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Economy & Business

Downtown businesses wait, hope their commitment will pay off

This article first appeared in the St. Louis Beacon, Dec. 6, 2009 - On a recent Thursday just before noon, two Schnucks employees wearing elf hats and dressed entirely in black stood atop a granite counter in the services department of the company's new downtown Culinaria market. A female employee danced to "Eye of the Tiger" and "Celebration," her co-worker turned a broom into an air guitar and customers waiting in line smiled but mostly concentrated on paying their bills.

Upstairs, the lunchtime crowd listened to the rousing music mix and munched on salads, sandwiches and an array of prepared foods.

Schnucks made a splash when it opened the 27,000-square-foot grocery store/food court/coffee shop hybrid this summer, and the festive atmosphere you'd expect during the opening weeks of a new store has carried over through December.

Amid grumblings that the flashy new market has hurt surrounding cafes and eateries, many still hail the arrival of Culinaria as a clear sign of progress for a downtown that has long struggled to attract major businesses.

With 12,400 residents and growing, according to recent figures from the Partnership for Downtown St. Louis, the city center is seen by some owners of shops, restaurants and bars as an attractive location. Maggie Campbell, the partnership's new president and chief executive, and a St. Louis newcomer, said one of the first things she noticed about her new city is the diversity of businesses.

"There's a sense of excitement about things that have happened over the last 10 years," Campbell said. "You see a wealth of buildings that have been brought back to life, and people are creatively putting ground-level spaces to use."

But Campbell is also realistic about the challenges facing her organization and city officials. "There's also still a healthy degree of dissatisfaction and a feeling that more can be done," she said. "You walk about and see plenty of empty buildings."

And for every satisfied downtown shop owner, there is a story of an owner who took a risk and didn't survive -- or who bemoans the state of business.

"Certainly there are days when I regret" moving downtown, said Michael Lynch, owner of Salt of the Earth, a home decor store on Locust Street. "There are days when I lose sleep."

Such is the mixed picture of the downtown business scene in St Louis.

The Latest Hotspot -- 9th and Olive Streets

Two weeks after the splashy Culinaria opening this summer, Cafe Cioccolato moved into the first floor of a building across the street on Olive. David Salvato, the cafe's owner, said he'd long eyed this central location for his business, which sells imported chocolates, espresso and other desserts and drinks.

He closed his two locations -- one in Union Station, the other in the Loop -- and has put all his energy into the downtown cafe.

Years ago, Salvato said, he anticipated that residential growth patterns would make the area where he is currently located the epicenter of downtown -- or at least the densest part of the city center. Although residential projects around him have slowed, Salvato said he's still glad he's in a part of downtown getting increasing attention.

Some of that attention is due to the adjacent Old Post Office Plaza, which houses the St. Louis Business Journal and a Webster University campus, among other tenants. The Partnership for Downtown St. Louis announced this week that the plaza is among the winners of its Better Downtown Award, given to projects deemed to have improved the physical environment of the city.

Another winner: Culinaria.

"Every downtown wants a grocery store, but it's difficult to figure out how to get one going," Campbell said. Culinaria "is meeting a demand that's clearly here. And it's going to be a model for other downtowns across the country."

Downtown residents, workers and tourists are the customers for Culinaria, said Schnucks spokesman Paul Simon. The first two groups are the majority of people who shop there and are the targets of the company's marketing efforts.

"Any one of those groups alone wouldn't sustain a grocery store downtown, but the combination of the three is why we moved forward with the project," Simon said.

While he wouldn't share revenue numbers, Simon said the company has been "content with customer traffic so far." He said it doesn't make sense to compare the store with other Schnucks locations because Culinaria is about a third of the size of a traditional grocery and has a markedly different inventory.

Some downtown residents have already made good use of the store. Addie Kujore, 28, who owns a townhouse in Columbus Square and works at Wells Fargo downtown, said she welcomed Culinaria. Previously, she went to the Central West End for groceries, so her travel time for shopping has shrunk.

Downtown resident Virginia Benson said Culinaria is an important addition because it gives people more shopping options. She buys prepared foods at the store but typically goes to the Hill for her grocery staples.

Benson said the importance of a grocery store within walking distance to where downtown residents live is overblown. "One of the questions I always hear is, 'You live downtown: What do you do about groceries?'" she said. "I do the same thing everyone else does; I drive 10 minutes."

Culinaria is paying attention to what its customers are buying. The store is heavy on prepared meals for lunchtime shoppers, but it also continues to stock canned goods and other traditional grocery store fare. Simon said downtown residents have indicated in surveys that they want non-perishable items in addition to the salads, soups and sandwiches.

