom and dad’s businesses. That ain’t a good deal.”

The coup d’grace was Sternlicht’s next set of sentences:

“The endgame for Amazon is to wipe out the main streets of America. Maybe if the consumer is so busy he’s OK with that. But I can assure you they don’t know the consequences of what they’re doing. Those commercial businesses along main street pay the real estate taxes that fund schools and if they go away, and most assuredly they are going away, then taxes on individual homes will have to go up to pay for the support system.

 

I don’t think the average person spends a lot of time thinking about that. It’s really convenient to have them deliver a bicycle pump to your house that costs $20 for free in an hour. By the way, that’s predatory pricing. In the industrial commodity complex if you sell aluminum below the cost of consumption of aluminum, it’s called dumping and it’s illegal. They’ve been allowed to get away with that forever. They’ve lost more money in shipping than they made in the margins on the goods that they were selling. That’s predatory pricing and they were never called out on it. In my view, what they’re doing is illegal, and it crushed mom and dad. How can you compete with that?

 

The endgame where the consumer will get really crushed is when my little store that I used to go to buy my pump is out of business and Amazon will charge me $80 for a pump and $200 to have it delivered. The government put restrictions on the sale of vaping for teens. That’s the government looking to the future and saying it’s not good for teenagers. The government could look to the future and say, ‘You’re going to destroy America as we know it today, and we can’t let that happen.’”

Wow….

In the interest of full disclosure, I buy frequently from Amazon. Like everyone else, I enjoy the convenience, the vast selection and the ability to shop prices. Companies that I work with do lots of business on the Amazon platform and it has added to their bottom lines and our ability to access consumers throughout America.

But I do worry about what all of this is doing to Main Street. In Delray, we have an interesting dynamic, high real estate values which lead to high rents and a shifting landscape which makes it hard for independent retailers to survive. These conditions lead to vacancy, which isn’t good for a Main Street.

But I also don’t think it makes any sense to long for the good old days or wish that technology is going to retreat. It’s not.

Retail—at least as we knew it– is over or at the very least highly challenged.

Sure there will be stores, but successful retailers will have to carve out a very distinct niche, learn to be “experiential,” employ a digital strategy and or exist in high traffic areas. It’s possible to succeed, just not easy or obvious anymore. And frankly—as the son of a retailer—it never was easy.

Still, while it seems counterproductive to wish away the likes of Amazon, there are some big issues that we need to talk about as a society.

If retail fails or shrinks considerably (and that’s what’s happening), it will have an impact on sales and property taxes which fuel local government.

Real estate on and off Main Street will have to be rethought and reinvented.

There’s peril and opportunity in change, the challenge for leaders and communities is to make you maximize opportunity and hedge against peril.

P.S. the next article I read on Bisnow was an interview with Jorge Perez, CEO of Related Companies. It was on sea level rise and included this quote: “Sea level rise is something that is going to hit us all.”

Yes it is…and that’s a thought for another day. We sure do live in interesting times.

 

 

14 November, 2018 0 Comments

Keep Your Amazon Headquarters; Build Your Own Ecosystem

November 14, 2018 By Leave a Comment

NY is paying $61,000 per job and Virginia is shelling out $796mm in tax incentives to land Amazon’s second headquarters.

I saw an article in the Tampa Bay Business Journal recently that caught my eye.

The headline was a show stopper for those of us who care about economic development and the use of public dollars: “Incentives are becoming less important than workforce.”

Which is another way of saying that today—maybe more than ever—talent rules. And the cities and regions that develop, nurture and attract talent will be the cities that win.

The Business Journal’s headline may sound funny in the midst of perhaps the biggest incentive gusher ever which was the pursuit of Amazon’s H2 headquarters and its promise of 50,000 jobs and billions in economic impact. Congratulations to our friends in Crystal City and Long Island City: the two winners of the Amazon sweepstakes who will split the prize.

But even amidst the gaggle of mayors who threw incentives Amazon’s way, the smart guess was that Amazon would choose a headquarters where executives believe they can hire from a deep pool of talent. Northern Virginia and New York City are both regions rich in tech talent.

But also playing into the decision was Amazon’s desire to be in a city or region where today’s and tomorrow’s workers will want to live.

I’m a passionate student of economic development and it’s endlessly fascinating to me how cities and regions work or don’t work.

