Bruce Murphy
Murphy’s Law

Can City Save Boston Store?

City subsidy will keep declining store open, but leaves controversial questions about its downtown strategy.

By - Jan 28th, 2014 12:51 pm
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Across America, the downtown department store is dying.

Sears just announced it will close its downtown Chicago store. Last year, Macy’s closed downtown department stores in St. Louis, St. Paul, Honolulu and Houston.  The company closed three other downtown department stores in the prior four years.

Some 30 American cities lack a downtown department store, from Houston, the fourth largest city, to Arlington, Texas, the 50th largest. For that matter, the idea of an enclosed, suburban-style downtown mall seems as dead as the dodo.  In 2010, Columbus Ohio dismantled its downtown Columbus City Center and replaced it with a 9-acre park called the Columbus Commons.

Rocky Marcoux

Rocky Marcoux

Such is the environment in which Department of City Development Commissioner Rocky Marcoux announced a proposed agreement whereby the city would pay Bon Ton Stores Inc. $1.2 million over four years if the company keeps its downtown Boston Store open through January 2018.

Ald. Bob Bauman, whose district includes Downtown, is, to say the least, not sold on the idea. “There are a whole lot of issues here,” he thunders, “and I’m really rather shocked at the vacuum of questions in the coverage of this issue by the media.”

“What is the future of department stores?” he goes on. “Are we just propping up a wagon maker in the age of automobiles?”

But Marcoux who negotiated the deal, says that keeping Boston Store open, while important, is not the key issue. Rather it’s the fact that Bon Ton has its home office here (as well as in York, Pennsylvania), and has 750 jobs in the city.

“We’re trying to keep the 750 corporate jobs here,” Marcoux says. “There’s a significant risk to those jobs if they close the store.” The proposed subsidy would cost $400 annually per job, which in today’s climate of rampant corporate giveaways, is cheap.

The jobs, Marcoux notes, are “overwhelmingly” in the home office, with a minority at Boston Store. “These are very good jobs, they’re the kind of jobs cities compete for.” And should the department store close, he contends, some cities may make an offer to Bon Ton to move its home office elsewhere.

Of course, Bon Ton would still have Boston Stores at Mayfair and Bayshore malls, and it essentially pays no rent for its corporate office, Bauman says. WisPark, which owns the building where Bon Ton and its Boston Store are located, bases the rent on a percent of gross sales, and sales have been so low the rent has been nothing, the alderman says.

While the Journal Sentinel story on the deal portrayed it more as a bid to save Boston Store, Marcoux contends “it’s not a straight play for the retail, it’s a straight play for the jobs.”

Bauman questions what kind of commitment Bon Ton has to Milwaukee. “I’ve never met an official from Bon Ton. They haven’t asked for this money, they haven’t made the rounds of the Common Council, they don’t seem to have a lot of local commitment, their CEO lives in Baltimore and comes here by plane.”

But in the current climate, where cities all compete to offer subsidies, CEOs don’t have to make the rounds of the Common Council. Bon-Ton Chief Executive Officer Bud Bergren has hinted that Boston Store needed help. At a 2011 event sponsored by the Business Journal, he told the audience that Bon-Ton isn’t committed to operating the Grand Avenue Boston Store “for the long run… Right now we’re staying open, but I wouldn’t necessarily guarantee you how long it’s going to be.”

So what’s to stop the company from pulling out of this agreement? “We’re going to look foolish if they file for bankruptcy in two years,” Bauman charges.

Marcoux, however, notes that “the money is based on the number of jobs they keep here. We will do this on a year-by-year basis.”

Bauman argues this sets a precedent for every other retailer in town to demand a subsidy. Marcoux counters that the city will turn down a straight money for retail deal. “We want it tied to jobs,” he notes, again pointing to Bon Ton’s corporate office.

