The hip, independent store owners of Valencia Street like to think they have nothing in common with franchised America; just as the owners of Artillery AG, an art and design store on Mission Street see their customers as different than those after mass-produced art. But, that is no longer true. Homogenized America and the Mission have more in common than ever before.
For just as surely as the rise in e-commerce is triggering Walmart, Sears and other big box stores to close hundreds of stores across the country, it is also closing one or two-person shops throughout the Mission and San Francisco.
“We are experiencing a major transformation in retail and how people purchase,” said Egon Terplan, a regional planning director with SPUR. “It’s directly having an impact on brick and mortar stores and in some ways we are in the very beginning of that transformation.”
To be sure, San Francisco retail has had the double whammy of e-commerce and high rents, but rents will plateau while e-commerce will only continue to grow. No longer is San Francisco’s independent retail movement protected by the shop local ethic. Instead, like the rest of the country, it must accommodate to the click here consumer or die.
Mission Local will be looking at this transformation in an occasional series, “Shop Local Disrupted.” We began with a video profile of the owners of Artillery AG. We’ll talk to the bicycle shop owner who discusses the difficulty of accommodating the shopper who orders parts online as well as the grocery store owners who have scrambled to appease customers who want instant delivery. We’ll look at how shops on Valencia and elsewhere are adapting. You will hear owners and customers talk about what is being lost and what is gained and policy makers will discuss how these changes will impact plans for the urban retail of the future.
No one seems to know exactly when the whole shop local craze began, but its genesis coincided around the time in the early 1970s when E.F. Schumacher published Small is Beautiful, an economic treatise that offered an appealing, if unheeded, rationale for the local economy. “From the point of view of Buddhist economics,” he argued, “production from local resources for local needs is the most rational way of economic life…”
That may be, but as he was writing, capitalism was spinning out the Walmarts, Targets, Home Depots and other big box stores that would come of age in the 1980s to decimate the small purveyors that served mainstream America. These and other franchise models spurred new formula retail laws in San Francisco that successfully protected some of the city’s commercial corridors from becoming homogenous duplicates of other American cities.
Now, franchises, big box stores and the made local producer are all being disrupted by e-commerce.
The transformation Terplan and others talk about is particularly acute in San Francisco. Not only have e-commerce sales grown steadily – representing 8.3 percent of all U.S. retail sales in the last quarter of 2016, from just over five percent five years ago, according to the U.S. Census Bureau – but this encroachment is happening here at the same time as commercial real estate rates have skyrocketed.
Steven LeMay at Retro Fit is facing the possibility of having to relocate after 21 years on Valencia Street not because he lacks customers who come for the experience of finding cast-off gems in his vintage store, but because the new landlord wants more rent. Others, like Laura James, closed Ruby, a gallery boutique, because of the competition from e-commerce.
“The days of a small-time entrepreneur with a passion opening on the corridor are mostly over,” said Sean Quigley, president of the Valencia Street Merchant Association and owner of the 25-year-old curiosities store Paxton Gate at 766 Valencia St. that may have been one of the first stores on Valencia to offer shoppers a different experience by the very nature of its merchandise.
“Occasionally, I hear about landlords who care more about what type of business is in their building than they do about trying to maximize their rents,” he said. “Every now and then a small timer finds a spot that no one knew about. But it’s becoming less frequent. And with real estate management companies taking over where you used to have one-on-one relationship with your landlord, that’ll only get worse.”
Higher rents mean that locally-owned shops in the Mission and Hayes Valley now have pricier merchandise. But the change in buying habits puts any conventional upscale brick and mortar store in peril.
A New Kind of Commercial Corridor
The businesses that survive will either accommodate to the changes or close. This is happening at such places as Artillery AG, which recently renovated, winnowing the number of artists it represents, adding a florist and a photo booth.
Economists see the commercial corridors of the future as places that offer experiences that can’t be purchased online. This could mean more restaurants, entertainment venues or a place like the Mission’s Urban Putt that combines miniature golf and food. Already, some traditional retail stores are adding new features like the in-store coffee and tea bar that Benny Gold on Valencia recently opened.
In this new environment, it is no surprise that the Mission has gained a half-dozen new barber shops in the last year, that a new fitness or exercise boutique seems to open every month and that the Mission has 10 ice cream producers in 1.5 square miles, the latest one, Smitten replacing a small retail store.
So far, the city’s response to the changing retail environment has mostly been focused around the Calle 24 Cultural district and Mission Street. There, its efforts have resulted in restrictions on combining storefronts on 24th Street and in marketing efforts to attract Latino shoppers around the Bay Area to the Mission for a cultural experience.
Diana Bernal Ponce De Leon from the city’s office of Economic and Workforce Development acknowledged the changing environment and said the marketing effort recognizes that residents would rather use their “valuable time around an experience.”
To that end, she said, the city is framing the Calle 24 cultural district as well as the more than 400 businesses on Mission Street between Duboce and Cesar Chavez as a cultural experience.
Still, it is difficult to ignore the reality of what kinds of businesses are moving onto those streets. Among the newest tenants on 24th Street is a brewery and on Mission Street a new dispensary. The new Mexican restaurants are upscale. All, however, are businesses that have a shot at surviving the click-here buyer’s quest for a new experience.
We asked Steven LeMay, the owner of Retro Fit, a vintage store on Valencia Street, what happened to the Shop Local Ethic.