«Contesting the streets Volume 18, number 1 • 2016 U.S. Department of Housing and Urban Development | Office of Policy Development and Research ...»
At the founding of the ZL public market, seven anchor tenants accounted for around 10 percent of the market’s booths, roughly three booths for each. By moving their own operations into the market early in the relocation process, HSVU leaders were able to market the ZL public market’s development plan persuasively to prospective market vendors who might otherwise have felt uncertain about moving their business to a new, indoor public market.
Because street vendors rely on each other’s presence to draw foot traffic, after ZL street vendors were assured that certain anchor tenants’ customers would visit the public market, they became more willing to set up stores in the ZL public market. As more floating street vendors observed their friends and colleagues relocating, gradually they perceived the ZL public market as a potential business opportunity and decided to relocate as well.
After anchor tenants or ancillary market tenants committed to paying the rent and sharing market renovation costs, HSVU allowed them to sublease their booths to anyone at any price for however long they saw fit. This policy inadvertently created an informal market for ZL public market booths, which allowed market booths to be bought, sold, and exchanged between different subtenants. In addition, HSVU leader/anchor tenants became the largest landlords in this market.
Because of this flexible sublease policy, some anchor tenants thought of renting market booths and conducting their vending business in those booths as two different business decisions. By acquiring (or investing in) more market booths than they needed to conduct their vending businesses, some entrepreneurial anchor tenants anticipated the possibility of future sublease income streams from their spare market booths. The public market project capitalized the street vendor.
The anchor tenants did not move into the market because they were eager to cooperate with the city government; they joined the system only because of clear economic benefits and certainty that their dominant positions would continue to be guaranteed. The HSVU leasing policy offered them tangible financial benefits from the capital appreciation of market booths and potential sublease income.
Scale, Merchandise Mix, and Variety The large number (250) of vendors in the ZL public market was another asset to the market’s success. The vendors offered customers a wide variety of competitively priced products that prompted them to return for both specialized and basic items. One HSVU leader said, “As a rule of thumb, I personally think a successful public market must have more than 150 booths, so the products are diverse enough to draw people back.” The merchandise variety was further enabled by HSVU’s ability to allow market vendors to sublease their rights to sell in the market to anyone else on a daily basis—even at a higher daily rent than the market vendors had to pay to HSVU. This practice helped generate new types of
businesses and bring in new business owners to the market. This daily-lease strategy turned out to work particularly well for the fashion retailers. By subleasing their booths to other aspiring street entrepreneurs, particularly those in the specialty apparel, designer clothing, or chic accessory segment, 2 or 3 days a week, existing market vendors were able to add trendy new formats to their booths’ overall product portfolio. In fact, more than one-half of the “fashion vendors” in ZL public markets were subtenants.
These daily-lease subtenants were critical to the revitalization of the ZL public market in several ways. First, sometimes a subtenant’s business might fare even better than their “landlord’s” business. In these cases, these budding entrepreneurial subtenants, who were optimistic that their exclusive merchandise and/or superior service would continue to thrive, might decide to “purchase” the booth from their landlord and officially became a ZL market tenant. Second, when a certain type of product or service was already oversupplied, the mechanism could automatically adjust itself by discouraging market subtenants to lease space. The third benefit of this daily-lease policy was that the sublease tenant helped assure that all booths were operational, especially in situations in which the first tenant might need to be away for personal reasons. Vacant stalls are very conspicuous and hurt the market’s image. This daily-lease policy allowed subtenants to plug in to idle booths and maintain the sense of a bustling market.
Management Structure Both opinion leaders and anchor tenants acted as the main contact people for the ZL public market, and they were available whenever the market was open. They worked together with the HSVU board, overseeing the daily market operations, such as collecting market booth rentals and membership fees, enforcing market rules and regulations, and handling complaints and disputes.
HSVU leaders hired a full-time clerk, several guards, and cleaners to cover the daily operations of the ZL public market.
Because HSVU leaders were all street or market vendors themselves, they understood market vendors’ specific needs. Therefore, market vendors were more likely to support their leaders’ decisions, which in turn made it easier for HSVU leaders to implement new ideas and address new challenges. The management structure also allowed for quicker and easier input, which helped build market vendors’ trust of their opinion leaders, instill a sense of ownership in the market, increase communication, and create openness to the market’s governance structure.
In Situ Relocation At the beginning of the ZL public market’s planning process, the city government decided to build a new market building on a public space that was part of the original ZL street market. Thanks to its close proximity to the old street market site, the new ZL market was able to retain the social, commercial, and cultural networks of the old street market. As the literature review has shown, by locating the new market building on the site of the old street market, the city government helped sustain the new ZL public market not only by maintaining the support of a loyal customer base, which the old street market had developed for more than 50 years, but also by minimizing the impact on customers’ shopping and travel patterns. In addition, as we shall see in the next case, in situ relocation is a necessary but insufficient factor in sustained relocation and market operation.
Cityscape 57Weng and Kim
The Relocation Process of the Guan Dong Open-Air Market The GD open-air market first appeared in the eastern part of Hsinchu City in the late 1940s.
Management of the GD public market vendors differed from that of the ZL street market vendors;
whereas a vendor organization managed the ZL street market vendors, the city government managed the GD public market vendors. Roughly speaking, two types of vendors operated in the GD public market. One type was the GR vendor, and the other was the UN vendor. The city government assigned a civil servant to oversee the day-to-day business of the market, such as resolving disputes and collecting stall rents.
