Make an Internet Investment Pay
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This article was prepared for the February 6, 2002 edition of U.S.
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New Streetscapes Seek `Princeton Look’
Suburban sprawl and endless traffic are sending people
back into town and city centers. Seeking pedestrian access to work,
shopping, and entertainment, yuppies, young college grads, and empty
nesters are moving into downtown areas of mixed-use development. This
new trend brings new opportunities and challenges to developers and
retailers both in small towns like Princeton and in big cities like
Philadelphia, where the downtown residential population has grown
by 20 percent since 1960.
Encouraged by the demographic trend, developers are creating new
venues
for street front retailing. The Promenade at Sagemore, in Marlton,
is an example of a “lifestyle center” that features
landscaping,
open air, and an upscale tenant mix. The Washingtonian Center in
Gaithersburg,
Maryland, a Washington, D.C., suburb, created a “main street”
that includes a lake, a public square, dining, two large retailers,
many smaller ones, and parking garages.
Midge McCauley of Downtown Works (a division of Kravco in King
of Prussia, Pennsylvania) has been working on retail and street front
leasing for 20 years. Admitting that when she was young, she was
“trained
to shop,” she adds that she has always been interested in
merchandising
and fashion. McCauley believes that her broad liberal arts background
— a B.A. from Penn State and an M.A. from Temple University —
prepared her well for her mission: improving the quality of retail
on the streets.
A former teacher of language arts at the elementary school level,
McCauley happened on the perfect job many years ago: “I was in
the right place at the right time,” she says, “when the Rouse
Company in Columbia, Maryland, needed someone to look for quality
retailers.”
McCauley speaks on “Streetfront Retailing — A Trend That
Affects
Industry” on Thursday, February 7, at 11:30 a.m. at a meeting
of the Princeton Chamber at the Doral Forrestal. Also speaking is
James Paresi of the Paresi Design Studio. Cost: $35. Call
609-520-1776.
McCauley has lots of hands-on experience in developing retail areas.
Her firm is redeveloping two city blocks in Newark, including the
Hahne’s Department Store that has been sitting empty for 25 years.
Her firm is also developing the ground level of a major apartment
building, formerly a GE missile factory, for the University of
Pennsylvania,
and it is co-developing the an African-American owned strip center,
Progress Plaza, near Temple University. She offers a number of
suggestions
on the process for creating these old and new mixed-use models of
retailing:
Decide on a developer. McCauley believes Princeton waslucky having a single developer build Palmer Square. “It makeslife easier if one developer has control over a great deal ofspace,”she says. With a single organization controlling the merchandise mixof stores, the merchandise quality is generally higher than withindividually-ownedbuildings where every landlord has an individual agenda. Anotheroptionis a partnership like the 34th Street Partnership in New York, whichhas dramatically changed the quality of retail and the look of 34thStreet over the last 10 years.Determine the demographics and develop a plan. “Youhave to come with a plan for what you want the area to be,” saysMcCauley. Will it have universal appeal, or will it be dominated bystudents or older people? The next step is to create a merchandisemix that works for the expected demographic composition.Bring together the stakeholders. “It is verytime-consuming,”says McCauley, “but over time it can make a difference.” Shecautions that everyone will not cooperate at the beginning. “Butif you can get together enough people to get started,” she says,”it has a snowball effect.” People whose buildings areeyesoreseventually get embarrassed, and the supporters of the new projectgain the majority.Deal with financial issues. She believes that a successfulrevitalization eventually resolves the financing issue by increasingreal estate value and bringing in higher taxes and higher rents.Rehabilitate old structures and create new ones.Particularlyin city centers experiencing residential growth, developers arefindingit particularly cost-effective to do historical rehabs, says McCauley.”Philadelphia has wonderful old buildings,” says McCauley,”but during the fifties and the sixties, dreadful facades wereput on them, disparate from the original architecture.”Create a safe and attractive street environment. The last15 years have seen the growth of business improvement districts,public/privateentities developed to address quality-of-life issues in downtownareas.Funded by a special tax on all building owners within a district,these organizations pay attention to cleanliness, security,streetscape,and issues of homelessness. They may also market the area and tryto improve quality of the retail.Ensure sufficient attractive parking. “Today, whenparking garages are being built,” says McCauley,”municipalitiesare requiring that developers create retail shops on the streetlevel.”In these structures, parking begins on the second floor, and “thebottom level continues the street.” Citing unsightly parkinggaragesin Philadelphia in which razor wire is visible from the street, shesays that local governments are now asking developers of parkinggaragesto hide the cars and create something that is visually interesting.Train landlords to be proactive. McCauley spends a lotof time trying to educate building owners about the types of tenantsthey should be seeking. “Building owners must seek good retailersand convince them they should be in the area,” she says. Theymust change current leasing procedure, in which owners typically just”sit around and wait for the phone to ring”McCauley sees Princeton as a great example of mixed-usedevelopmentand emphasizes the importance of a 24/7 residential presence in aretail area. The result is light, activity, and security. CitingPrinceton’sactive, vibrant downtown, she observes, “towns around the countryare modeling themselves around Princeton.”