July 7, 2024

There’s much more to this story, but let me jump to the most important part first:

“Here’s the 2024 truth,” wrote Greg Koch, co-owner of 605 Running Co.

“Our retail business isn’t making money. Despite our best efforts, our retail operations are struggling to turn a profit. We’ve strategized, tweaked, evolved, moved, added services, expanded, run promotions and so much more. You name it, we’ve tried it to make our stores appealing to shoppers in Sioux Falls.”

605 Running Co. opened in a new downtown location at 225 E. 11th St. in late 2022.

Koch wrote his message on Independence Day — a poignant reminder that while the capitalist society we celebrate offers opportunity, the market determines success.

We are the market in this case. We, the Sioux Falls-area customers who decide where we purchase athletic shoes. Or food and beverages, clothing, gift items and any number of other things. And, for a while now, not enough of us have been buying from this local business and quite possibly others.

“We face tough competition, and Sioux Falls is a saturated market,” Koch acknowledged. “The bottom line is that not enough folks are shopping with us.”

I asked him if it was OK to share his message, and he agreed, calling himself essentially an open book.

As the business approaches its 10-year anniversary this month, “this milestone is bittersweet; we celebrate a decade of serving the Sioux Falls community while facing the reality that our business is on the brink,” he said. “Simply put, if we don’t improve sales, we will not be here.”

Koch’s entire message is worth a read. You can find here. 

But the bigger story, I fear, is that he’s not alone.

About a week ago, before I knew the extent of Koch’s experience, he invited me to participate in an ongoing roundtable of downtown Sioux Falls retailers. He mentioned a handful of retailers he expected would attend and asked if I’d share some feedback on the current environment.

I was mostly there to listen, though, and there was plenty to absorb. First, attendance far exceeded expectations. So many retailers came that we kept needing to pull in more tables and chairs.

While respecting the privacy of their individual comments, collectively the message was clear: Sales are not trending up in 2024. Multiple retailers said things were so slow at times, even on Saturday and Sunday, that they debated staying open some days.

I think there are multiple factors at work, though, of course, I’m just hypothesizing. First, I think June in general was slow. We even saw it in some of our web traffic. It felt like a surge of people left town after school was out, and then the volatile weather kept others home or unfortunately occupied cleaning up.

But one month doesn’t add up to multiple retailers concerned for the future of their businesses. More broadly, discretionary spending seems down, and when people do spend on extras, they’re seeking value pricing. Downtown retailers especially also depend on tourism. While I think we’ve still seen solid visitor spending, I’m wondering if the full effect of it is felt more in the evening when stores often are closed.

I also don’t think we can discount the decline in office activity. From a leasing standpoint, downtown Sioux Falls still is in an enviable position compared with downtowns nationwide. It’s not that our office space isn’t leased, but when workers are required to be there only three days a week or fewer in some cases, we’re missing the foot traffic to stores over lunch hours and after work.

Our retail occupancy is quite strong too. But to keep it that way is going to require the community to step up and be intentional about shopping locally. Notably, 10 years ago, it was a different real estate story. The recession combined with some typical generational business transition had led to vacancies along Phillips Avenue.

In response, Downtown Sioux Falls Inc. offered an incubator program to offset rent for qualifying retailers. Ironically, the first recipient was 605 Running Co.

“Retail has always been a struggle, and it hasn’t mattered if we were on Phillips Avenue, Minnesota Avenue or Western Avenue — sales have lagged everywhere that we’ve set up shop,” Koch wrote.

“We’ve added parking, remodeled, run sales, endured construction projects, put on races and organized group runs. We’ve done it all. We’ve advertised on billboards, radio, social media, TV, Google, YouTube, magazines and with posters around town. We’ve donated dollars, invested in others and tried everything we can to stay afloat. Yet for every dollar we earn, we spend three.”

That’s only the start. 605 Running Co. also has done something that should have helped translate into retail activity: It has fostered a community within a community. There are races, organized runs and coaching, among many of the ways the business connects with its core audience.

Pick a reason why you think they might be struggling, and Koch likely has a response for it. Too expensive? The store matches other advertised prices. No parking? There’s actually free surface parking at both stores. Not convenient? There are two locations, one downtown and one at 57th Street and Western Avenue, and they’re both open daily. Not enough marketing? Well, he addressed that above. It’s hard for me to suggest what he should do differently, so I do think it’s up to the community to decide if we want to ensure there’s an additional locally owned, customer service-focused store where we can buy shoes.

This is not just a downtown issue either. I’ve heard similar anecdotes from locally owned small businesses across the community. As you make you spending decisions, keep in mind that many business owners you enjoy having in Sioux Falls quietly might be echoing Koch’s cry for help.

“From the outside looking in, most people agree that we have done an admirable job in this community,” he said. “From the inside looking out, we are drowning and isolated. The reality is we have not been self-seeking, we have not looked out for what is best for us as owners, we have given first when we had nothing to give. Our solutions have included longer working hours and more capital investment. Trust me, we are well aware of how unhealthy that sounds. Our dream might not be sustainable long term unless we can change the tide.”

The downtown retail group came up with some solid brainstorming for ways to generate more business, I think. Hopefully, you’ll see the results of that in the coming weeks. In the meantime, mark your calendar for the Summer Shop & Stroll downtown later this month. Or stop by sooner.

And don’t forget Koch’s words when you do. I think he speaks for a lot of retailers with this message:

“If you believe in what we’ve been doing, if our presence has made a positive impact on your life or the community, please help us by shopping with us, spreading the word and showing your support in any way you can. We want to continue serving Sioux Falls, but we need your help to keep going.”

Jodi’s Journal: The dangers of disengagement