Where the deal looks weakest is in its potential impact on Boston Store. Bon Ton, at first glance, seems like a retail colossus: it operates 270 department stories nationally under several names, including Bergner’s, Carson’s and Younkers, and that includes eight downtown department stores. But Bon Ton’s stock has dropped from a high of $56 in 2007 to just under $11 today,  and Morningstar shows it’s debt is ten times higher than the industry average, and its revenue, net income and earnings per share have been in decline for years. TheStreet.com called the company “a retail train wreck.”

Bon Ton has told city officials its downtown Milwaukee Boston Store loses $600,000 annually and has sales of just $45 per square foot, well below $125 per square foot for the company’s average store.

But Bauman says the city is left to take the company’s word for it. “We don’t know how much money they’re losing. So how can you fix something if you don’t know what the problem is? Why are they performing so poorly there? And how will handing them that $300,000 help? They’re not promising to do anything, as I understand it, to improve the store.”

Marcoux says “they are going to make some improvements and we’re going to discuss that at the Common Council meeting.”

But he puts more stress on the fact that Bon Ton’s stores “are very successful at other venues. Their demographics, their customer base, is the kind of people who are moving downtown.” And if Milwaukee, he notes, you’ve got 22,000 people living near Downtown, when you include the Beer Line.” And two more residential developments, at 7th and Michigan, and in the Germania Building, at 135 W. Wells St., are coming.

But all those residents have clearly failed to turn around Boston Store and the Grand Avenue Mall. As I’ve written previously, the attempts of public and private sector leaders to revive W. Wisconsin Ave. have so far not led to any major breakthroughs.

Marcoux says he believes the days of enclosed downtown malls have passed, but the owners of Grand Avenue don’t see it that way, which ties the city’s hands, and stalls potential improvements. “We’ve agreed to disagree,” he says.

But Boston Store, Marcoux notes, has street entrances and could easily make the transition to a street retail strategy, should that day ever come. Meanwhile, Marcoux contends, “an empty store discourages people from coming Downtown. If this deal hadn’t happened, that would be a setback for the city.”

In that sense, the Journal Sentinel headline was exactly right: this is an attempt “to buy time to redevelop” the west side of Downtown. It probably won’t improve anything, but seems more palatable than having a huge, boarded-up store on the city’s main street.

Short Takes

-Bauman contends the plan is really more symbolic to help Mayor Tom Barrett politically “The mayor is running for reelection in a year-and-a-half. Don’t think that isn’t part of the equation.”

“Nonsense,” answers Marcoux. “That’s not how we do work here. I’ve been working on this deal for two years.”

-You’ll find a flood of interesting, mostly-thoughtful comments, from all sides of the political spectrum, regarding the potential of wind power in Wisconsin, in response to my last column. I have to say, it’s gratifying to have so many interested, impassioned readers.

20 thoughts on “Murphy’s Law: Can City Save Boston Store?”

  1. Paul Gibler says:

    While many American cities have seen retailers leaving downtown, our neighbors to the north are experiencing a different environment with both Saks and Nordstrom announcing stores in Toronto’s Eaton Centre. While the Nordstrom replaces an exiting Sears store, the Saks store is a new build store. Also the Pacific Centre located in central Vancouver produces more sales per square foot than any other mall in Canada according to a Reader’s Digest Report on Canada’s Top Shopping Malls. Meanwhile in Chicago we have Target going into downtown with a CityTarget and in Minneapolis they are testing an even smaller format – TargetExpress store on the urban University of Minnesota campus.

    The last time I went to the downtown Boston Store, I found that they had a significantly downsized home department, which I find surprising given the number of housing units in the downtown area and the demise of Linens and Things in the Shops of Grand Avenue. I wonder if part of the Boston Store problem is that they don’t have the right merchandise mix? They also seem to have forgotten the tricks of visual merchandising with their windows showing minimal effort put into creating an engaging and surprising visual destination.

    I’ve asked my students if they shop at Boston Store or visit the Shops of Grand Avenue and find the answer to be no. I would think that given Milwaukee’s ranking of 6th highest number of college students/hundred residents that more efforts could be put into targeting students then I’ve seen.