— Michele AlperinTop Of PageMake an Internet Investment PayWhere do you go — instantly, without any thoughtat all — when you want directions to a new furniture store,tomorrow’sweather forecast, a great deal on a used DVD, info on how your lateststock purchase is faring, a last-minute birthday card for your niece,or a quick look at what’s in the news? The Internet of course. Whatin heck did we do without it? At home and at work, the ‘Net has becomeindispensable. (Take my refrigerator, my washing machine, my phoneeven, but no way will I part with my Internet connection.)The Internet is a dream come true for anyone who needs informationabout anything. But it has been a nightmare for many who have pouredmoney into the medium in much the same way that children pour waterinto the moats around their sand castles. So far, it has proveddifficultto keep all that money from running out, leaving little in the wayof profits to show it had ever been poured in.On Thursday, February 7, at 3 p.m. the Trenton Forum on InteractivePublishing looks at content on the Internet in its second seminar,”Interactive Publishing: A Look Back and a Look Forward.”Call 609-394-1325.Among the speakers is Thomas Baker, media consultant, a creatorof the Wall Street Journal Online, and former senior vice presidentof Work.com In a written statement he says, “The fact that anumber of successful business models for online publishers weredevelopedduring the 1980s and 1990s is often forgotten. There’s no questionthat the Internet has proven itself a powerful information medium.The challenge for many of us remains finding the most cost-effective,if not profitable, ways to harness its power. We’re going to lookhard at the industry’s successes to find the lessons we can applyto our work today.”Also looking to their experience and giving advice on how to profitfrom an Internet presence are Baker’s fellow panelists: CraigAllsop,CEO of Newtown, Pennsylvania-based Internet Publishing Group;CharlesBrady, president of myESP.com, an Internet community-servicescompany;and Anne Holland, publisher and managing editor of industrywebsite ContentBiz.comThe Trenton Forum on Interactive Publishing is organized by TrampSteamer Media (www.trampsteamer.com), an interactive publishingcompany headed by Mark Feffer, and by Thomas Edison StateCollege.Top Of PageLessons From Baby EinsteinIt’s a classic fairy tale: New mom with small bankaccountcreates a product to meet her baby’s needs — and cleans up. Themom is Julie Clark, a former English teacher and the mother of twolittle girls, who wanted them to experience music, art, and poetryright from the start. She came up with the idea of video tapes gearedto infants that would do just that.This thinking, and the initial product development, took place ina basement in Bedminister. Initial working capital was $5,000. Clark’shusband, Bill Clark, an entrepreneur who founded Optical DataCorporationin 1981 and sold it to Cox Communication in 1996, provided thebusinessacumen.The couple produced the first videos themselves in their home, usinga Mac. They borrowed no money, and took in no venture capital. Inits first year, 1996, Baby Einstein had sales of $100,000. Despitethe fact that the Clarks put little time into the company (a few hoursa month), had no staff, and did virtually no advertising, salesincreasedtenfold the next year, and up to $4.5 million the year after that.More than half of that $4.5 million was profit, Bill Clark says. In2001, sales totaled $17 million, and on November 2 of that year,Disneybought the company for an amount the Wall Street Journal put at $25million. (Clark says he is not allowed to comment on the sale price.)The couple have exchanged a New Jersey basement for a home in LoneTree, Colorado, but Bill Clark returns to the Garden State on Tuesday,February 12, for an 11:30 a.m. meeting of the Venture Associationof New Jersey at the Westin Hotel in Morristown. His topic: “TheSaga of a Serial Entrepreneur: From Optical Data to Baby Einstein”Cost $45. Call 973-631-5680.Listening to Clark, fresh from a business trip to L.A. and soundingrelaxed and happy in his Colorado home, the story of Baby Einsteinsounds too good to be true. But the company’s success, in at leastsome part, is the result of hard lessons Clark learned from his firstbusiness venture.”Optical Data was a venture-backed company that was troubled for15 years,” he says. He founded the multimedia publishing companyin 1981 while he was working on his second college degree, abachelor’sin physics from Drew (Class of 1991), which it took him 10 years tocomplete because he started his company when he was still six creditsshy of graduation. His earned his first degree, in journalism, fromSan Diego State, in 1974.Optical Data was a New Jersey corporation that was headquartered inWarren before Cox acquired it and moved it to Atlanta, where Clarkstayed on for a short time before accepting a post as president ofthe Entrepreneurial Education Foundation in Denver. Among OpticalData’s problems, he says, is that it was always undercapitalized.The corporation was a groundbreaker, he says, the first to sellmultimedia,non-textbook, basic curriculum materials to school districts.”We were forward positioned,” says Clark. “Wemiscalculatedhow willing the world was to change.” In addition, the cost oftraining educators to use the new