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Main Spotlight: 5 Predictions for 2023

  

January 25, 2023 | Main Spotlight: 5 Predictions for 2023 | By: Matthew Wagner, Ph.D., Chief Program Officer | 


In January 2022, we released our first-ever annual predictions covering the work of Main Streets and anticipated impacts on small businesses that make up the fabric of our downtowns and neighborhood commercial districts. Making predictions is always a risky proposition but is a valuable pursuit to get a better idea of what to keep an eye out for in the coming year. Perhaps an even more risky proposition is to take a reflective look back to see what was on target, what was a mixed bag, and what we got wrong. So, before we dive into what we expect to see in 2023, let’s take a look at a few of last year’s predictions and see how they played out.

GOT IT RIGHT: Main Street Workforce Constraints Remain, Resulting in Accelerated Technology Integration and Further Business Model Shifts

Unemployment remained low throughout 2022, with recent layoffs primarily impacting the technology sector. Stories abounded throughout the year of small businesses continuing to make shifts or integrating technology. One of these stories landed on the front page of the September 26th edition of the Wall Street Journal that covered a Milledgeville, Georgia, plumbing company from our entrepreneurial ecosystem work with partner Georgia Power and Georgia Main Street.

 

MIXED BAG: Certain Retail Sectors Will Continue to Grow While Others Level Off

“Looking ahead at opportunities for continued growth in our downtowns and commercial corridors, we should anticipate that retail spending around health and fitness (e.g., sporting goods up 29.9 percent), home improvement, furnishings (e.g., furniture up 28.2 percent) décor and gardening will continue to grow in 2022.”

Looking back at the 2022, Quarter 1 started out strong. However, inflationary pressures, which we did not factor into the stickiness, began to slowly erode. Sales with a number of sectors we predicted to be strong began to go flat, with sporting goods/recreation seeing the biggest impacts with several month-over-month sales declines.

WHAT WE GOT WRONG: Due to the Rise of Remote Work, Office Space Will be Reconfigured and Repurposed

This one comes with a caveat: if this had been a prediction that our colleagues over at the International Downtown Association made for their urban districts, we would have put this in the “what we got right” category.  Many larger central business districts have struggled to bring white collar professionals back to their offices. Downtown Washington, D.C., is even looking at offering tax relief to developers converting office to residential.  

But for our Main Streets, whether small downtowns or neighborhood commercial districts, the office sector is more centered on the office-service sector in which interaction with clients is more prevalent—think your local real estate or insurance office. As such, while some shifting occurred, it was far more limited and less disruptive than thought when we made the prediction in early 2022.

So, while no forecast is always perfect, taking the time to better understand trends and how they might impact the work of place management and small business is still a valuable planning activity that can help to inform the coming year.  As such, I spent some time looking ahead to 2023 and landed on five key areas to consider, investigate, and discuss in the coming year.



For decades, the U.S. ecosystem hubs were concentrated along the coasts (think California’s Silicon Valley and Boston’s Route 128 Technology Corridor). Due to technology business relocations and consolidations in finance, places like Austin, D.C., Chicago, Charlotte, and Atlanta, have witnessed an acceleration of greater talent concentrations over time.

One key to success in these regions has been the concentration of human capital combined with the density of place that creates both intentional and accidental collisions that in turn form new ideas, access to capital, and networks that are the hallmark of successful small business support systems. However, the global pandemic has shifted both. For example, the rise of remote work, which has primarily been in the technology office sector, provided opportunities for human capital to decouple from these areas, diffusing this workforce to often suburban and rural locations. And now, these tech and financial centers are faced with what Professor Scott Galloway has coined the “Patagonia Vest Recession.” More on the long-term prognosis for Big City downtowns can be found in this recent analysis piece from Architecture Magazine.
As I indicated earlier, the office sector was largely unimpacted in most small and mid-sized cities. The heavy migration of remote work talent and recently-retired individuals to these areas provides the ingredients necessary to greatly enhance and stimulate a series of micro ecosystem hubs around Main Streets. They will likely never make the headlines or even be “named,” but nevertheless will have profound impacts on these communities’ overall economic growth and resiliency.

I spent time last year in Jasper, Georgia, where new businesses were popping up all over downtown and an entrepreneurial vibe was evident in meetings with both newcomers and existing residents who saw newfound energy in the community’s economic prospects. According to the Internal Revenue Service’s migration data from 2019 to 2020, there were 1,502 tax filings representing 2,972 new residents in Pickens County (Jasper, Ga.). The 2020 population for the county was 34,032 with newcomers representing a nearly 9 percent increase and an income injection into the economy of over $131 million! 

For many years we have focused on place-based assets. As Main Street organizations we should begin to better understand our existing and new human capital assets and leverage place-based and organizational assets that create these accidental collisions—from obvious third places like cafes, breweries, and libraries, but also through our own task forces and other volunteer activities that enable us to capture talent. That is what will begin to drive and grow our own ecosystems. Think human capital asset mapping! 


Yes, I know many of you may be thinking “when did that happen?!?” Certainly, in early 2020 the rate of e-commerce sales growth was off the charts—in fact, during an 8-week period in March and April 2020, e-commerce growth exceeded the equivalent of what occurred in the previous decade. But what we have also witnessed during the global pandemic is an unexpected awakening, with consumers realizing what they missed when it was gone: the experience of going into a store, interacting with other humans, seeing family or neighbors, and just being able to use their senses as part of shopping. We had missed this essential form of leisure. In fact, the tide had already begun to turn in 2021. In evaluating the following graphic with data from the U.S. Department of Commerce, bricks-and-mortar sales growth began to surpass e-commerce sales growth during the first quarter of 2021, and throughout the year kept a consistent 6-7 percent growth advantage. 

