WESTSIDE / COVER STORY : Signs of the Times : Many Cash-Strapped Public Entities Have Opened Retail Outlets to Supplement Their Funding
Where should a cash-strapped museum or public television station turn for extra funds?
The mall, of course.
In malls across the Westside, nonprofit groups and public organizations are setting up shop, selling everything from museum posters and educational puzzles to city traffic signs and coroner’s toe tags.
The trend is very much in evidence on the Westside. Among those turning to retailing at local malls: public television station KCET, the environmental group Heal the Bay, the Red Cross, the Museum of African Art--even the Culver City Chamber of Commerce.
Some criticize the commercialization, arguing that the competition for retail dollars may undermine the often high-minded missions of the groups involved. There are also questions about the bottom line--it is not at all clear whether such retail sales will ultimately provide a reliable stream of revenue.
But the new breed of mall retailers say their ventures, dubbed “social capitalism” or “philanthropic economics,” could prove crucial, helping to boost their visibility and finances amid declining public and private funding for government and nonprofit agencies.
Those efforts have taken on urgency with the election in November of a Republican-controlled Congress that is expected to reduce federal spending for public broadcasting and the arts. But nonprofit entrepreneurship has been gathering momentum since the early 1980s, experts say.
“Over the last 15 years, since the Reagan tax cuts and federal grant cuts to nonprofits, there has been an effort for nonprofits to generate their own dollars,” said Patty Oertel, executive director of the Center for Nonprofit Management, a Los Angeles-based group that advises nonprofit groups. “Nonprofits’ needs were the same, so it has led to more entrepreneurial endeavors. With the success of museum stores, there is some proof that it works.”
Indeed, museum stores have led the way in what might be called “nonprofiteering.”
One longtime practitioner is New York’s Metropolitan Museum of Art, which opened its first museum store in 1910 with the dual goal of raising funds for educational programs and museum operations. The merchandise ranges from 50-cent Monet postcard reproductions to $450 replicas, in molded stone, of a Roman sculpture depicting a satyr.
Many museum stores scrape by, but the Metropolitan Museum of Art stores have been successful. Nationwide, the Met’s 16 stores generate about $82 million in gross sales a year and constitute the greatest source of new museum members, said according to John Curran, vice president of merchandising activities for the Metropolitan Museum of Art shops.
The museum opened a store in Century City mall in 1990, the same year it opened one in South Coast Plaza.
“We are successful because of the quality of the reproductions and because of the museum’s cachet,” Curran said. “The founders of the museum were really businessmen and they knew that the way to expand the museum educationally was to sell well-priced fine art reproductions, something we invested in right from the beginning, whereas other museums didn’t.”
Many others are now trying to follow suit. On the Westside alone, at least half a dozen stores have opened in malls or shopping centers since 1990.
Indeed, the rush can make for strange commercial bedfellows. Between Thanksgiving and Christmas, the Museum of Contemporary Art and the Gene Autry Western Heritage Museum shared a temporary storefront in the Edgemar outdoor shopping area on Main Street in Santa Monica. Such was the store’s success that MOCA officials say they are exploring the possibility of opening a permanent retail store on the Westside.
Public broadcasting stations, which compete fiercely for donations, viewers and listeners, have also entered the retail fray. Learningsmith, a seller of educational merchandise, opened in Beverly Center in April and is affiliated with KUSC (91.5 FM), a public radio station operated by USC. The company, co-owned by WGBH-TV and a venture capital firm, pays royalties to KUSC in return for the use of the radio station’s name.
One of Learningsmith’s chief competitors is the KCET Store of Knowledge, a Carson-based company partly owned by KCET-TV (Channel 28), which opened a store in Santa Monica Place in September--its fourth. KCET did not invest money in the store but receives a third of the store’s profits in return for the use of its name.
Both stores are highly polished, with an array of interactive computer programs, big-screen televisions, hands-on displays and sales personnel trained to inform shoppers about the products. Shelves are filled with products ranging from instructional dinosaur skeleton assembly kits to New Age Zen rock gardens.
“We control and influence the type of products in the store so that we can be sure the lifelong goal of learning is realized in the store,” said Barbara Gowen, vice president of public information for KCET.
Gowen added that the station cannot expect much in the way of public funding, especially with Rep. Newt Gingrich’s ascension to U.S. House Speaker. Gingrich has recommended cutting federal funding for public broadcasting.
“KCET has a need and desire to think in a much more entrepreneurial way in the next millennium,” she said. “Our goal is to establish an endowment. We contribute our name and reputation. We will not see any (revenues) for a number of years, because we are reinvesting the money into stores.”
Some experts see potential pitfalls in such strategies. Susan Monaco, director of research at the Center for the Study of Commercialism in Washington, said that when public broadcasters embark on retail ventures with private business partners, they make themselves more vulnerable to outside pressure. Already, she says, they are risking commercial influence by relying increasingly on corporate sponsors for programs.
