The Cost of Doing Business in Haddonfield

(Editor's Note: This is the first installment of a two-part series examining the relationship between Haddonfield's retail district and the Partnership for Haddonfield, the nonprofit corporation created to provide support for local businesses.)

From 2000 to 2007, Ken Scott and Fern Laberge operated Nakona, an apparel shop on Kings Highway that sold boutique brand clothing and footwear.

When the couple first considered opening up in Haddonfield, there were no business incentives for new retailers and no specially designated business improvement district. In fact, there were at least three other suitors for the storefront about which they’d inquired. The asking price was steep, but the property—and the town—seemed like a market in which they would be well-positioned to succeed.

But after eight years, Scott says, the money that they thought they’d find in what was billed as one of the most vibrant downtown districts in South Jersey seemed to have dried up.

“There’s a misconception out there that it’s actually a walking town, that you get a lot of walk-in traffic, but you don’t,” he maintains.

Scott says a lot of his customer base was composed of Haddonfield regulars, but also from people who traveled from as far away as Cherry Hill and Blackwood.

“We became a destination because the customers came back just to see Fern,” he says.

Scott operated the Freedom Surf Shop in Long Beach Island for 25 years and is no stranger to retail business. He says he had considered opening a store in Haddonfield years before he eventually did.

Eventually, although Nakona was making money, “it just wasn’t enough,” he says. Worse, Scott and Laberge's efforts to make it work in Haddonfield had squashed their hopes of relocating someplace else.

“By the time we got out of here, we didn’t have enough [capital] left,” Scott recalls.

In 2004, the borough established the Haddonfield Business Improvement District (BID), a commercial zoning area within which additional taxes are levied on property owners to fund townwide shopping and cross-promotional efforts.

At the same time, Haddonfield also established a management corporation, the Partnership for Haddonfield (PFH), to oversee the use of these funds. In 2010, the PFH tax totaled a quarter of a million dollars, or 65 percent of its budget; another 26 percent, or $101,357, came from a percentage of its prior year surplus.

What many Haddonfield residents and business owners may not understand exactly is how these funds are spent or the strategies that govern their distribution.

Even Scott, whose store operated both before and after PFH was incorporated, doesn’t understand why the town is paying to recruit new renters.

“It almost makes sense in a bad economy to have somebody go out and look for people, but that should be the landlord’s responsibility,” says Scott.

“If Haddonfield does it right and builds it up, you don’t have to bring people in. I would spend that money on events,” he says.

Haddonfield Patch took a look at some of the common questions that business owners ask about the operations of PFH, including its calendar of events, retention and recruitment efforts, incentive programs, and the ways in which it seeks to address some of the myriad challenges that retailers in town face in the current economic climate.

Bang for the Buck?

Lisa Hurd is the retail coordinator and chief overseer of the Partnership for Haddonfield. 

Citing the Colliers International Philadelphia Retail Survey (June 2011), Hurd says that the commercial vacancy rate in Southern New Jersey, "which represents all types of retail," is 9.7 percent.

"The overall vacancy rate for neighborhood centers like Haddonfield was 15.3 percent," Hurd says. "We’re at 5 percent."

The overall New Jersey retail vacancy rate is anywhere from 7-8 percent, with the greatest areas of strength in the northern parts of the state, according to reports from The Goldstein Group and New Jersey and Company.

Hurd also claims that of the 200 or so businesses that operate in Haddonfield, two-thirds have been in business for more than five years (133), and half of those have been in town for 20 years or more (67). She describes the borough's 6 percent annual business closing rate in town as “exceptionally low for a main street business district.”

“More than half the spaces that turned over in the past two years have been leased within a month,” Hurd says. "We have about 10 vacancies, and only one of the vacancies is on Kings Highway."

Last year's PFH annual report states that the business turnover rate in Haddonfield declined to 3 percent in 2010, "the lowest level since 2007," a year in which 20 new businesses opened against six closing.

The report states that three of the new arrivals in 2010 were recruited by Hurd, including soap makers Duross and Langel, with whom Hurd has had some very public exchanges. Patch contacted Steve Duross, whose business Hurd had courted for Haddonfield for about five years. He offered some clarification on his dealings with Hurd and on .

“There were two different issues that got collapsed into one," Duross says. "One was the issue I had with the Partnership for Haddonfield, Lisa Hurd in particular, and the second was the economics of my business and how it wasn't a good fit for Haddonfield. They’re two different stories.

“I’m not blaming Lisa for the lack of our success," he says. "I should have done my homework better. That's on me.