Some question whether Culinaria is good for the diversity of food and drink stores downtown. Brian Spellecy, who writes the blog Downtown St. Louis Business, said that while he considers Culinaria mostly a gain for downtown residents, he's noticed that other businesses have been hit hard.

A nearby coffee shop, Espresso Mod, went out of business about a month ago. Paul Charsley, the shop's owner, said the arrival of Culinaria, which sells Kaldi's coffee, "stuck the knife in us."

"We hadn't thought about closing, but when you have a 40 percent drop in business (since Culinaria opened) and you're already treading water, that's a death knell," said Charsley, who has since moved to Sonoma, Calif., and begun working at a car racing school.

Other businesses have also struggled. Baladas Bistro, a downtown eatery that relies heavily on the lunch crowd, has seen a 50 percent decline in business since Culinaria opened, said owner John Dalton.

"It's been devastating. I don't mind competition, but to get a large taxpayer subsidy to open as a grocery store but then really turn into a food court, it's not an equal playing field," Dalton said, echoing a sentiment expressed by several small business owners downtown.

Dalton has made changes to his menu and started barbecuing outside during warm weather in an effort to set his store apart from Culinaria. But he said the grocery store has matched many of his efforts. "It's hard to compete with low prices -- Schnucks is absolutely putting people out of business," Dalton said.

"I think about closing every day, but I still have faith," he added. "But if I don't see great improvement in spring I'll have to close my door."

It's not just Culinaria that has affected his business. Since Dalton opened more than two years ago, he said, his customer base has largely been people who work downtown. The downsizing at companies like nearby AT&T has also taken a chunk of business away.

Salvato, the Cafe Cioccolato owner, said that although Culinaria has brought more foot traffic to that part of downtown, the store competes with him in several areas. Salvato has backed off on liquor sales because he didn't want to compete with Culinaria. He's still pushing espresso sales, with the hopes that enough customers prefer his gourmet brands.

"Would I prefer if [Culinaria] hadn't gone into espresso? Sure," Salvato said. "But are we better off not having a grocery store? No."

Other stores have repositioned themselves as well. City Grocers, which had been downtown for five years prior to Culinaria, closed in mid-August for a week and re-opened as City Gourmet. Craig Heller, its owner, said the change was made in response to Culinaria's arrival.

"With Culinaria, there's no need for (another) grocery store," he said. "We changed directions quickly."

City Gourmet has all but stopped stocking groceries and has instead focused on items like stir fry, a burrito bar, sushi, and beer and wines.

Heller said it's hard to say how Culinaria has affected his business because he has a different inventory now. He said he's confident that the store can survive, in large part because of an increase in business over time from people who live downtown and come in at night.

Simon, the Schnucks spokesman, said he believes Culinaria has filled a void downtown. "Competition makes us all better," he said. "Schnucks doesn't lack competition in any part of the city."

Campbell, the Downtown Partnership president, said she agrees that competition is healthy. "Some of the businesses downtown will figure out how to compete and what they can do in terms of service and quality," she said. "At the end of the day, if Culinaria attracts extra people who haven't been to downtown or don't come down often, that brings (more) people past storefronts. For those businesses that can hang on and find ways to be competitive and set themselves apart, in the end hopefully everyone wins."

Connecting Downtown, Creating Lively Streets, Getting Right Mix

Lynch, the Salt of the Earth owner, said he's noticed a pattern downtown. When a new property opens, like Culinaria, "everyone wants to be around it," and the dynamic of downtown changes. Buildings are slated to be renovated and other shops are supposed to open, but as soon as the next hot store opens the focus moves to that area.

While 9th and Olive is the latest focal point downtown, Washington Avenue remains the liveliest section. Steve Patterson, a downtown resident who writes the UrbanReviewStL blog, said, thanks to the Washington Avenue revival, he's seeing people downtown he wouldn't have seen five year ago -- most notably parents pushing strollers.

Campbell said she quickly got the sense that the Washington corridor is a strong business area with a high concentration of restaurants, bars and shops. But like many others, she still notices empty storefronts on nearby streets and blocks.

"There are some really good spots downtown, but there are a lot more dead zones," Patterson said. "Those zones kill the activity and kills expansion."

Spellecy, the downtown blogger, said he agrees that these dead areas give visitors the impression that the area is unsafe or that the neighborhood is struggling. "If I just walked three blocks and didn't pass anything other than parked cars, maybe a vacant building, it's alarming," he said.