I think the most successful places practice economic “gardening” which is an effort to grow your own companies rather than throw money chasing corporations that oftentimes take advantage of cities by threatening to leave if you don’t ante up.

If you grow your own and create an environment where companies would be foolish to leave, you won’t to have worry that someone else will steal your jobs by waving checks at CEOs.

So how do you create an environment conducive to economic gardening and how do you keep the garden healthy and sustainable?

I like the analogy of threads—you have to knit a fabric and build a community by adding to– not tearing at –the fabric of your city.

Threads include: good schools, a good support network for parents, strong and safe neighborhoods, a clean environment, great parks, recreational opportunities, a range of housing options, good transportation networks, strong and ethical governance, business friendly regulations, a people friendly or tolerant atmosphere, abundant art and culture, a sense of place, efficient and competent local government, great health care and the list goes on.

If you build a strong fabric and create a place that is brimming with opportunities– both economic and social—over time you will create a dynamic and sustainable environment that generates jobs by keeping and attracting talent.

Consequently, if you tear at the fabric by pulling threads, chasing away investment, making it hard to get established and hard to get rooted you will send a message to go elsewhere. In those types of places we send a clear message. We are essentially telling our children that ‘yes we raised you here, but there’s nothing for you here so go elsewhere as soon as you can.’

And we will tell outsiders that their investments are better spent elsewhere.

Growth and change are hot topics around these parts. Recently, the South Florida Business Journal reported that there was $950 million of projects underway in downtown Delray Beach. That’s both a source of angst and pride and I can understand both feelings.

Growth and change can be hard to swallow, especially if it swallows up what we like best about our towns. But growth and change are also inevitable. The best communities find a way to shape and manage growth and change.

The best cities also focus on the opportunities that growth and change can provide: they maximize benefits hopefully for as many people as possible, while minimizing impacts.

They talk through the tough issues, raise the level of discourse and do their best to build for the future.

In many ways, we are all stewards. We are here to leave a better place for those who come next. If we adopt a mindset that we need to be concerned about not only our quality of life but also that of others, we have a chance to create something good. But if we have an “I’m in the boat, pull up the ladder” mentality we ensure that the future either drowns or heads elsewhere and that the boat we’re in will sink.

It’s better to swim than it is to sink.

 

6 November, 2017 0 Comments

Growing Our Own

November 6, 2017 By Leave a Comment

No bigger game than Amazon.

November is National Entrepreneurship Month.

I didn’t know that, but as far as I’m concerned we ought to be spotlighting and helping entrepreneurs 12 months a year.

Since 2008, there has been a net decline in new business creation in the U.S. One of the contributing factors appears to be a growing aversion to risk for young adults who grew up during the Great Recession.

 

A new survey by Junior Achievement shows that 9-out-of-10 parents would support their kids starting a business as adults, but only 1-in-3 teens say they would consider becoming an entrepreneur, identifying “risk” as one of the top reasons for not striking out on their own.

We need to reverse that trend—it’s not an overstatement to say that if we don’t we will lose our edge as a nation.

America was built by entrepreneurs: people in business, government, science, education and the non-profit world who took risks because they saw opportunity.

Entrepreneurs are the people who solve problems, build, create, sustain and design successful societies.

We’ve all been reading lately about the efforts of close to 250 cities and regions to lure a second Amazon headquarters and its promise of 50,000 jobs. It’s a big opportunity—no doubt a game changer for the lucky winner who will have to put up billions in incentives to make it happen. South Florida, including our own Business Development Board, is playing the game and to some extent I guess you have too.

But personally, I would rather make an investment in seeding a new generation of entrepreneurs than throwing money at an already wealthy company like Amazon. I prefer what they call “economic gardening” (growing your own) to chasing smoke stacks or the modern digital version.

Fortunately, there is a lot beginning to happen on the gardening front: FAU and Lynn University have good business schools, Tech Runway at FAU has potential and the business community in Palm Beach County is relatively strong. Boca Raton’s economic development efforts are impressive, West Palm Beach is coming of age and Boynton Beach has some very exciting projects under consideration. Northern Palm Beach County has a very strong business community anchored by a progressive Chamber of Commerce (shout out to our friend Chamber president Beth Kigel) and Lake Worth has tremendous potential especially in the energy sector.

As a two time board member of our BDB, I can attest that we have a solid economic development organization that in my opinion has been a little starved of resources by the county over the years (relative to budgets in Broward, Miami-Dade and Hillsborough counties).

