Total taxable sales on the Third Street Promenade rose 4.2% last year while the city’s other shopping districts, Main Street and Montana Avenue, both saw a roughly 3% drop in sales.
The Promenade’s sales increased every year between 2010 and 2015 as the retail market recovered from the recession, but the growth of online shopping precipitated 5.5% and 2.9% drops in 2016 and 2017. Sales last year were the highest they’ve been since 2015, indicating that the district is adapting to consumers turning away from traditional retail.
Officials said changes in strategy will be crucial to sustain not just businesses, but municipal services. Sales tax from brick-and-mortar businesses is a key source of revenue for the city of Santa Monica, which is planning to tighten its belt over the next decade in anticipation of stagnant sales.
Jennifer Taylor, an economic development administrator with the city, said she thinks Downtown Santa Monica, Inc. (DTSM), the area’s business improvement district, developed several plans in 2018 that made a significant difference in sales.
“DTSM was really being proactive about reimagining how to activate the Promenade in new ways,” she said. “They started to do more pop-up activities and creative activations to attract foot traffic.”
The new Tesla dealership and the reopened Apple Store also garnered a high volume of sales, Taylor said.
Santa Monica Place brought in 4% more sales last year, about the same as the Promenade. The mall’s sales have been uneven in the last several years and fell 11% between 2016 and 2017.
Taylor said some new and popular tenants opened in the mall last year, like Uniqlo and Peloton, and interactive concepts like the Cayton Children’s Museum and Tyra Banks’ Modelland are bound to both bring in sales themselves and lift up other retailers and restaurants.
The rest of downtown Santa Monica experienced a record 17.5% growth in sales. For the last several years, sales in the area were growing by about 1% to 2%.
Lots of new restaurants and businesses opened downtown last year, Taylor said. In late 2017 and 2018, the Laemmle Monica movie theater, Uovo, HiHo Cheeseburger and Elephante opened on just one block of 2nd Street.
The rapidly growing workforce of Silicon Beach is supporting businesses in downtown Santa Monica, she said. Many workers are in centrally located co-working spaces, such as WeWork, which opened two locations downtown last year.
“There are a lot more people working in the area and going out for lunch, coffee, happy hour and dinner,” Taylor said.
Other commercial districts aren’t getting a Silicon Beach boost, however.
Montana’s sales fell by 2.7% last year and dropped by 1.4% the year prior. Heidi Hennig, the merchant outreach coordinator for the Montana Avenue Merchants Association, said the rise of online shopping is hurting the walkable, upscale shopping district. She said the association is planning on holding as many events as possible to attract foot traffic to the neighborhood.
“A lot of businesses did close last year,” Hennig said. “It’s the increase in online shopping. It’s insane.”
Taylor said the street’s traditional retailers may be closing, but they’re being replaced by restaurants and beauty studios, which consumers can’t find online.
On Main, which saw a 3% drop in sales last year and a 12.7% decline since 2015, several restaurants opened and closed relatively quickly and some have remained closed for years, said Anthony Schmitt, chair of the Main Street Business Improvement Association.
He said he thinks the association needs to work more closely with landlords and the city to help new businesses succeed and lessen some of the restrictions included in their leases, such as early closing times and outdated parking requirements.
“Downtown is looking at reinventing itself to be more of an experience space instead of just retail, and DTSM has the budget to address that,” Schmitt said. “We’re just a little street, and we appreciate the charm and unique quality that we have, but we will need to form partnerships with our community to sustain that.”
Taylor said she thinks the city’s merchants associations and business improvement districts can’t stem the inevitable changes associated with the growth of online retail, but they can adapt to it by reevaluating the appeal of their shopping districts and what consumers want.
“Having the associations and BIDs really seems to make a difference in weathering the storm of what we’re seeing in retail trends around the country and the world,” she said.