Wednesday, November 16, 2011

Buxton: The $30,000 Downtown Retail Market Demand Study

"Customer data is like a child's kaleidoscope. It's all a matter of how you look at it." - Tom Buxton

Last night at City Hall a small handful of the faithful gathered to hear exactly how Buxton Marketing, a consultancy hired with a considerable amount of CRA dollars, would redefine our downtown and help remake it into a retail environment that is not only more economically sustainable (so to speak), but also in tune with what the community wants. Something that apparently, and especially in the opinion of those who hired Buxton (or, as one wag put it, Buck$Ton), the usual market forces, local retailer wisdom and consumer demand have not done for us. This being a matter for the experts instead.

A Market Demand Study in such economically parlous times such as these might seem like an odd pursuit to some. With City Hall claiming to have cut budgets and making due with less, it would seem to be an inappropriate time to be spending $30,000 to find out what variety of vichyssoise sells best in this part of the SGV. Particularly when you consider that some of the City Hall service reductions that have been made, such as cuts to after school care at the YAC for the children of working parents, have hurt some people in town.

Of course, this is also the same City Council that thought nothing of sending itself to a 3 day League of California Cities convention in San Francisco on the our dime, so there is that cause for skepticism as well.

But why dwell on any of this? We do have a City to save here (I guess), and trying to figure out from what in particular is hardly going to move any product downtown. Let's get down to business, shall we?

Buxton apparently is not your usual survey and tabulated results kind of market demand consultant. Those attending were not handed a clipboard and asked to check the boxes next to those products that they would most like to buy here in Sierra Madre. Nor do they seem likely to send people out into the streets looking for consumers to discuss shopping preferences with. Instead they do it with information gleaned from the data banks of the more successful businesses in the area. This is a very modern approach we're talking about here. You can understand why our somewhat pokey City Hall might have been impressed.

Below is how they describe what they have to offer on their FAQ site, Buxton FASTFacts (click here). And yes, they do say "best practices."

Best Practices - Turning Customer Data Into Dollars: Many retailers have no shortage of customer data. What do you see as the best uses for customer data to enable (the) retailer to maximize their marketing strategies?

Collecting customer data is the basis of today's marketing plans. Using it to tailer media placement, model prospects for new customer acquisition, and more efficiently circulate ongoing retention efforts is becoming essential to drive marketing ROI. We recommend to our clients multiple best practices around using data. These include:

- Use transaction RFM to target customers who warrant ongoing investment - screen out best customers from those who won't shop, period.
- Use merchandise data to tailor inventory and selection by store and channel for less waste and higher sell through.
- Analyze customers against external data to identify key characteristics. This will help to optimize promotions and drive specific customer behavior.
- Count customers by month / year and channel to determine customer churn.
- Count annual sales by customer frequency and ask yourself - what percentage of customers is driving what percentage of sales?

Well there you go. Just so you are aware, ROI is acronymic for "Return On Investment," and I am fairly certain that RFM denotes "Recency, Frequency, and Money." Consultant-speak meant to describe people who just keep coming back and spending. The kind of folks all retailers would love to get to know better.

But I am a little worried about the whole "screen out best customers from those who won't shop" thing. Sir Eric, who is famous for having alligator arms when it comes to paying for anything, still likes to go into stores and look at stuff. I hope this means they won't be stopping the purchasing challenged from entering downtown.

Anyway, so here's the skinny. What Buxton does is it buys data from various sources in the area, crunches the numbers, and then issues a report. Every credit card purchase, swipe of the debit card, and what is actually bought during the transaction itself, is all recorded and tabulated. Stores collect this kind of stuff because bundling and selling such information is a very lucrative, low overhead business. Companies like Buxton will pay handsomely for this kind of data, which they then repackage and resell to places such as the City of Sierra Madre's Community Redevelopment Agency for tens of thousands of bucks.

Of course, when Buxton resells this stuff to towns like ours, they artfully repackage it to make you feel like you are being let in on something very special. I personally love marketing jargon and hype, I work with it every day in my line of work. And Buxton has a couple of great terms that I just have to share with you.

Psychographic Segmentation Profile: This one is kind of along the lines of "separating the wheat from the chaff." Where do you find the best areas to do business, and how do you identify the needs of the best possible customers (people who buy), rather than catering to the alligator arms set? Sierra Madre apparently has a strong PSP, but is currently not taking advantage of it. And why is that? Our "Leakage Surplus Analysis" shows retention weakness.

Leakage Surplus Analysis: The Buck$Ton lady threw out a figure of $173 million as the "leakage" Sierra Madre suffers on a yearly basis. Which seems like a lot until you divide it by the 6,400 households here in town and come up with the figure of $27,000 per wickiup. Which is basically a year's worth of groceries. What is meant by LSA is a figure that represents all the spending that is done by Sierra Madre as a whole that is not done here. It is leaking out beyond the Michillinda Curtain and going to the unclean.

As any small city Chamber of Commerce can tell you, it is very hard for downtown shops to compete on a range of products carried or prices offered with the likes of Wal*Mart and Target. The rise of this kind of box retailer is what has decimated small downtown shopping areas all across this great land of ours. The mix of restaurants and other food vendors, coupled with nail salons and similar niche style businesses we have here, is typical of what has been left behind by the big box revolution. And we actually do this better than most.

But I really do not believe that Buxton will supply our existing pizza and liquor store based economy with the kinds of data that will turn our downtown into something it is not. Despite what you might have heard. Rather what this information is intended for is to attract big retailers to Sierra Madre. By identifying what the more affluent consumers in this town purchase through data gleaned from area retailers, the City will now have a set of verifiable statistics and analysis to show to some of the retail corporations who might be willing to give downtown Sierra Madre a look.

Which, if I am right, would be yet another instance of our tax money being used to push for things that most people here in town won't be all that crazy about. Unless it is a Whole Foods, of course. But where would that leave the Farmers Market, I ask?

An interesting statistical analysis would be to compare the $30k cost of this study with our current sales tax take of around $180,000 a year. In order for this study to pay for itself we would need to see an increase of around 4% in sales tax generated revenue.

During my ill-fated run in the 2010 City Council election there was a debate where the issue of what is best for Downtown Sierra Madre came up. During this debate I attempted to make the point that we have something very unique and desirable here in town, that being our downtown shopping area and the independently owned businesses there. And what I said is that while there are always things that can be done to make things even better, our downtown is an attractive asset for the community as a whole, and should be nurtured and protected.

While I was walking out of the place I noticed that Nancy Walsh had gathered a small group of little souls about her, and was intently discussing something. What that was, I later found out, was my little spiel about our downtown. What she took my earnest little rap for was proof that "they" are against bringing big retailers into town.

This, in my opinion, is what the Buxton deal is all about.

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45 comments:

  1. While the ALF deal seems to be waining in reality, perhaps turning that property into a commercial shopping site would make some sense, if it could be done in a small town, esthetic scale. If sales tax revenue is the ultimate reason for having a commercial zone, perhaps that would be the ticket, and should be considered as a possibility.

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  2. Rumor has it, Buxton has a plan to toss the Occupy La people into paddywagons as captive shoppers to increase the commercial shopping base, and let them occupy the park, like our contingent of day laborers.

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  3. Is Sierra Madre a good market for salty snacks?

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  4. Nancy and Elaine would like to see a Lane Bryant in town.

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  5. Based on the revelations that came out when she was fired as the Executive Director of the California State Democratic Party back in the 1990s, perhaps H. Susan Henderson might be skewing the trend towards our having a Victoria's Secret here in town.

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  6. Another reason why we need to pray that the courts finish the job on getting rid of redevleopment agencies.

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  7. Walsh is heading up the "branding," remember?

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  8. Nancy certainly branded herself when she gave her little speech about the GPUSC.

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  9. $180,000 in sales tax revenue. $250,000 for one ridiculously flawed general plan report. We don't need more sales tax revenue, we need a city council that does not waste our money.

    The city has no business meddling in marketing surveys. And I have to believe Crawford is right again: they are up to no good.

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  10. The Gang just can't help but mess with perfection. I guess there is no money in it.

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  11. Absolutely 8:02. Why not take that CRA money and use it all to repair water pipes in the CRA area?

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  12. So in all this data gathering, do the gatherers go to Target, WalMart,Walgreens, Rite Aid, Marshalls, Ross, Trader Joes, and figure out whether a Sierra Madre resident bought the organic bananas or not?

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  13. For cryin' out loud, put a stake in it. Everyone knows that no big retailers want anything to do with us. We have tried and tried for years to get 'em and they do not find us 'economically feasible.' I say Good. Next idea please.

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  14. Go to http://www.youtube.com/watch?v=3Dc5sdcpsco

    Or, youtube, Tap Chicks.

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  15. Maybe the Bottle Shop will start to carry organic bananas. For the more health conscious daiquiri drinkers in town.

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  16. This was a public input meeting?
    So how many members of the public attended?

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  17. I counted 16, including staff and councilmembers.

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  18. What we need to protect this town from is the city council (G3, not Mary Ann) and their multitude of development minions. And why the hell was another $30,000 spent on a consultant? Why are they able to continue to waste our money on such frivolous spending, whilst bemoaning a lack of general funds to conduct city business? How CORRUPT can a government get and still not be held fully accountable for its criminal behavior???! We should be making all those rats - JB, Moran, Walsh, Aguilar - walk the plank...

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  19. Chain retail will demand larger buildings. Slippery slope.

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  20. Hasn't been a city council election in years gone by that the candidates didn't have a bullet point about economic growth and health of the downtown. And it gets weaker and weaker every year anyway. Why? The mall, the mall, the mall! All of southern California was malled in the 1970's and very few towns even look like us, as small as we are, so can we expect to ever look like a Montrose or old town (yes there is such a place) Arcadia even?

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  21. Does this mean I will be able to buy quinoa in town?

