Cities Need More Starbucks, Not CityTargets

NEW YORK (TheStreet) -- A few months ago, after visiting CityTargets in Downtown San Francisco and near UCLA in Los Angeles, I called Target's (TGT) urban concept stores major disappointments, though not necessarily epic failures.

Here's the deal: To refer to what Target does in core neighborhoods of big cities as a "concept" belittles the word. I always thought a concept was something bigger than an obvious and poorly-executed idea. There's absolutely no innovation in Target's urban push. It's merely a workaround of city planning regulations and activist opposition.

We'll get updated numbers from Target shortly after it reports earnings on Wednesday, but don't expect much change from the above-citied article. CityTargets -- speaking quantitatively ( actual square footage data) and qualitatively (the way they "feel") -- are hardly different from any other type of Target outpost, except SuperTargets.

Starbucks Is Urban, CityTarget Is Not

When I lived in San Francisco, I was a bit of an urban activist. In 2005, I aided a neighborhood association's efforts to keep Home Depot ( HD) from locating in the city. We lost. As is typical in these battles, all the big retailer has to do is make concessions on square footage, parking spaces and how many local jobs it will create and the project gets approved.

City governments and neighborhood groups suck in this regard. They talk a big game about character, but all they really care about is traffic. It's quite sad. And big box stores such as Target and Home Depot know this. They come in, weather opposition, scale down plans and, nine times out of 10, win approval.

Home Depot never actually moved into the contested space, despite paying rent on the land for months. I think Lowe's ( LOW) is there now. In any event, neither project, as constructed, adds much to this still rundown portion of San Francisco. They're merely suburban accoutrements forced onto the unkempt fringes of an otherwise great city.

That's precisely what Target is doing throughout the urban areas it's starting to inhabit. Bringing, for all intents and purposes, suburban infrastructure to the city. This is bad for two primary reasons.

Number one, for every CityTarget that goes up, as conceived, in cities such as San Francisco and Los Angeles, existing character erodes and the dream of building something that adds to the urban fabric dies just a little.

Number two, it's bad for the pathetically unimaginative brick-and-mortar retail space.

Consider the physical retail experience. It has barely changed in decades. Walk into the cookie cutter design sketch, find a germ-infested shopping cart ( Wait! Sanitary "wipes" for your cart; that's innovation!), push it through the store while buying staples and sleuthing for bargains. Swipe your credit card or, at only the most forward-looking outlets ( snark, snark), use a clunky self-checkout system.

Even as they get their collective butts handed to them by ( AMZN), most retailers erect relatively lame online presences, provide lip service about mobile and digital innovations, tout "new," yet hardly impactful product lines (like Joe Fresh at JCPenney ( JCP)) and, most of all, keep to the status quo. For Target and other "successful" retailers, that's billions in revenue. (Target reported $73 billion in sales in 2012).

But, by and large, the broad space stands still. These retailers use the urban core of big city neighborhoods to pad their stats. I guess that's what flies in the retail industry. Slap lipstick on a slightly more petite version of a soulless big box pig and, suddenly, it's "urban" or "citified." It's innovative. It's a strategy. A concept.

Bottom line. Target had an opportunity -- still does -- to break ground on more than a slightly-altered version of what it already does. Instead of seizing this moment in time, the company contributes to the same culture of obviousness that keeps most brick-and-mortar retail stuck in the mud somewhere in the swamps of Jersey.

Seventy-three billion dollars in revenue sounds fantastic today. International expansion. Urban expansion. It's all good until it isn't anymore. No envelope-pushing, like even seemingly boring enterprises are doing (for example, just dig some of the stuff 3M Company ( MMM) is doing; this stodgy old company was at SXSW this year!). Target pulls the same "strategies" from the same tired retail tool bag it and its peers have been going to for ages.

That brings the story to Starbucks ( SBUX). A company that delivers the exact opposite results vis-a-vis the two primary reasons that make Target both a bad urban and retail proposition.

Opposition often accompanies Starbucks' expansion plans. That's the case near my Santa Monica neighborhood where the company has a deal in place with the city and developers to take over a major corner, consisting of a vacant space and a lot that has housed a florist for decades.

I talked to the owner of the florist last week. He has been at the location for about 25 years. When I asked what was going on about all he could tell me is that "it's all about the money," rubbing his thumb along his index and middle fingers.