Campbell said the challenge is figuring out how to connect the vibrant parts of the downtown. Patterson has this piece of advice: allow more street parking, which he said encourages people to get out of their cars and tends to make blocks livelier.

Barbara Geisman, St. Louis' deputy mayor for development and a resident of downtown, said adding street parking has long been on her radar and remains a priority. She said she is looking at where more parking meters can be installed.

Kujore, the downtown resident, said it's a matter of getting more people to walk on downtown streets. She often goes to Washington Avenue for happy hour or dinner on the way home from work. But Kujore said she's noticed that while pockets of downtown are busy at lunchtime, it still doesn't feel crowded overall.

Added Nicole Crockett, who moved recently to downtown St. Louis: "The downtown livelihood is a weekend livelihood. When you look at the hustle and bustle, you'll notice that it's on a Friday or Saturday or during sporting events. I want to see that energy during the week."

Salvato agrees: "The street traffic is light during the day and extremely light at night. When tourists come they ask me, 'Where is everyone?'"

Spellecy said more evening entertainment options and cultural venues would give people a reason to come downtown other than for nightlife and sports.

Patterson said he'd like to see more sidewalk cafes. There's also a need for more street vendors, he said. "If you want something during noon on a weekday or midnight on Friday and Saturday, there are options. But other times there aren't many options."

Kujore said she likes the small eateries downtown, but wants more variety in restaurants. "We're going in the right direction, but I want more of what we have," she said.

She's also adamant about wanting more retail options. Campbell said that's one of the most common comments she hears from downtown residents and commuters who work there.

Earline Bell, president of the Downtown St. Louis Residents Association, a group that represents downtown residents, said she would like to see more national chains like the Apple Store, J. Crew or Marshall's. She said she likes the boutique shops but that "they largely cater to visitors."

Geisman said the city's challenge is to show major retailers that a market for bigger businesses exists downtown. She said it was well on its way to doing so before the economy tanked. "The bottom fell out on mainstream retail everywhere, and so we've reached a plateau for the moment. We've been attracting retailers more slowly than we were initially. There are still boutique retailers, but we haven't reached the mainstream retailers yet."

Added Campbell: "There's not a lot of retail moving anywhere. It's the sector that recovers slowest, from what I'm hearing."

Both Geisman and Campbell said they are hopeful that when the retail environment begins showing improvement, major retailers will see downtown as an attractive place to open. Geisman said these stores tend to have a herd mentality, which is why getting the first store in place is key. Her wish list includes clothing stores, and then others like Best Buy and Bed Bath & Beyond.

Geisman said it's important to keep a mix of national retailers and smaller shops. Spellecy agrees, but he says right now the balance is too heavily tipped toward the smaller stores.

Slow Going For Some Downtown Shops

Campbell said that while getting new shops to move downtown is important, keeping the current crop of businesses is also a priority.

Lynch, the Salt of the Earth owner, said he's seen plenty of retail stores come and go over the three-plus years he's been downtown. (His other store is in Webster Groves.)

"We moved down here because we thought it was exciting with everything happening in terms of development, and we wanted to be a part of the rebirth of downtown," Lynch said. "I still think a lot can happen, but we've taken a pretty good hit. I think everyone has."

The economic downturn has hurt, of course, and it's been particularly tough on stores like his that sell high-end goods. But Lynch said part of the problem is that not as many people are buying up residential properties and moving into the nearby buildings as he'd expected.

And he said he doesn't get anywhere near the foot traffic he counted on from people who live in the neighborhood. Lynch said recently that a resident who lives behind his store came into Salt of the Earth and told him, "Wow, I didn't know you were here."

"That makes me sick to my stomach," Lynch said. "How on earth are stores supposed to stay alive when people who live down here don't know you are here."

Much of his business comes from out-of-towners who are here for conventions, which have slowed in the past year as well because of the downturn.

Salvato said he's also been hurt by the slower-than-normal tourism and convention business. He is still counting on more people moving downtown who have disposable income. While it's been a slow start for business, he's making a long-term commitment to downtown and still believes it's the best place to be in the long run.

Geisman said she's aware that some downtown businesses are struggling, and that downtown needs more residents who will also be customers. But she said it's inevitable that some businesses won't survive.

"Economy or no economy, some businesses thrive and some businesses struggle," she said. "It's the ebb and flow of things."

Lynch said he's confident he can be among the survivors. "If we can weather this storm, we'll be OK," he said. "I have a lot of faith in downtown, but the fact is right now there are so few of us in retail down here."

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