    Marketing and Retailing Lecturer
    UWM

  2. Bruce Thompson says:

    I would like to see a comparison to the public subsidy per job for this proposal to the Amazon distribution center in Kenosha. Also the average pay at the two locations (warehouse jobs tend to pay poorly). That would give us a better idea of whether this proposal is out of line.

    In response to Paul’s post, I note that both Vancouver and Toronto have good public transportation that makes it easy to get in and out of downtown, but most of the cities that Bruce mentioned as losing malls or department stores do not. I wonder if there is a pattern there.

  3. Mike Bark says:

    The problem with these subsidies is that there’s a tendency to throw money at retailers and coffee shops who aren’t exactly out there creating high paying jobs.

    If I went into Rocky Marcoux and said that I would move our firm’s headquarter from West Allis to Milwaukee if he gave me some tax money I’d be laughed out of the room. Even though we’re talking about 18 people who at minimum are making $15 an hour with employer provided health insurance. Exactly “the the kinds of jobs” cities compete for. I could do the same meeting with the good folks in West Allis and they would also laugh me out of the room.

    Now if I said I was going to open a coffee shop in an area that already has coffee shops I’d probably get some preferred financing from either city.

  4. John Cooper says:

    I work downtown and have been to the Grand Avenue Boston Store often. It is stocked poorly (for example, there are virtually no men’s clothes between sports and jeans on the casual end and business clothes on the other), the personnel are indifferent, and it has a cavernous, past-its-prime feel, nothing like the bustling and crowded Boston Store at Bayshore. I have to suspect that the corporation is deliberately under-supporting this location. I would rather see almost any retailer there that would make an honest attempt at a profitable store.

  5. STACY MOSS says:

    Well, great little article. Necessary one too. There are a lot more questions to be asked.

    I thought it was funny that Bauman noted no one from Boston Store talked to him. That makes sense as a matter of protocol but if the Mayor’s is on your side why bother? Gotta start somewhere.

    Regarding the corporate jobs — retaining them is a stop gap measure. It’s about preserving the past. Actually the past is gone. It’s just a matter of time before Boston Store fails downtown because it has already failed.

    I would be relieved if Milwaukee had a future too.

  6. wisconsin Conservative Digest says:

    Grand ave is done as is Norhtridge. when a reatsil project busts, they never come back. Best to levle them and start over. In both cases teh landlords di not ake the rpoper measures to make them vibrant and to attract people from the suburbs. Milwaukee’s downtown has been on downgrade for years. if they want to improve they need more people to live down there and high crime, lousy schools, stupid leaders will not make that happen.
    The fact is that many of use have been talking about this for years but the corruption, inept leaders, dumb lefties have destroyed Milwaukee. Look how West Allis has rebuilt. I was part of that. I love living in this area and went downtown often years back, but there is not any good reason for me to do so anymore. I do all that I can to convince people that have meetings downtown to move them out here. We have 3-4 time as many people come. We still go down to the symphony, theater etc, but those things are moving out here too.
    When the Milwaukee people decided to do one stupid thing after another, like knocking down the freeway, demonzing business and successful people, making it tough on property owners and the corruption like Ament and co. People have written it off. Barrett is nice guy but the most worthless leader in the history of Milwaukee.

  7. Barbara Aho says:

    Long ago I always shopped downtown. But I do everything possible to avoid it now. For one thing, the parking is just miserable. Remember Abele’s $10,000 worth of tickets? But also why bother to go there to just shop at a chain store? At one time there were more small locally run shops. Far more fun to explore. And the owners were engaging. And the more condos there are downtown, the less likely that I will go there. Culture is attracting and could be utilized to great advantage. And not just blockbuster traffic jam type events either. I do venture there for the famer’s market and then explore a little. Saying this, I do believe it is a good idea to support Boston Store. Especially since, I think, we would be stuck with a downtown condoland otherwise.

  8. Tim says:

    Barbara, are condos displacing any people or businesses? Exactly what are condos or residents Downtown displacing? If anything, they’re improving the retail situation in Downtown… which isn’t just the Grand Ave mall.