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  22. Trader Joe, CVS, Rite Aid, Walgreen have all determined Sierra Madre is not the place to open up shop. One of the biggest problems retailers have when trying to establish a business in Sierra Madre is the cost of over $3,000 and a wait of 3 to 5 months. In other cities all you need is a business license. It took the new ice cream business 4 months to open up shop. She missed the entire summer for business. Also the Congregational Church is hogging retail space with their store front church nonsense. More lost opportunities for sales tax dollars.
    The ALF site should be developed as retail as it is zoned. The ALF will generate no sales tax dollars.

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  23. Can some one please tell me what did we get for $30,000?

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  24. The driver of development in town seems to be city hall these days. Everything is about bringing in more tax money. In this case more sales tax money. Pretty expensive operation we have there.

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  25. Walsh and other Farmer's Market supporters claimed the Farmer's Market would be good for the local businesses. Have retail sales increased on Wednesdays? I think we need to hire another consultant to determine if this is so.

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  26. The Chamber claimed the Food Truck rallies would generate business and return business for the downtown. What a joke.

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  27. The Leakage Surplus Analysis is that the food trucks showed up in town to take Sierra Madre's money elsewhere. It cut down on drive time for the people living here.

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  28. Farmer's Market = Leakage Surplus
    no jobs and except for a few dollars all the money leaves town.

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  29. When one has leakage in the downtown, the polite thing to say is "excuse me".

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  30. Of course we are against bringing big retailers in town. Extensive talks with Trader Joes went nowhere because of lack of parking and they already have two large stores close to Sierra Madre. Can't think of any other "big" store we'd want. This study is a boondoggle of huge proportions.

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  31. It seems like most of what the city wants does not help local businesses.

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  32. I have an idea: Let's hurt the existing businesses that have taken the gamble of doing business in the un-business friendly environment of Sierra Madre and have a Roach Coach caravel. The Gang of Fools and the City Manager only see big development as the saving grace to make and spend more of our money. As long as Elaine is in Sierra Madre nothing good will ever happen. She is a proven lair and a messenger of mis-truth. She can never be trusted. Elaine is the root of our problems. The City Council has to have someone to think for them, it is obvious they cannot think for themselves, she is the one giving direction. The Troll has had that job for years, with the help of Elaine. The Troll was the one who recommended the hiring of Elaine. They all sleep in the same bed. The only way to remove the bed bugs to to throw the bed away or burn it. Without change form the top, we are screwed.

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  33. I hope Buxton Marketing gets input from my spouse. One can only imagine how her answers will confuse and skew the dandy stats. I have been trying for years to understand her preferences (which include low salt no salt, price, recommended by a friend, nasty clerks, swell clerks, rain checks, background music, hours to talk to her on the phone, and of course returns)

    TJ's is the largest store she shops except she enjoys the consternation she creats at the likes of Ralphs & Vons when raising cane over the "card price vs ticketed price", and loves to offer her card to customers in front and back of her in the check out line.

    No doubt this "consultant study" is to lay groundwork for something big right here in our quaint Downtown.

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  34. I think the city looks at the existing businesses downtown as an obstacle to what they believe needs to be done.

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  35. I want Tiffani's, Gucci, and Vera Wang.

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  36. Did the consultant consider the shopping preferences of our new homeless residents? Perhaps a Good Will Thrift Shop on the Blvd would add charm to the downtown.

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  37. Will there be anything in the Buxton report about a medical marijuana dispensary? Might work out well with the homeless shelter demo.

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  38. That is a comforting thought, 10:43. It will be good for our kids to see people being healed right there on the streets of Sierra Madre.

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  39. Some of our businesses do just fine, thank you.
    Did anyone ask them how it goes here?
    Or would free information be too revolutionary an idea.

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  40. The city wants something authoritative so they can claim superior knowledge.

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  41. I know what I'd like to see downtown... a new City Council. I wouldn't mind a medical marijuana dispensary either. If you think that homelessness=marijuana use, you need to get your head out of your ascot.

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  42. There is entirely too much hobophobia on this site.

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  43. remember when Beth Buck and her gang of rabble rowsers where screaming the lies that if the 85 condos weren't allowed to be built that a big box drug store retailer was planning to move into town?

    I'm still waiting.

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  44. Beth used to get paid to say things like that.

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  45. I missed this discussion by a whole four months, but you hit the nail right on the head with Buxton. Like several other market consulting firms, they simply buy data and repackage it for the community in a boilerplate report. It is always chain-oriented and never applicable to a downtown setting like yours. There are also numerous problems with the way the source data is collected and with the algorithms used to develop the estimates. I have seen them be off by as much as a factor of 29 times. They might catch on if they really understood the methodology, or even cared, but they don't. How do I know? I do market research for a living and I understand the methodology - therefore I do not buy flawed data, but develop it from scratch. It takes longer and it requires actually knowing what you are doing, but even then I always bid less than the Texas Con-men. I do believe that good analysis can pay dividends. Sadly, you will not get it from them.

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