By the 1990s, as the population of Hsinchu City grew larger, the crowded and unhygienic conditions of the GD public market generated concerns that it might be detrimental to the city’s image.
In 2000, after successfully moving the ZL street market vendors indoors, the city government decided to build another new enclosed market building to accommodate the original GD open-air public market vendors. Armed with the knowledge and experiences from relocating the ZL street market vendors, the city government felt confident it could recreate “another successful ZL public market relocation experience,” as one civil servant recalled.
The government deployed the following best practices learned from the ZL public market.
• Relocation in situ. By setting up the new public market at the original site, the new market building could inherit an established customer base. The GD market vendors could avoid the unprofitable lag time of rebuilding their customer base all over again. So, according to the literature, one of the largest reasons for failure had been avoided: vendors were not relocated to distant locations but were kept in situ.
• Fostering a vendor organization. The city government believed that a self-managed public market would give vendors a stronger sense of ownership and incentive for the market’s success.
The Guan Dong Public Market Vendor Association (GDVA) was established as a for-profit legal entity at the general meeting and the vendors ratified the GD market bylaws. The first GDVA board of directors was elected in 2003. It was assumed that the GDVA would strive to further the common interests of its members, such as maintaining a clean shopping environment, attracting more customers, and increasing foot traffic. These assumptions later turned out to be wrong.
• User participatory design. The city government thought that a public market planned and designed with the involvement of its vendors would be more responsive and appropriate to vendors’ practical needs, thereby leading to more successful businesses. The GDVA was, therefore, fully consulted during the entire design and development process.
• The market building. The new market building was completed in 2006. The mixed-use fivestory building, which included two levels of underground parking, was built at the cost of 165 million new Taiwan dollars (3.5 million USD). The ground and second floors were designated as the new market, with 112 market booths, while the remaining floors were designated as a community activity center. The new market had a modern cargo elevator, two passenger elevators, an inclined moving walkway system, a central air-conditioning system, and a loading dock. In short, physically, the new GD market building was a scaled-down version of the ZL public market.
In the fall of 2006, the new GD public market opened. It did not generate the same amount of foot traffic as the original open-air market. The city government and the GDVA failed to recruit enough market tenants to fill the empty market stalls in the beginning—the total market booths were only 60 percent full. On the second floor, particularly, only 8 market vendors had moved in and the rest of the market booths (41) were standing unoccupied. As a result, the cash flow from the market booths rental did not match the investment scale of the market building either. Even though significant efforts had been made by the city government to encourage street vendors to move into the new market, a critical mass of vendors did not move in.
Major Findings About the Guan Dong Public Market Relocation Process Even though the lessons of relocating the ZL street market vendors had been applied by the city government, the result of the GD public market relocation process had been mediocre. Uncovering the reasons why the GD market was not successful despite mimicking the “best practice” ZL case is important for honing in on the reasons why the first case worked and learning more about the critical role of vendor organizations. As we explain in the subsequent sections, spatial regulations and enforcement importantly shape the economic viability of a property rights system within the market (see exhibit 2).
Management Structure and Membership Even though the city desired to work with a vendor organization and tried to foster one into existence, the main reason the GDVA failed was the problematic way that it was constituted. The government adopted a two-phased GDVA member recruitment strategy, which later turned out to be very detrimental to the market’s development. The city government invited the GR vendors to join the GDVA first and recruited the other UN vendors to join the GDVA later. All the GDVA leaders were GR vendors. The result of this recruiting bias was that the UN vendors and their interests were not well represented when the GDVA leaders were holding general meetings and ratifying the GD market bylaws, which were crucial in forging the market’s spatial and economic structure.
The city government gave first priority to recruiting the GR vendors because they had established a loyal customer base. The hope was that, after the GR vendors’ committed to moving into the market, their seniority and name recognition would help generate the anchor power to influence their customers and also the UN vendors to follow them into the market, as had happened at the ZL market.
To encourage the GDVA members to promote the success of the new GD market, the GD market bylaws required that the GDVA membership status could be granted only to the people who had fully committed to moving into the market. Because the city government used a two-phased tenant recruitment process, predictably the first recruited market tenants (that is, the GR vendors) were able to grab all the market booths on the first floor, and then left all the empty market booths on the second floor to the GDVA members who might (or might not) move into the market later.
Furthermore, under this system, only the GDVA members could change the GDVA bylaws.
Therefore, the UN vendors could not change the system unless they joined the GDVA first. Because all the market booths on the first floor had already been grabbed up by the GR vendors, however, if the UN vendors really wanted to change the way market booths were assigned, the only way they could achieve this aim would have been to first rent the market booths on the second floor of the market. None of the UN vendors decided to join the GDVA, and most of the UN vendors remained on the sidewalk where foot traffic is higher than it would have been on the second floor of the GD market.
Allocation of Market Spaces and Zoning While approving the GD market bylaws, the GDVA founding fathers also decided to abolish the GD market zoning code, so the GDVA members could freely choose the floor where they wanted to conduct their businesses. Right after the GDVA abolished the market zoning code, the GDVA leaders asked the city government to change the market floor plan layout, because all the GR vendors wanted to stay on the first floor and refused to go to the second floor.