I’m especially intrigued and excited by some of the emerging groups of young creative entrepreneurs that we are seeing pop up: Creative Mornings Palm Beach, Palm Beach Tech and One Million Cups are just a few of the groups emerging filled with energy, ambition and community building potential.

There are also some real interesting co-working spaces popping up.

I’m especially happy to see the growth and excitement behind Palm Beach Entrepreneur Week Nov. 10-18. (Like The Beatles song, that’s actually an 8 day week).

Highlights include a meetup at the Social House in Lake Worth, a Creative Morning at Saltwater Brewery in Delray Beach, a pitch competition in West Palm Beach, a Florida Venture Forum showcase at FAU’s Tech Runway and more… Check out the website for a full schedule: https://eweekpb.com/#landing-events

All this is really cool to see. But we need more.

More angel investors, more mentors, more venture capital, more news about entrepreneurs and more outreach into schools. The Boca Chamber’s Young Entrepreneurs Academy is a great start. We also need more affordable space in key downtowns like Delray—not easy to do based on market forces and high prices.

We sit in a great location—close enough to Miami (an international city and a gateway to the Americas), close to an emerging Fort Lauderdale and within a county that offers a great quality of life.

If we reach our potential—the Amazon’s of the world will be asking to move here and ideally the next Amazon will be born here.

31 July, 2017 0 Comments

What’s Not Going to Change

July 31, 2017 By Leave a Comment

I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time.” — Jeff Bezos, CEO of Amazon

 
I’m not quite sure I’m a fan of Jeff Bezos.
But I sure do respect him.
He knows how to scale a business and disrupt industries as well as or better than anyone.
Just ask Walmart or any legacy retailer, bookseller or even cloud storage companies. 
I’ve been thinking about Amazon lately and what it’s impact and the impact of ecommerce may mean for cities and real estate.  But that post is for another day. 
The quote above made me think about something else. I think Bezos is right.  And while entrepreneurs always seek to skate where the puck is heading, the quote is also relevant to cities. 
A loud and active group of people seem to lament change in cities and I get it, we don’t want to lose the soul of our communities but change is inevitable and so the discussion should focus on how to best manage and steer the inevitable.
But what about thinking about what won’t change? What will still be needed in 10 years and beyond?
There are –as Bezos instructs –opportunities in what won’t be going away.
 
As much as we love Delivery Dudes we probably will still want to visit a great restaurant because it’s not just about the food it’s about the experience and the ambience. 
As much as we “stream” we may still want to see a great movie on a big screen with other people. We still may value “date night” or a matinee as I did the past two weekends when we went to see “The Big Sick” and “Baby Driver “at Cinemark. 
I love Netflix, but when I’m home I’m distracted. When I’m in a theater I focus and I end up enjoying the movie that much more–provided I don’t nap. 
Ipic is banking on that experience to endure as they build a new theater in Delray. 
I grew up the son of a retailer. My dad owned a retail pharmacy in Smithtown, N.Y., a business model that was disrupted by the likes of Walgreens and CVS. 
Now there are rumblings of Amazon going into the prescription delivery space. It will have an impact I’m sure. But as I watch an independent pharmacy being built on US 1 in Delray which will include an old-fashioned counter and other elements of retro drug stores I wonder if maybe we will leave room for authentic, old fashioned experiences like my dad’s old store. 
Yes AirBNB is all the rage but I think hotels will be around in 10 years. Maybe not the generic kind, but cool independents and boutique brands like Aloft that embrace local aesthetics will make it as will the incredible Crane’s Beach House which offers service, intimacy and strong ties to the local community. 
Big box retail and malls will be severely challenged but independent stores or highly curated chains with unique products and superior services and experiences should find room to survive and thrive. 
Food stores are changing too. 
A news story last week reported on a landmark study that showed consumers shopping for different items in different places. They may grab some items in a local farmers market, buy paper goods at a big box, shop for prepared meals at a local market and hit up a dollar store for staples. The 60,000 item supermarket may find itself struggling or having to reinvent.
So while we should cheer the CRA’s and WARC’s pursuit of a long coveted Publix for West Atlantic we should also recognize that our Green Market, local gardens, ethnic food stores and food halls have a place in our communities. Today’s consumer seems to crave options, authenticity, experience, ambience and value over generic mass. One wonders whether local retailers may mount a comeback: remember when Burdine’s was the Florida store? They didn’t stock sweaters in September because Burdine’s served the Sunshine State not a mass national market?
One of the bigger questions related to what will remain has to do with the future of the car.
Will it remain the same as today? My guess is no. 
There’s too much money being bet by major companies to think that the auto culture won’t be disrupted. 
When autonomous vehicles arrive, it will become the single greatest real estate opportunity of our lifetimes. With so much land and infrastructure given over to the car—i.e. seas of parking lots, garages, lanes and lanes of heat trapping asphalt–think of the opportunity to reinvent cities.
 No, transportation won’t be same. But my guess is the need for people to gather and experience together won’t change–providing great opportunities for cultural institutions, parks, recreation, restaurants and I hope old fashioned town hall democracy to thrive. 
The more technology engulfs our life the more we may crave human interaction and experience; which is the beauty of cities.
Cities are one “invention” that may change but I think they will endure and become more important than ever. 
I sure hope so. 
11 April, 2016 0 Comments

