Chain Reactions

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."

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This article was originally published in the October 1998 print edition of Entrepreneur with the headline: Chain Reactions.

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