One day he came to work and that city planning notice was taped to the window. He was/is on a month-to-month lease. Starbucks swooped in. There was nothing he could do. And, as much as I appreciate the presence of local business in the community where I live, I gotta say the neighborhood will be better off with Starbucks at 11th and Wilshire, not the passive florist.

There are a handful of factions at work in Santa Monica and other cities like it. Some want to preserve Santa Monica in a mausoleum. They want it to be what it was 10 years ago, ignoring all of the positive change of the last decade.

Then you have the folks responsible for making the Santa Monica/Venice corridor "Silicon Beach." There are tons of startups locating here. And plenty of great local businesses. The type of people who help drive 21st Century economies live and want to live here now. A florist on the corner, as nostalgic as it might make some of us feel, does very little to contribute to this progress. Little to add to the vibrancy that draws Richard Florida's Creative Class to a place.

We expect to see people walking around cities with Apple ( AAPL) gadgets, not Sony ( SNE) Walkmans. Things change. As they should. As they must.

Starbucks will bring something to the corner of 11th and Wilshire that the florist does not and a CityTarget simply cannot (there's not enough space for starters). It brings something that this new generation of residents wants, expects and will support.

These people "call" ( FLWS) on Mother's Day. The florist has become obsolete, thanks in large part to its passive approach. It allowed itself to become little more than a distribution center for online business. It requires a dingy warehouse, not prime real estate in the heart of a thriving city.

Like every Starbucks that opens in Santa Monica, this one will draw a crowd. The company recently popped up 0.6 miles away from 11th and Wilshire, at Lincoln and Broadway, as part of a mixed-use development (retail anchoring apartments). And guess what? What was a once a run-of-the-mill corner, now has life. The tables on the plaza in front of the Starbucks always have people sitting at them drinking coffee and chatting among the city dwellers who have seemed to pop up out of nowhere.

Newsflash: They were always there. They have just had no reason to be public. Starbucks gave them one. It provided a venue for urban theater to unfold. Now they have a Starbucks -- and plenty other old, new and yet-to-emerge businesses -- that serve the several square blocks that operate as their neighborhood. In a relatively dense, walkable environment like Santa Monica, it's not overkill to have a Starbucks every half mile, even with other cafes and coffee shops in between. It's not even close to overkill. People live the day-to-day within very close proximity to where they live. Or at least that's the goal of many.

For as much as Starbucks contributes to the life of a city, it also stands out as an innovator in an otherwise dead retail sector. It provides an always-evolving experience that not only separates it from the pack, but creates the type of bond between consumer and company that only exists at a handful of other non-traditional retailers -- the Apples, Teslas ( TSLA) and Lululemons ( LULU) of the world.

Starbucks doesn't just talk about mobile and digital innovation. It delivers like a tech company. From its most recent earnings conference call on April 25 (via Seeking Alpha:
In Q2 we introduced new innovations and initiatives that further demonstrates Starbucks leadership in consumer card, loyalty and mobile payment experiences as more and more of our customers choose the Starbucks card as their preferred method of payment. Consider the following statistics; today, nearly one-quarter of all U.S. transactions are made by My Starbucks Rewards loyalty members and nearly one-third of all U.S. in-store transactions are prepaid.
Our mobile apps now have more than 10 million active customers and we are approaching 4 million U.S. global payment transactions per week, accounting for roughly 10% of total U.S. tender. To put this in perspective, Starbucks card tender now exceeds $3 billion annually in the U.S. and Canada, a scale that rivals many premier U.S. banks.

Go to a Starbucks in Manhattan; it's not an overstatement to say that almost everybody pays with the smartphone app. And Starbucks has merely reached the tip of the iceberg with regard to how it intends to evolve the mobile/digital experience. This is more than a coffee shop to many; it's a way of life. It's an ecosystem in the spirit of Apple, Amazon and Google ( GOOG).

Target doesn't come close. It banks on notions of habit and necessity. When somebody comes along to further disrupt retail -- adding to the pain Amazon has already caused -- Target (and most of its peers), like the newspapers and radio stations that came before it, will be woefully unprepared to respond.

If you choose to not disrupt today, expect to be disrupted tomorrow.

-- Written by Rocco Pendola in Santa Monica, Calif.

Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.

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