As we look ahead into 2023, a couple of things are already shedding light on this prediction coming to realization. First, the sizable stock price declines and recent announced layoffs from Amazon. While 20,000 sounds like a lot, given their size it’s still fairly small. However, this certainly marks a shift from the hiring frenzy of 2019/2020. And, the fact that much of the anticipated layoffs are occurring in distribution further suggests headwinds for online ordering.

Secondly, several exclusively online brands announced that they would be moving into the bricks-and-mortar space. One could argue this started with Apple. And now we see what was seemingly a purely transactional online experience transform into a closer alignment between the brand and the lifestyle feeling that a company attempts to evoke through an instore purchase. Some brands recently making this switch include Warby Parker, Bonobos, Allbirds, and Amazon (through various iterations including partnerships with Kohl’s and Starbucks).

Hmm, perhaps they realize something we Main Streeters always knew: people like human interaction and the experience of being around others, even if that means just sitting in a coffee house with a $6 latte by themselves. 



During the pandemic there were a number of particular retail sectors that experienced sizable growth.  For example, retail bike sales grew by 54 percent from April 2019 compared to April 2021. Sales and interest in garden sheds grew by 400 percent. And in April 2021—powered by consumers having extra-large covid relief tax refunds—furniture sales were up 181 percent over the previous months. But that was then, and as we saw in 2022, overall retail sales began to reach some norm-setting more consistent with 2019 than 2021. Inflation headwinds are part of the equation, but the fact is that 2021 was such an incredible spending year that in 2022, many consumers already had a lot of what they could not get in 2020. As such we would anticipate consumers will now direct more of their spending to servicing those past purchases and more leisure experiences. So, what does that look like for Main Streets? Time to work with our retailers to add more service elements!

  • For bike stores: more servicing elements, groups rides, and perhaps joint service promotions with travel agents for bike excursions. While bike sales are down, bike riding as a form of recreation remains very strong—just ask our friends over at Rails-to-Trails.
  • For clothing, shoe, and other fashion retailers: repair services. Yes, even Tommy Hilfiger and Hugo Boss are launching repair services as part of a movement toward more eco-friendly “repair, reuse, and recycle” shifts in consumers. It’s one way to keep the consumer engaged in your store when inflation threatens a pullback in new sales.
  • For restaurants: more cooking classes and online video tips. Consumer dining remains strong, but eventually that will start to pull back with economic shifts and diners realizing all the home improvements they made during the pandemic could be more fully utilized. This is another way to keep customers engaged and coming back.

 


Much of the news cycle over the past year has reflected on our younger generations through the lens of workforce participation. In fact, Gen Z will make up 30 percent of the workforce by 2030. But for Main Street, 2023 will mark a highly visible shift in asset ownership along our neighborhood and downtown commercial districts. The context for this prediction simply comes from observations throughout visits to 50 plus communities in 2022 in which whether it was focus groups of entrepreneurs or district tours, there was an obvious youth movement.

In early November 2022 I had a chance to visit nine different downtowns within the Maine Downtown Center’s program. In Bath, Maine, I got to experience the Grant Building development, a mixed-use preservation project spearheaded by young developers Mandy Reynolds and Sean Ireland. This project was actually just one of a few properties they had taken on with projects ranging from housing, co-working spaces, and retail.  

The Grant Building Project in Downtown Bath, Maine; Jon Stein, owner of Fogtown Brewing Company.

And in Ellsworth, Maine, I met up with Jon Stein, owner of Fogtown Brewing Company and an example of what we had historically thought of our long-standing business owners…those that served on committees and had a deep level of community engagement. I visited Jon on election day. That evening he found out he won election to Town Council.

These are not isolated examples as my travels have demonstrated a highly visible shift is afoot. Despite the often doom and gloom of the passing torch from one generation to the next, our Main Street’s are in terrific hands and the future is bright.



For years, names like Jamie Diamond, Jeff Bezos, and Elon Musk have dominated the news cycle and even entertainment pages. Some might refer to this as corporate idolatry. In 2023, we believe there is a real opportunity to really showcase and highlight the importance of Main Streets and the small business owners as essential players who make of our neighborhoods and downtowns as critical to one’s quality of place and to what truly brings value to the consumer experience. With the rise of the “covidprenuer,” these past two years have witnessed amazing growth in individuals endeavoring to reach their dreams of business ownership. Many of those individuals chose to launch along our Main Streets for the very reason that they wanted to give back to their community and be a part of something bigger than just their business. This motivation is often missing in corporate America and consumers took notice during the pandemic when businesses were shut down. Join us in the coming months as we begin to push this storyline as part of Main Street’s brand and identity. 


In closing, I’m a big believer that innovation occurs at the crossroads of people’s different backgrounds and experiences. While these are just some of my thoughts based on visiting with many of you and your communities throughout the year, please reach out and share your own observations. We will continue to monitor these trends and predictions for 2023 and look to incorporate our findings and your experiences into evolving and adaptable planning tools for your Main Street program's continued resiliency.


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