Friday, May 31, 2013

Popularity or stability

Matt Yglesias pointed out on his blog yesterday that when your favorite bar or restaurant becomes popular, it typically raises its price points since it can't expand. When a chain store becomes popular, it expands into new locations, retaining its relative price. 

He's assuming that expansion is limited to individual corporations, ignoring the character of the nightlife strip: when a destination becomes popular, competitors arrive to cash in. 

He also ignores the long-term consequence of the chain: a cheap pizza chain opens next to your favorite pizza parlor either driving it out of business or driving it to produce a cheaper-quality pizza. Chains produce a race to the bottom. 

Popularity is the key here. Local-serving stores -- the so-called mom and pop -- do not draw to popularity, but to local needs. Popularity is a kind of upscale phenomenon of disposable income searching for the latest titillatory entertainment. The prototype is the roving bands of young singles flocking to a newly 'discovered' slum site cum nightlife strip. 

The invasion of the slum site is not the opportunism of development or gentrification, it's more like thrill-seeking; development will follow that disposable income, not lead it. You can see it in Chinatown, where Apotheke and Capitale opened without any gentrification. They opened because there was no gentrification. 

The success of the chain store isn't always its popularity. Sometimes it's just its price. Pinkberry, the Gap, Urban Outfitters and Red Mango belong in a different category from Costco, Ikea, Kmart and Walmart. Disposable income seeks the one, constrained income the other. 

Yglesias' observation reveals the future of commerce. The local-serving store that doesn't depend on non-local sources of demand isn't even on his youthful, upscale, trend-seeking radar. His notion of commerce is all about growth, not about community or stability. 

No comments: