From the October 1998 issue of Entrepreneur

In 1992, business owners along Belmont Shore's main street shopping district were excited. While a recession was still gripping the rest of Long Beach, as well as most of Southern California, the retailers saw what they believed was a major sign of progress.

The Gap had moved to Second Street.

"That cracks me up now," says Debbie Parker, who operated Cherubs Children's Apparel across the street from the Gap at the time. "We were all so excited; we felt like we'd been `found.' We didn't think there would be a downside to chains. But was there ever!"

After 11 years on Second Street, Parker was forced out of business earlier this year when her landlord refused to renew her lease, opting instead to rent to a Mexican fast-food chain, Baja Fresh, for $20,000 more in rent per year.

Now the same beachside businesspeople who were excited six years ago fear their eclectic, boutique community shopping area will soon have all the character of a suburban mall. Chain stores and restaurants are moving onto Second Street in waves, and small-business owners feel they're being swept out to sea. A partial list of national and regional chains in Belmont Shore includes Rite Aid, Jack in the Box, Johnny Rockets, Banana Republic, Frame-n-Lens, Kinko's, Jamba Juice, Sunglass Hut and Starbucks.

Of course, Belmont Shore is far from alone. Independent business owners nationwide are seeing chain stores moving out of suburban malls or "big box" shopping centers and onto Main Street to compete with their businesses. The reason is simple: That's where the customers have gone.

That means increased competition for both customers and space, but it doesn't mean small-business owners should roll over and play dead. Belmont Shore's 15 blocks of retail space are filled with retailers who have fought back against the chains, found a market the big stores can't fill and discovered ways city officials could help. As a result, many of these stores have prospered. Not all have survived, and none believe the battle is over, but business owners in this area are learning to adjust to the changing face of retail.


Kurt Helin is the editor of two weekly newspapers in Long Beach and is a Belmont Shore resident.

Old-Time Main Street

The Belmont Shore district is nestled on the east side of Long Beach, the fifth-largest city in California. Second Street cuts through its heart and has been the home of a strong retail community since the turn of the century. Its demographics would make any retailer drool: 15,000 people live within walking distance of the shopping district, and the average household income is nearly $60,000.

But what business owners and residents feel makes the area special is a sense of community mostly lost in big cities. "The Shore" is the heart of a city whose small-town feel once earned it the nickname "Iowa by the Sea." People in Belmont Shore know their neighbors' names, host community pancake breakfasts and like walking to the corner store to do their shopping.

They also like to know their retailers by name. Trying to sit outside Polly's Gourmet Coffee with owner Mike Sheldrake for five minutes without being interrupted is nearly impossible. Coffee connoisseurs stop and ask Sheldrake about his golf game, about news from former employees and where he's going on his next vacation. They also ask how business is, with a hint of concern in their voices, because Starbucks has moved in a few doors away.

Polly's has been serving (and roasting) gourmet coffee on Second Street for 22 years, back before anybody knew a latte from a cappuccino. "We'd give anybody who walked in the door those first days a free sample, and their eyes would light up with this where-have-you-been-all-my-life look," says Sheldrake, 51.

When the gourmet coffee trend hit, restaurants and bakeries in the area started serving espressos, but actual coffeehouse competition stayed away from Second Street at first. The first Starbucks came in 1994 but was located nine blocks away. Although Polly's saw a 10 percent drop in business, Sheldrake says he understood that people who live 12 blocks from Polly's now had a coffee shop just three blocks away.

In February, Starbucks opened a second store on the street, just one block from Polly's, or, as Sheldrake puts it, "a sand wedge away." The move angered some area residents, who wrote to the local paper complaining about Starbucks trying to crush independent business. Sheldrake, however, saw Starbucks' arrival as an opportunity.

"I knew people would come here because they were mad at Starbucks, but I also knew that would only last a few months," he explains. "So I hired a sales and marketing manager. We brought in new signs, expanded our product range, put in new lighting and increased advertising."

More important, a 35-hour training program was implemented for employees--even those already working in the store. After the training, staffers had to pass a 110-question test designed to improve customer service and create a more knowledgeable staff.

The strategies worked. Since the second Starbucks opened, Polly's sales have increased more than 20 percent.

Sheldrake says too many small-business owners see chains moving in and start cutting back. "I knew that would be the kiss of death," he says. "If we wanted to survive, we had to do things that put us on the next level."

A Niche In Time

While Sheldrake has been able to compete head-to-head with chains, that's not an option for every small business. That was the situation Dodds Book Shop faced when megabookstores began moving into the Belmont Shore area.

Dodds has been a fixture on Second Street since 1965; for the first six years, the bookstore operated under different ownership under the name Lordans. Current co-owner Kim Browning, 68, who has worked at the store for 30 years, describes Dodds as the quintessential independent bookstore, with a mix of bestsellers and hard-to-find books on topics of interest to Belmont Shore residents. Books on sailing make up a large part of the sports section, and there's no shortage of books on metaphysics.

