In a Sept. 28 report to the city’s Economic Development Committee, consultants working on a new retail strategies study presented findings that challenged traditionally held views about the forces affecting Evanston’s business districts.
“I think notions that we feel are believed to be true about the way the retail universe work – the data doesn’t necessarily support in such black and white terms,” said Sarah Kellerman of Interface Studio. “There’s also some local narratives that I think the data doesn’t necessarily support.”
Kellerman and Michael Berne of MJB Consulting presented some preliminary findings as part of their Evanston Thrives business district strategy update, which included a summary of retail market trends.
The city OKd a $245,000 contract with the two firms earlier this year to conduct a study of all of the city’s business districts and offer a comprehensive strategy for steps the city can take to improve them.
The firms are still in their listening and analysis phase, with plans to conduct listening sessions with key stakeholders over the next few months. A final report is expected to go to City Council some time in January or February of next year.
At the meeting, Kellerman and Berne shared with committee members their market research associated with the project, highlighting data that challenged popular “notions” concerning trends affecting the city’s business districts.
E-commerce vs. brick and mortar
Notion: E-Commerce is the death of traditional brick-and-mortar retail and, if anything, grew became a more powerful force after COVID-19 hit.
Once the pandemic arrived, the thinking was “’we were going to see 10 years of e-commerce growth within the span of three months,’ right?” Berne asked. “And these new shopping habits were going to be ingrained and there was no going back.”
But two years into COVID-19, online market share has grown from 11.4% of total retail sales in the first quarter of 2020 to 12.9% in the first quarter of 2023, the presentation stated.
“Really, not that much,” and more like the growth one would see without a pandemic, Berne said.
“If there ever was a moment when brick and mortar was going to be relegated to the dustbin of history,” he said, “it was when we were cooped up in our houses, when because of restrictions, public health concerns, we weren’t going into stores. And two years later, it just didn’t happen.”
Berne further noted that online shopping services have costs of their own associated with shipping, customer acquisition and returns. As a result, the only way for those retailers to bring down those costs is to have a strong and extensive brick-and-mortar network, he said.
Local narratives
Notion: There’s a huge, almost insurmountable number of vacancies in the city’s business districts, particularly in downtown Evanston.
According to CoStar Retail Analytics, Evanston’s vacancy rate citywide in 2022 is around 5%, and 10% to 12% downtown, Kellerman said.
Those vacancy rates, she told committee members, are “not out of step with what a lot of places are seeing.”
A committee member asked the two how those numbers compare with vacancy rates in Chicago and suburban locations.
Berne estimated that in the Chicago Loop area, vacancy rates are somewhere in double digits, and estimated they are likely higher along the city’s Magnificent Mile shopping district – somewhere in the 20s.
He reported the vacancy rate for Chicago suburbs at 10.6%
Generally, he said, the threshold for a retail district is a vacancy rate of 10% or less. Ideally you want something more like 5%, he said.
So citywide, “we’re in reasonably good shape,” he said. “Downtown, it could be better but certainly not apocalyptic,” he added. “And indeed Evanston is certainly not alone in this problem of downtown retail recovery, post-COVID.”
Sales tax performance
Notion: Evanston lags substantially behind neighboring suburbs such as Skokie and Wilmette when it comes to sales tax.
Based on sales tax performance, the figures indicate Evanston has performed well – showing steady year over year growth, the consultants said.
In that regard, since 2011 the city has shown a slightly higher trajectory than either Skokie or Wilmette.
Kellerman told committee members that “there is this perception, we know, and we’ve heard that, you know, Wilmette is on this meteoric rise and they’re literally and figuratively eating Evanston’s lunch. And based on sales tax performance, that’s not entirely true.”
The consultants further broke down sales tax performance by category, comparing Evanston with the two suburbs.
Skokie outperformed Evanston by a big margin in the category of “apparel,” no surprise with Old Orchard mall a centerpiece in that suburb.
Kellerman pointed to the discrepancy to make a point.
“We don’t think that growth in every one of these categories is really what we’re going to propose here for Evanston,” she told committee members. “We want to be a bit more nuanced about it. We want to think: ‘What are the categories where Evanston could really excel? And where are there ways for recommendations coming out of the retail action plan to also align with our values as a community?’”
For example, apparel, where Evanston lags anyway, includes “fast fashion,’’ viewed as an economic sector with negative climate impact, Kellerman said.
“So is that really a category that we want to double down and try to grow, knowing there’s so much competition locally and knowing that there are some real drawbacks to that particular sector in the industry?”
Later in the presentation, Council member and committee member Bobby Burns (5th Ward) asked if the city should actively identify businesses that “we think would work in certain pockets, retail corridors of Evanston,” rather “simply sitting back, waiting,” for them to come here.
The consultants responded positively to the suggestion, noting a changing reality.
At one time, Evanston “had a real momentum and feeling of growth and so the city as a partner was a steward and making sure that things were going to a common goal,” Kellerman said.
“And in the world we live in today, and in sort of a recovery posture, we have to think a little bit more of how we work towards recruitment,” she said, “how we are building [the retail districts] as an active partner.”
The full presentation is viewable on the city’s YouTube channel as part of the Economic Development Committee’s Sept. 28 meeting.