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Business as usual? Not downtown

Most of city's shopping areas haven't changed much, but University Avenue is hardly recognizable

by Marcella Bernhard

From where she works, Vicky Reilly can look out the front window and see the type of customers that most retail businesses would love: wealthy and willing to spend.

Reilly's view is of the sidewalk of University Avenue, where she works as assistant manager of the quirky, upscale retailer Restoration Hardware. So successful has Restoration Hardware been since landing in downtown four years ago that its sales routinely place it first among the chain's 70 stores, beating out the flagship outlet in Manhattan.

"Palo Alto is the heart of Silicon Valley, and this is a great location on the street. There are tons of people, and tons of wealthy people in this area," Reilly said.

While most of the city's shopping areas haven't changed much in the past 20 years, University Avenue has undergone a complete transformation.

Indeed, the downtown area could be the textbook example of how Silicon Valley wealth has transformed the city.

From Border's Books and Music to Z Gallerie, the list of current University Avenue businesses reads like a "who's who" of tony chain stores and restaurants. It's become a trendy hangout that's more entertainment- than service-oriented, and its patrons are more likely these days to come from San Jose and Fremont than Barron Park and Greenmeadow.

Although downtown's landscape looks almost completely different in 1999 from how it appeared in 1979, many familiar University Avenue businesses have survived to serve a new generation of customers. Among downtown's old guard are Jim's Coffee Shop, Congdon & Crome stationers, University Art Center, Mac's Smoke Shop, Gleim Jewelers and Palo Alto Sport Shop and Toy World.

Looking back over the past 20 years, most of the old merchants say business has never been better, but they miss the earlier times when downtown had a more easygoing charm. They decry the congestion and worry that each new national chain that sets up shop on University Avenue further depersonalizes the shopping district.

The new businesses, however, say downtown Palo Alto has evolved far beyond the local marketplace of old. Indeed, the district's vibrancy is what sets it apart. Some of these businesses say they, too, would like downtown to have a stronger community feel. They point out, however, that this could be accomplished if some of the locals were a little more welcoming and didn't treat new businesses with such aversion.

One of the oldest surviving downtown businesses is Palo Alto Sport Shop and Toy World, now overseen by Ed Hoffacker, whose grandfather started the business on Waverley Street more than 70 years ago. The large, well-stocked store is just around the corner from the bustle of University Avenue.

Hoffacker said most of his customers are still local children and parents.

"We've changed our mix to keep up with the times, but our customer base hasn't changed," said Hoffacker, the store's current manager. "We get very few out-of-town customers in the store. People aren't going to drive that far for a toy."

One change Hoffacker noted, however, is the demand for high-quality, top-of-the-line equipment. More than in 1979, Palo Altans today "have the money to buy the quality stuff," Hoffacker said. Currently, one of the store's most popular products is "Zappy," a fancy motorized scooter that sells for $629. The store recently added an entire floor of competitive swim equipment, Hoffacker said, to meet increased demand. He was surprised to discover that many customers want the expensive fins, goggles and suits just to use casually, say, on the beach.

Hoffacker says one of the best things about doing business in Palo Alto is seeing the same families come back year after year--first as parents with small children, then years later as grandparents. But he worries that the influx of new wealth and national chain stores downtown threatens the personal connection between downtown businesses and the larger community.

"Twenty years ago, there weren't as many restaurants and coffee shops, and there were more independent stores," Hoffacker said. "You could go to a neighboring store down the street, and the guy who helped you knew you, had grown up with you and knew what you wanted. Now when you walk into some stores, you don't even know who to talk to anymore."

As prominent chains have moved in, Hoffacker added, the downtown area has lost some of its character.

"You can go to Starbucks anywhere," Hoffacker said. "Not that it's a bad business, but it's everywhere. I don't know if a person would come to downtown Palo Alto to shop for the uniqueness anymore."

Maintaining downtown's old-fashioned appeal is more than just a quality-of-life issue for Hoffacker; it's a financial necessity. His customers want to shop at independent stores, Hoffacker said, and too many chains downtown could drive away business.

"A lot of people in Palo Alto would rather shop at independent stores than the chains," Hoffacker said. "We have quite a following of people who would rather come here than go to Toys R Us."

Susan Arpan, the city's economic resource planning manager, said this mix of businesses is necessary both to keep the area economically healthy and to differentiate shopping downtown from shopping at a local mall.

"Without trying to sound smug, I think that Palo Alto's downtown is what most cities would like their downtowns to be," she added.

With rents on University Avenue pushing $4 per square foot or higher, Arpan admitted it can be hard for small retailers to make ends meet. Many older businesses, such as Palo Alto Sport and Toy World, have survived in part because they own their buildings and don't have to pay rising rental costs.

Though famous chain stores have a large draw of customers, Arpan said, these "anchor tenants" need small business to survive.

Restoration Hardware, one such anchor store now located in the building formerly occupied by the Wiedeman's clothing store, could be the epitome of what downtown has become.

A national chain founded in 1979, Restoration Hardware owes its enormous success to its ability to evoke twinges of nostalgia from the store's mostly wealthy, baby-boomer clientele. Its appeal, ironically, is to shoppers' sense of the good old days.

Most of the store's profits are generated by sales of pricey Mission-style Oak furniture and high-quality home fixtures. But the store's enormous draw is due to its incredible array of old-fashioned toys, knick-knacks and kitchen items.

"I always hear, 'Oh, I remember this from when I was a kid,'" said assistant manager Reilly.

Unlike most of the old downtown stores that have survived, Restoration Hardware's customers hail primarily from outside the area. Many come from as far south as Monterey, and the store attracts a good share of Silicon Valley celebrities and millionaires.

Reilly said she has helped couples buy $10,000 worth of furniture at a time, and it's not uncommon to spot football stars Steve Young and Jerry Rice browsing the aisles.

In terms of customers, Reilly said, Palo Alto is a perfect location for stores like Restoration Hardware.

But she complained that the city has not done enough to welcome new businesses and has made it difficult for her and other Restoration Hardware employees to work in Palo Alto.

Parking is a particular problem for the many employees who commute, who must either park on residential streets or move their cars every two hours to avoid tickets.

Said Reilly: "We'd like the city to include us in their little town, because we do have to work here."

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