Just before the 1996 holiday season, both Barnes & Noble and Borders bookstores opened up shop in the area. While neither chain is on Second Street, both are within a five-minute drive in recently revamped outdoor shopping centers. "We felt an impact immediately," Browning says. "There was a significant drop in business."

Such a drop--which lasted for nearly two years--would be enough to send many small-business owners packing, but Browning said she knew the first thing she needed to do was stay in business.

"Most independents know if they can hang in [there] for two years, people will come back," Browning says. "But that's a long time to hang in there. We're just beginning to see people come back."

To draw customers, Dodds intensified its focus on topics their local clientele was interested in and worked to improve customer service. Dodds can't compete with the discounts the big chains offer on the latest Tom Clancy or John Grisham novels, but Browning contends she and her staff have a better feel for what people in Belmont Shore want to read.

Browning's staff is another key reason sales are recovering. All Dodds employees are full time, most are college graduates and all are avid readers. "That means we can do things the chains can't," Browning says. "[For example,] if you come in and say you have a 56-year-old uncle who likes this or that subject, we can recommend a book he'll like--and it probably won't be off the bestseller list."

Dodds is experiencing somewhat of a comeback, although the growth is not as consistent as it was in the pre-chain days. But things are getting better every month, Browning says--a good reason to keep hanging in there.

Struggle For Space

Browning is quick to credit her landlord, Leland Garrison, as one reason Dodds has survived. Garrison is a resident of the area, has his own business across the street from the bookstore and is a big fan of Dodds.

Not all landlords are as supportive. The fight for retail space can be as intense a competition as the struggle for customers. Parker, 43, learned that the hard way with her children's clothing store, Cherubs.

The store had been open for four years when Parker bought it in 1987, and she ran it for another 11. It did well because it was one of only a handful of children's clothing stores in the city, and the only one on Second Street, Parker says.

Her landlord, who lives outside the area, warned her last year that when her lease came up for renewal, he might not renew it, bringing in a chain restaurant instead. Parker doesn't blame him for the decision. "If I were a landlord and could bring in a tenant that was as stable as what was there before and could offer $20,000 more per year in rent, I'd take it," Parker says.

Cherubs' closing came as several other small businesses were being pushed out or bought out by chains. Gone was Egyptian Pharmacy, the oldest business on Second Street, replaced by Rite Aid. Gone was Howie's Market, a local grocer, replaced by diner chain Johnny Rockets. At press time, Koo Koo Roo was headed to the street, and another five restaurant openings were planned.

The rash of closings brought together three groups notorious for not working well together: residents, the Belmont Shore Business Association and a group of local property owners. All three groups knew that keeping the flavor of Second Street would require not only their cooperation but the city's help as well.

Take It To City Hall

"There's always a need for chain stores in a district like Second Street," says Frank Colonna, who, for eight years, was head of the Belmont Shore Business Association and in June was elected to the Long Beach City Council. "They bring in a national marketing presence and a karma that validates the area. But there needs to be a balance, and along Second Street, we were losing that balance. The business mix was changing."

In March, at the insistence of the three groups, the City Council passed a moratorium lasting through December 31, 1998, that bans new restaurants from opening on Second Street. During that time, city officials will work with the groups to see what can be done to keep a balanced business mix.

Perhaps the biggest concern for retail business owners was the increasing number of fast-food establishments or restaurants specializing in food to go. "Their food is to go, but we want people to stay and walk around," Colonna explains.

Representatives of the three groups are working with Colonna on a Planned Development Ordinance for Second Street. The members are considering the use of tighter parking restrictions to discourage property owners from converting retail sites to restaurants, says Colonna; that will help keep the business mix balanced. The three groups have given themselves six months to develop the ordinance; a tentative plan is expected by late fall.

While the ordinance may maintain a balanced business mix, it can't force a landlord not to rent to a chain. Polly's Sheldrake says Second Street's business owners had better get used to competition from chains because they are not going away. Independent stores that survive, he adds, will do so because they are run efficiently.

Even chain competition is not enough to discourage new small-business owners from giving the Belmont Shore district a chance, however. "The active lifestyle of the residents drew us to the area," says Thom Lacie, the manager of Runners High, a running shop that opened on Second Street in November 1997. "Part of the community here wants specialized stores; they like the personalized service."

Sales at Runners High have greatly exceeded Lacie's pre-opening expectations, he says, and when asked what is key to his business' success, he falls back on that old cliché: "Location, location, location."

Contact Sources

Frank Colonna, http://www.shorehomes.com

Dodds Book Shop, 4818 E. Second St., Long Beach, CA 90803, (562) 438-9948

Polly's Gourmet Coffee, pollys@pollys.com, http://www.pollys.com

Runners High, 5375 Second St., Long Beach, CA 90803, (562) 433-7825