materials was high, and the responseof standard textbook companies was swift. “We thought we woulddominate the next generation of publishing,” Clark says of thecompany’s dreams. This grandiose thinking is common among start-ups,he says, and is often fatal.”It was a mistake,” he says. “We should have stared atour balance sheets rather than at our press clippings.”This hard-won experience stood Clark in good stead when, after a yearas its president, he left the Entrepreneurial Education Foundationto join his wife in building Baby Einstein. Here are some of thereasonshe gives for the phenomenal success of that enterprise, with whichhe and his wife remain associated.Start with a good idea. The concept behind Baby Einsteinis that little humans who can not yet walk or talk — let alonebeg for the latest Rug Rats movie on DVD — are capable ofenjoying,and learning from, videos. But only if the video is created for theworld in which they live. Backgrounds need to be simple, preferablyblack and white, and pictures need to fill the entire screen because,Clark explains, babies do not have well-developed peripheral vision.Material must be kept simple, and short. For the mega-hit Baby Mozart,for example, the Clarks did not use a full orchestra, but rather asound designer and “a couple of classically trainedmusicians.”And the first movement was trimmed from six minutes to one to fita baby’s attention span.In understanding what babies like, the Clarks created a buzz froman audience that, for the most part, is not yet able to say much morethan “dada,” if that. The pint-sized critics gave the Babyvideos rave reviews by saying nothing. Adults who have observed tykeswatching the videos report that they do not squirm or fuss. They sit,or lie, transfixed.This reaction, of course, is a striving parent’s dream. Even parentswho recoil from the tube under nearly every circumstance are delightedto have their babies get a leg up on the rest of the pre-nurseryschoolset by absorbing classical music and art via video.Distribute wisely. At the very beginning, the Clarks soldtheir videos by mail, stuffing them into mailers and licking stamps.In the first year, they did $100,000 worth of business this way. Inthe second year, they signed a one-year, exclusive contract withupscalespecialty toy retailer Right Start. “It was the right move,”says Clark. In the store’s well-heeled, education-conscious(obsessed?)clientele, Baby Einstein found its perfect customer base.When other retail outlets were added, they were of the same caliber.Zany Brainy, for instance, sells the videos. Presumably, casting theenrichment tools before the masses at supermarket checkout lines andin discounters’ bins would lessen their appeal among their targetmarket.Pick a great name. The name “Baby Einstein” wasJulie Clark’s idea. Bill Clark says his reaction was “you’recrazy!”Now he gives credit to his wife’s insight. “She’s the Englishmajor. I’m the physicist,” Clark says to explain his wife’superiorinsight into the power the name conveys. Who was more brilliant thanEinstein? And what do conscientious upper middle class parents seekfor their children more than brilliance?Protect that name. In fact, be scrupulously vigilant inprotecting every scrap of intellectual property. Clark says hiscompanybegan using the Baby Einstein name without obtaining permission, butsoon heard from Hebrew University in Jerusalem, to whom the greatman bequeathed rights to his name. There is now a body of post-mortemlaw governing the use of the names of even long-deceased persons.Clark doesn’t think his company broke any of them, but neverthelessstruck a licensing deal with Einstein’s estate.From that point on, Baby Einstein used expert legal representationto trademark every one of its titles. So diligent was the companythat, says Clark, the U.S. Trademark office will not give any othercompany rights to any name that combines the word “Baby” withthat of a famous person. Other companies have tried, but have beenrebuffed. This lock on the names was a big reason that Disney wantedto buy the company, says Clark.Build slowly. Zero to $25 million in five years may notseem like a slow rate of growth, but Clark says he and his wife werecareful to keep cash flow ahead of growth, and to resist the urgeto release too many videos. It is unusual for a start-up to fuelitselfentirely from product sales, but that was a prime goal. The companybuilt its profits steadily, but without moving so fast that it hadto incur debt.Plan an exit right from the start. Clark was sorry hehadn’t gotten out of Optical Data Corporation long before he did,and was not going to make the same mistake with Baby Einstein. “Ayear in,” he says, “I sat down with Julie and said `if thiscontinues to grow, it will require added investment, more staff.’”The couple asked themselves whether they wanted the life that wouldgo along with that commitment. With two small children, who Clarksays are their number one priority by a wide margin, they had notroublearriving at a quick answer.The plan would be to build a strong balance sheet, lock upintellectualproperty rights, and find a buyer.Have fun. Remarkably, building this business took littleof either of the Clarks’ time, leaving them free to focus on theirtwo children. Aspen is now seven, and her sister, Sierra, is four.Both Clarks are staying on with Baby Einstein. Julie Clark willwrite books and videos for company, and Bill Clark will help withthe business transition. In addition, he looks forward to puttinghis multimedia background to use on some online projects for Disney.Now, if only the couple would put out an instructional videoshowing would-be entrepreneurs how to duplicate their success —and their family-centric Colorado lifestylNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