Leadership Is The Answer

April 11, 2016 By Leave a Comment

leadershipimage

Fortune Magazine just released its list of the world’s top leaders.

Interestingly, no candidate running for president on either side of the divide made the list which was topped—somewhat controversially—by Amazon CEO Jeff Bezos.

Bezos was the recent focus of a New York Times expose’ detailing some pretty tough working conditions at the Seattle based company. Fortune’s editors acknowledged the piece and said that Amazon will probably never make the list of `best places to work’ but noted Bezos’ business acumen and the disruptive business model he has employed to challenge and or beat everyone from Walmart to Barnes & Noble.

While there’s no doubt that Bezos has changed the world, I find it hard to fully admire someone who doesn’t create a good culture in the workplace. While Amazon may be an outlier in terms of performance, my guess is that most companies, organizations or governments can’t thrive unless they get their culture right.

A friend recently asked me what I felt were the biggest issues facing Boca Raton and Delray Beach.

Was it education? Drug addiction? Crime? The sober house/ rehab industry? Overdevelopment? Traffic? Affordable housing?

Nope.

The biggest challenge we face as a community and as a nation is leadership, or the lack thereof.

Leadership matters.

If you attract, retain, cultivate, grow and support leadership in your schools, companies, organizations, non-profits and communities you can pick the problem and be assured that good leadership will either solve it or make a noticeable difference.

Good leadership makes the intractable, tractable. And the opposite is also true. Without solid leadership it’s hard to make a dent in problems and just as hard to seize opportunities.

On the national level, this election is certainly unlike any other we’ve seen. I have friends who are all over the philosophical map—conservatives, liberals, moderates and people who usually don’t pay any attention to politics. But this year it seems everybody is paying at least some attention and most of the people I know cannot believe what they are witnessing.

Regardless of your views, it’s hard to make an argument that this is a contest between our best and brightest minds—leaders who are equipped to tackle an increasingly complex and dangerous world.

I’ve heard the words “scary” “surreal” and “embarrassing” used frequently.

This brings us to the local level; where government is closest to the people.

One of the scary trends I’ve seen is the diminishing number of people who vote despite increases in population.

When the universe shrinks, a small number of people can exercise control over the many that choose—inexplicably– not to have a voice.

Consider these numbers in Delray Beach.

In 1990, there were 26,330 registered voters in Delray. The landmark vote that elected Tom Lynch mayor and Jay Alperin and David Randolph to the commission attracted 41.54 percent of eligible voters. Randolph earned 7,720 votes.

In 2014, less than 6,500 votes were cast in the Delray municipal election. In 2015, less than 7,000 votes were cast in a hotly contested mayoral election. The winner had less than half the votes that Randolph earned 25 years prior in a city that had far less people. The turnout was 16 percent.

That’s not a sign of civic health.

Boca’s not any better. In 2015, there were slightly less votes cast in Boca than in Delray, despite Boca being a much larger city.

In 2014, about 11,000 votes were cast. There are nearly 60,000 registered voters in Boca.

Low voter turnout is not necessarily a symptom of poor leadership, but the more people that pay attention to local issues the better. And if they pay attention they may get involved and that should certainly improve the pool of candidates.

If we want to solve problems and seize opportunities, we need good people at all levels of government participating in our Democracy. It’s that simple and that hard.