  9. T says:

    I live downtown and work for Boston Store. You people and your speculation and OPINIONS are garbage. Support the downtown and stop purchasing in the suburbs to impress your friends and family and then returning the items in the downtown stores (Boston Store and other that have gone their way). THAT is the trend that has gone on for years. YOUR lack of support is why selection and stores are not seen downtown. So letting the store and corporate offices leave is going to help the city? Better retailers will come in to a blighted downtown? You folks are a special kind of stupid. The Grand Avenue store has great associates and it’s a VERY CLEAN store. Want better window displays? The man who does them is ultra-talented. Maybe give some help in getting assistants by spending some money and stop talking out of your asses. Really, your towels, jeans, dress pants are more SPECIAL when you buy them in the burbs? What a bunch of whiners and people who have no clue—-and THANKS for being concerned about MY JOB.

  10. Todd Spangler says:

    Before it closed last year, the Macy’s in downtown St. Louis mentioned in the column had radically downsized from seven floors to three a couple years earlier in order to cut costs and attempt to increase its economic viability; however, to some extent it also lowered the appeal of the store by dramatically decreasing the variety of merchandise within. I can remember when I lived in Waukesha in the late 80′s/early 90′s occasionally driving down to Grand Avenue and shopping at the Boston Store and other stores in the mall, but by the time I actually lived close to downtown from 2006 – 2009, there was such a dearth of retailers in the mall I never even bothered going down there and simply drove up to Bayshore instead. I also often drove out to the Target south of Miller Park for many items not readily available downtown.

    Department stores in medium sized downtowns left standing essentially by themselves, such as the Macy’s was here in St. Louis, are simply not as viable as they were a few decades ago. Nor are downtown malls attached to department stores; there was a downtown mall in St. Louis developed in the 80′s very similar to Grand Avenue called St. Louis Centre. In that case, the Dillard’s store anchoring it finally closed in the 2000′s; the entire complex has since been redeveloped into a mix of eateries, a hotel, apartments, a movie theater, and a still to be finished blues (music not hockey) museum.

  11. Dave Reid says:

    @Tim Exactly, the development of downtown over the past 15 years has dramatically improved the city and has certainly helped areas like the Third Ward thrive… I certainly hope to see more development of apartments and condos in the future. And for WCD, in fact downtown has thousands of new residents (and has more than most comparable cities) over the past 15 years.

  12. Dave Reid says:

    @T So you know I live downtown and try to shop at Boston Store for my clothing needs.

  13. John Cooper says:

    I live downtown, too, and visit the Grand Avenue mall about twice a week. It would be very convenient for me to be able to buy all the clothes I need at the downtown Boston Store. I bought a nice sweater there two weeks ago. (And no, T, I don’t buy clothes elsewhere and return them at the downtown location. That’s just weird.) But I stand by my statement that the downtown store doesn’t carry the business-casual clothing that I need most. And I don’t mean to slam any associate at the store—I’m sure they’re all kind people. But the store is obviously undersupported by corporate. I don’t feel welcomed there. I feel like a guy walking through someone else’s empty house. That’s not me being snobby, and it sure isn’t me favoring the suburbs. As if! I live downtown, I work downtown, and I want ALL my stores to be downtown. But I expect them to have a competitive selection and to act as if they want my business, and in those ways, probably not the fault of the associates, the downtown Boston store fails.

  14. Chris Jacobs says:

    There is no good reason to shop at the downtown Boston Store. Paying to keep it open is a total waste, other than subsidizing the workers jobs there. There is little difference to the average person if the store stays open or is boarded up. Just go on Yelp and read the reviews. The place is a joke. The city just doesn’t have the guts to let a dead store close.

  15. Tom D says:

    I’m a little surprised that nobody here has mentioned the old Marshall Field’s (nee Gimbels) that anchored the other end of The Grand Avenue. As I remember it, Grand Avenue started going downhill only after Marshall Field’s closed.

    And why did Marshall Field’s close? Because they asked the City for money to help renovate their store and the city refused. At the time, I felt Marshall Fields request for public money was out of line and thought Milwaukee made the proper choice by refusing to play along. Now I wonder if Milwaukee would have done better by coming up with the money.