"However, the picture that was painted for us, the things we were told, and the blatant disregard for the actual truth—that’s where I have a problem with the Partnership, and specifically with [Hurd]. She painted a picture for us that was incapable of coming true. And I just don’t want her painting that picture for someone else," Duross says.

“What makes my business successful in Philadelphia is foot traffic. Haddonfield is car traffic,” Duross says. “Haddonfield exists for the great schools and the beautiful homes; the downtown district is not a destination.”

Duross added that even his landlord, Guy Elzey, was hesitant to rent the storefront to him for the business risk.

“He's been great to us," Duross says, "but as impressed as he was with our business plan, he did not believe that our store could succeed in Haddonfield."

Hurd says she worked with Duross "very closely through his opening and the first five months of his operation, fielding his questions, advising him of opportunities to get involved, directing him."

"He got a lot of attention," she says. "I don’t know why he’s taking this tack.

"While there’s a small group of very vocal retailers expressing concerns with the Partnership, we would be happy to address them," Hurd says. "Be part of the solution. Go to the people who can help you resolve them and work with them directly."

As far as the idea that property costs are prohibitive in Haddonfield, Hurd says that Downtown Works, the consultancy group that established the blueprint for the Haddonfield BID told PFH in 2004 that town rents were “if anything, low,” and remain comparable to those in the former Garden State Racetrack development area, The Promenade on Route 73, and the Cherry Hill Mall.

Hurd estimates that retail square footage in Haddonfield is “on average, probably $20-$23 a square foot,” but that rents also vary depending upon the size of the storefront.

However, Scott says leasing prices in Haddonfield are “astronomical.”

“I think that when The Promenade (on Route 73) first opened, they were getting $35 a square foot, and we were almost paying $30,” he says. “There was no negotiating, no nothing.

“I know it gave us a false sense of security,” he says. “If the value’s that high, and all the stores are rented, and there’s three people who want the store, then there must be some business there.”

Special Events Drive Traffic

The principal dedication of the PFH budget is “to promote the growth of the town and the successes of the businesses in the town,” Hurd said.  

A key function of that promotion is in the 10 or so PFH-sponsored annual events, which Hurd says are “mostly geared toward a broad audience,” and include the craft fair, sidewalk sale, holiday candlelight shopping and First Friday.

To these, PFH last year added the Haddonfield Wedding Walk bridal show, Dish and Dazzle informal modeling show, and Girls’ Night Out spring fashion shopping event.

The craft fair is by far the single most lucrative PFH event of the calendar year, adding $32,000 in revenues to its coffers against a budget of $39,105 for all other events. (This excludes $7,000 in specially appropriated “business support” for its March Girls’ Night Out event in 2010).

“We have budget constraints to some degree,” Hurd says. “To the extent that we want to run a quality event, at some point, to add events, we may have to subtract other events or ask for participation by sponsors.”

“Everything that leads up to Christmas is to pay for the rest of the year,” says Scott, who thinks “the PFH is actually something that’s underdone.”

“Events should be going on all the time in Haddonfield just to make the town more appealing,” he says.

Hurd describes the ideal Haddonfield shopper as “female, 25-50ish,” and the events PFH heads up are aimed at that demographic.

“Women are the shoppers, and that’s who we’re targeting,” she says.

Hurd’s goal is for the mix of stores PFH is working to attract to bring people downtown “once in a while to get a gift” but also “once or twice a week.” She compares the Haddonfield downtown with those of Red Bank, Westfield and Princeton, NJ as well as with Wilmington, DE.

To fulfill those aims, Hurd is following the recruitment blueprint as established eight years ago by Downtown Works. The retail strategy it proposes specifically advises Haddonfield to recruit retailers who specialize in “apparel, shoes, cafes, cosmetics and home furnishings,” Hurd says.

With such a variety of stores within those categories, Hurd says, a little overlap is all but unavoidable.

“There is absolutely no business in town that could not compete on some level with another,” Hurd says. “Virtually every retail category you could imagine is already open in Haddonfield.”

Hurd says that she although she never seeks to recruit “a store that would line-for-line compete with another business … the more you cluster similar businesses, the better it is for everybody.” She says she also works to help Haddonfield retailers relocate as needed within the borough to limit vacancies in town.

Still, Scott says, landlords rent to the prospective tenants they meet, not necessarily the ones that are ideal for Haddonfield.

“Competition is natural; it's unavoidable,” he says. “You’ve just got to sharpen your pencil and be one better.”

Coming Tomorrow: A look at how the Partnership for Haddonfield spends its money.