“As public stations become more dependent on corporate money, they run the risk of not being able to show programming that might offend,” Monaco said.
Riordan, Lewis & Haden, a venture capital firm that once counted Los Angeles Mayor Richard Riordan as a principal, is one of KCET’s two partners in the store. The third is Lakeshore Learning Inc., a Carson-based retailer that generated $90 million in revenues in 1993 through its six stores and a catalogue business.
Elizabeth Hansen, spokeswoman for the KCET Store of Knowledge, says that KCET’s corporate partners in the retail venture pose no threat to the station’s independence. “There are many corporations that underwrite programming on KCET,” she said. Store of Knowledge partners “are treated like any other underwriter.”
Others question how nonprofit organizations will fare in the fiercely competitive commercial market. Indeed, Heal the Bay’s attempts to set up a year-round retail store have failed. The group now opens a holiday store for about eight weeks during the Christmas season at Santa Monica Place.
However, Jon P. Goodman, director of the entrepreneur program at USC, expects nonprofit retail ventures to persevere. She says that their charitable nature, far from a drawback, is a powerful marketing tool.
“There has been a radical change in attitude about business since 1989-90,” Goodman said. “People are much more interested in lifelong causes and being a valued member of the community. Not-for-profit organizations are being more responsive to what the market wants. They are making people feel good about what they are buying. If a consumer is interested in whales, they might as well buy something that benefits whales.”
That appeared to be the attitude of Wendy Anderson on a recent Saturday as she shopped for children’s gifts at the Metropolitan Museum of Art’s Century City store. “I shop here for the same reason that I buy Newman’s Own products--part of the profits go to charity,” said Anderson. “With all the rubbish around, if I have a choice about where my money goes, I will exercise it. The merchandise also has some history and some meaning. It’s not just plastic Power Ranger stuff or things made in Taiwan.”
In some cases, nonprofit mall retailers are attracting business by offering offbeat goods. Culver City’s Chamber of Commerce took its cue from the cities of San Diego and West Covina, among others, which have opened retail stores that sell street signs, parking meters and other municipal castoffs to bolster city revenues.
“We realized that the chamber needed to get out of the business of fund raising for the sake of raising funds and find a new approach,” said Steve Rose, Culver City Chamber of Commerce president. Rose said the chamber owns and runs the store, called City Backlot, in the Fox Hills Mall. The chamber buys merchandise from Culver City and sells the items at the mall. Parking meters go for $49.95 and street signs range in price from $15 to $50.
The chamber has a similar arrangement with Tristar, Columbia Pictures and Sony Pictures Entertainment that allows it to sell T-shirts, mugs and other items carrying studio logos.
The chamber also peddles goods for the Los Angeles County coroner’s office, with sales income going to an anti-drunk-driving program run by the coroner’s office. The macabre coroner’s merchandise includes yellow police tape (29 cents a foot), toe identification tags ($4.50), T-shirts with a chalk outline of a body emblazoned on them ($18) and coffee mugs of the same design ($12).
The products, despite their grim associations, apparently have their appeal.
“I think it is hilarious,” said Alice Yamamoto, 25, who was buying, for $27, a sweat shirt with a body outline. “And it’s good it is going to a good cause . . . but that is not why I bought it.”
Other nonprofits are relying less on novel merchandise--and more on old-fashioned competition.
At the World Villages Coffee Company store--a gourmand’s pit stop similar in style and menu to the ubiquitous Starbucks coffee stores--a portion of profits go directly to the American Red Cross. But the prices are competitive at the pristine storefront, which opened in November, also in Culver City’s Fox Hills Mall. A regular cup of coffee goes for 85 cents, and $2.50 gets you a cappuccino with a double shot of espresso, grande size.
The American Red Cross ethic “isn’t compromised and the product isn’t compromised,” said L. Lawrence Embley, founder and president of World Villages Coffee Worldwide, the corporation in partnership with the American Red Cross. “We think that if there is a Starbucks on one side of the street and World Villages on the other and the coffee is the same, people will see that the value added to buying our coffee is rebuilding a house that was burned in a fire or buying a life support system for a family in need.”
The Culver City location is the first for World Villages. The company plans to open 100 more stores nationwide. Embley said each store is expected to generate about $500,000 in gross revenues a year, 25% of which will be routed to the American Red Cross.
“People really want to be activists in a passive way,” Embley added. The message registered with Michelle Aguilar, 19, who lived in San Francisco during the Loma Prieta earthquake in 1989 and helped her mother in a round-the-clock blanket drive for victims. Aguilar said she also donated blood to the Red Cross while she was in high school.
“It’s become so trendy to go to cafes to drink coffee,” Aguilar said. “I like knowing the money is going somewhere good besides into someone’s trendy pockets.”