    I wonder what would have happened if Milwaukee gave Marshall Field’s the money they wanted. Would that store still be open (as a Macys)? Would Grand Avenue still be on life support or would it be vibrant and profitable? Would Boston Store be as dowdy if it had to compete with Macys two blocks away?

  16. Tom D says:

    I disagree with the statement that “the idea of an enclosed, suburban-style downtown mall seems as dead as the dodo”, because my city has two of them (and 6 downtown department stores) and all are doing fine.

    I live in White Plains, NY, about 20 miles north of Manhattan. White Plains has under 60,000 residents, but has become the de facto “downtown” for Westchester County (population 950,000–coincidentally Milwaukee County’s population, too).

    Both downtown White Plains malls have 3 levels, about 100 stores, an attached metered parking garage, and two anchor department stores–Macys and Sears at one, Nordstrom and Nieman Marcus at the other. The two malls are about 5 blocks apart separated by apartments (rental and condo), offices, hotels, movie theaters, and more stores (including Wal-Mart and Target).

    This area does not “feel” suburban in the least. There are no surface parking lots, not even at Target and Wal-Mart–both use attached pay garages (although Wal-Mart offers free parking if you buy something). Some buildings exceed 40 stories. Even with the malls, there are still streets lined with shops and restaurants. Most buildings extend right out to the sidewalks (which are often full of people well into the evening 7 days/week).

    The area has a Walk Score of 98. I couldn’t find a Transit score, but there are over two dozen bus lines at rush hour (and 9 even on Sunday). There is a commuter train station two blocks from Sears with 3 or 4 trains/hour (each way) seven days a week. ZipCars are available.

    And while Third Ward residents lack a real supermarket, there are three between the two malls, and another 4 in a two-block belt around the malls. These seven supermarkets range from Wal-Mart to Whole Foods. There is also a seventh department store (a Bloomingdales surrounded by an asphalt surface lot) two blocks beyond the malls, but I consider that to be outside downtown.

    I bring this up to show that malls and department stores can still be viable (even without free parking) in an area with roughly the population of Milwaukee County.

  17. Kyle says:

    @ Tom – While I’m sure that style of mall can still work, I think you’re being a little naive to think that being “about 20 miles north of Manhattan” doesn’t play a roll in the success of the area. Somehow I don’t think Milwaukee is aided by Sheboygan or Kenosha in quite the same way.

  18. Robert Bauman says:

    Regarding the downtown Marshall Field store I believe the city did make an offer of some $1.5M to induce the store to stay. The offer was refused. I am told that Marshall Field was determined to leave.

    It would also be interesting to learn the population density of the White Plains area and other economic data such as median household income for the area. I suspect large retail stores follow population density and buying power among other factors. This brings the whole issue of sprawl, white flight, highway building and public transit into the discussion. Policy makers and citizens cannot continue to support transportation and land use polices that promote sprawl and then wonder why there are not enough people or buying power in the center city to support big box retail. There are few if any short term policy initiatives that will quickly reverse conditions that took 40 years to develop. Some us of have been beating this drum for decades, including former Mayor Norquist, but our pleas have largely fallen on deaf ears. There is only so much the city can do through subsidies if fundamental demographic and economic factors are working against us.

  19. Tom D says:

    Bob Bauman,

    White Plains has 5,820 people/square mile vs 6,188 in the City of Milwaukee. Westchester County has 2,205/square mile, much lower than Milwaukee County’s 3,926.

    Westchester has a much higher median household income than Milwaukee County ($88,093 vs $43,599), but that doesn’t mean as much as you’d expect. Everything costs more here so there is less disposable income than the raw numbers suggest. For example, the median owner-occupied Westchester County home costs $533k vs $163k in Milwaukee County, our median property tax bill is over $10,000, and milk is $3.88/gallon at Walmart.

  20. Paul K says:

    I’d like to see a survey of downtown residents on needs, wants, preferences, and demographics. Have any been done recently?

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