The Davis city staff is proposing to eliminate leasable square footage limitations on the Target site as they look to eliminate the few remaining vacancies in the pads. Given the discussion, it seems reasonable to revisit the whole issue of Target from the 2006 election.
In June of 2006, the council voted to approve zoning changes that would allow Target to come to town, but Target was such a divisive issue that the council agreed to put the matter to a vote of the people. It would narrowly pass by just under 700 votes and the narrow passage has been attributed to students who were often frustrated at the lack of basic shopping options in the city.
There was a wide array of reasons for the opposition to Target – the general opposition to big box, concern that it would undermine existing retail, and general land use concerns from adjacent residents (the precincts immediately adjacent to Target voted against it).
On the other hand, there were two primary reasons for support of bringing Target to Davis. First, already mentioned was the lack of shopping opportunities in the city which led to sales tax leakage. And second, the need for additional sales tax revenue.
So how has Target performed in the 14 years?
I suppose it depends on whom you ask. The city analysis, not surprisingly, is favorable.
In the staff report, they note: “In 2006, the city was concerned that the shopping center could have a negative impact on the economic viability of the downtown.
“Studies were prepared that showed there was little likelihood of urban decay, which has held true,” they write. “After 10 years of operation in the city, staff believes it can be empirically deduced that the tenants in the shopping center are not relocating from the downtown area, nor are they causing closure and mass vacancy in the downtown area.”
They quote from the 2017 State of the City Report: “The retail market in the city and Davis Core Area is much tighter than the county’s more balanced market. This is evidenced by relatively positive net absorption, vacancy rates of 3.7 and 3.2 percent, compared to the countywide rate of 5.3 percent, and increasing rental rates.”
That’s certainly one view.
I have not found any definitive studies, but there is an article from several years ago written by Tom Sakash of the Davis Enterprise. He quoted a study by a research team from the Institute of Transportation Studies at UC Davis that found “the downtown has not seen a substantial reduction in shopping frequency since Target opened in 2009 on the east side of the city.
“The biggest changes we saw were for shopping outside of Davis. That declined,” said Susan Handy, the UCD professor of environmental policy and planning who oversaw the study. “Shopping at stores outside of downtown declined after Target opened (as well), but for shopping downtown, we did not see very much change.”
What they found was that Davis residents had previously been leaving town to do their shopping at big-box stores, and “the Target store in Davis now kept that lost sales tax revenue in town.”
That in turn prevented Target from leading to a massive loss of retail business in Davis. Basically, the hope was that Target would start to alter patterns of people driving out of town, which was already occurring, rather than diverting business from the downtown.
At the time, Professor Handy said that “overall we think Target was not drawing a lot of traffic away from downtown.”
It does make some sense that, if you already had an existing commercial pattern where the lack of available retail created one behavior, adding a new option might alter that without harming existing businesses. The city also only added one big box, which perhaps prevented some of the worst impacts of big-box retail from hitting the city.
The question I have asked repeatedly is whether the city of Davis bet on the wrong thing. After all, what we have seen over the last decade has been the continuation of a trend that some have called a retail apocalypse. We have seen large numbers of “brick and mortar” retail stories close – including some long-standing brands.
By one account more than 12,000 physical stores have been closed due to a variety of reasons – over-expansion of malls, rising rents, and changes in spending habits.
Surviving so far have been discount superstores like Walmart and Target. The question is whether these stores are going to go the way of their predecessors and whether in ten years Davis will come to regret making the decision they did – even if in the short term it appears that Target has worked in Davis without some of the negative drawbacks.
For that I look at the work of Zuora CEO and Founder Tien Tzuo. In general, he believes that the notion of the retail apocalypse is overstated.
However, Mr. Tzuo is bearish on Walmart and, by extension, Target. The big problem, he argues, is the difference between Walmart and Amazon – and, not how you might think it, between e-commerce and brick and mortar.
The problem, he argues, is that for Walmart, and again by extension Target, a customer is just a stranger, a number.
He writes: “What was the last thing you bought at Walmart? Walmart certainly can’t tell you. Got any receipts handy? Once you walk past the cash register at Walmart, you’re gone.”
The problem: “Walmart is still essentially a product company… It knows how to buy and sell products. That worked fine for a long time. It doesn’t anymore.”
He argues that the difference between Amazon and Walmart is that Amazon “knows its customers.”
But Mr. Tzuo also believes that newer companies are emerging which are starting to open stores and find ways to be profitable. He argues that “it’s really hard to operate as a standalone e-commerce vendor.”
He argues it is not online versus physical, but rather “between data-driven, app-centric, flexible and omnichannel retailing on the one hand, and old and stale retailing on the other.”
In that sense, it seems the future may be bleak for the Targets and Walmarts of the world. But perhaps they can adapt.
In previous articles we note that Davis lags behind regional cities in per capita retail, but it also lags behind comparable college towns as well.
One reason we have pushed high tech innovation as a future anchor point is that it utilizes the city’s advantages in terms of its proximity to a world class university. That still seems to make a lot of sense. But what would also make a lot of sense would be for the city to start studying retail trends and figure out how to take advantage of the new and emerging retail market, rather than simply relying on old and what seems likely to be a dying industry.
If Tien Tzuo is right, out will be dinosaurs like Target and Walmart (unless they can adapt), and in will be tech-savvy companies like Warby Parker.
—David M. Greenwald reporting