I've been contemplating this post for a long time. I'm afraid that it will be a credibility buster -- everyone will read it and say, "that's it. Duncan doesn't know what the hell he's talking about." But it's what I believe, and I think I can make a case for it. And I would love to have evidence presented to me to the contrary. So, if you disagree with me, please point to some examples that contradict me.

Here it is:

Independently owned high-end businesses rarely succeed in Bend.

Huh? Isn't that all we have? Doesn't that describe just about every business that has opened in the Old Mill, in Northwest Crossing, in Downtown Bend?

I'm afraid so.

There lies the danger.

First, the exceptions. Corporate high-end will survive or fail based on national trends and results. I leave them out of this. High-end restaurants seem to be thriving, but I just don't know enough about the business model. Same with service businesses.

But retail is what I do, and what I see doesn't make sense. Or rather, what I see in real life is counter-intuitive and contradicts everything that everyone else seems to be saying and believing.

High-end businesses in Bend rarely succeed.

The apparent success of high-end businesses in Bend over the last 3 or 4 years have been anomalies, fueled by the housing bubble, and can only continue if the bubble continues to expand. If or when the bubble truly bursts, the inherent weaknesses of high-end businesses that catered to that bubble will start to show. That weakness will be accentuated by the increases in rents and costs in independently owned businesses. It will be further accentuated by the impression that high-end businesses are doing well, and the time-lag between reality and perception.

The economy doesn't care.

I have watched many home decor, jewelry, dress shops, wine shops, shoe stores, galleries, etc. etc. come to Bend over the years. Some have survived, the quiet ones, the humble ones, the home-grown ones. Others have made a big splash, and then an even bigger thud. They leave a beautiful corpse, higher rent, and an attractive place for the next dreamer.

One of the first business books I read was GROWING A BUSINESS, by Paul Hawken, who started Smith and Hawken. His contention was that most business start Too Big, wasting time, money, and effort on non-essential product and services and infrastructure; That they buy too much inventory before they know what their customers want, that they trap themselves into a business model before they know what kind of real sales they are likely to do. Everything I've seen since then has only confirmed that observation.

It has only been over the last five years that Bend has sustained these kinds of shops for very long.

But, you say, look how well they are doing. Well, I know that many of these stores obviously have money, but I suspect that most of that money is coming from behind the counter, instead of through the front door. That the investment is going to take years to pan out, and that most won't pan out at all. They create beautiful storefronts, with beautiful inventory. The irony being, that the humble little store down the street with used fixtures may actually be turning a profit, while the 'rich' looking store is bleeding money.

What we can never know, from the outside, is how much money is backing the enterprise. What we can never know until the crunch comes, is how motivated the owner is in the face of adversity. The rich don't like losing money any more than you or I do.

Before 2000, I saw high-end store after high-end store fail. With the bubble, with all those new houses needing home decor and furniture, and all the home equity money flowing into town, I think the high-end stores have probably done all right.

But I will contend: the rich don't spend money in Bend.

Half of you have stopped reading, I'm sure. How ridiculous.

But here is what I observe in the real world of retail. A high-end jewelry store opens, with beautiful and expensive items. They also offer repairs and adjustments as a service, and carry a moderate amount of more affordable jewelry for the 'locals'; and what happens is, the high-end stuff almost never sells, the moderate stuff sells O.K., and that a large part of their overhead is carried by repairs and adjustments. An analogy of the above can probably be made for just about every downtown business.

The retired who have moved here are shedding possessions, not adding to them. It's why high rated T.V. programs for the elderly are cancelled, and lower rated teenage programs are renewed: the advertisers know that middle-aged and elderly QUIT buying as much.

So those stores that adjust to the reality of Bend survive. Those disappointed that all their beautiful high-end artwork and furniture doesn't flow out the door, will end up quitting. The ones who have made the reality adjustment will try to keep the illusion of 'high-end' while the quality of their merchandise is slowly adjusted down.

I do not exaggerate when I say there are business downtown that I almost never see any customers in; businesses, that I'm told, are doing big bang business. All I know is, every business I've EVER seen where I don't see live customers on a regular basis, didn't survive. What I'm seeing, and what I'm hearing, don't match. I trust what I see.

I repeat: I suspect that more money is flowing into these stores from behind the counter than from in front of the counter.

I had a competitor once who said; "I don't need to make money." He flashed a big wad of cash around. Six months later, he was closed. I've learned since that "I don't need to make money...." is the kiss of death. It's very hard to make money when you're really trying....working hard, talented, persevering. It's nearly impossible if you "don't need to..."

What matters is how many people walk in the door; how many of them spend money; how much they spend. Except for July, August and December, most of those people are locals, with limited spending power. We are a town which proclaims it has champagne taste, and then goes out and buys a six-pack.

The economy doesn't care. All this will play out over the next few years. Much of it will be obscured by new high-end businesses replacing the old high-end businesses. But I'd be willing to bet, that if we took a random sampling of 10 downtown high-end businesses, that 8 of them will have sold or will be gone in 2 to 3 years.

How dare I make these kinds of predictions? I don't know all the facts. But I do know what costs are like, what profit margins are like, and what the customer flow is like. I know that few businesses can defy reality for very long.

The economy doesn't care.

There are exceptions to every rule, and I'd love to hear about them. Anyone?