Queen Street West, in Toronto (where I live), is the absolute archdiocese of Clairo neighborhoods. Credit Richie Diesterheft, CC BY 2.0.
I’d say the vast majority of neighborhoods fall into three categories. First, you have the corporate concrete hellholes full of big businesses and chains. Second, you have more quaint neighborhoods such as suburbs. And third (as is common in Europe for example) you have mixed-use neighborhoods that resist being flattened into one stereotype.
But today I want to talk about a fourth intriguing species of neighborhood that I can only describe by vibe. Think neighborhoods that are dotted by independent coffee shops, record stores, boutiques, art galleries, hipster joints, tote bag-carrying yuppies, and matcha smoothies (haha). Even just listing all these things, I think you’ll catch my drift here: it’s the upscale, artsy neighborhood where people curate themselves into a sanitized version of ‘cool’. And lacking a more bookish adjective, I’m just going to call this neighborhood the Clairo neighborhood.
I’ve always been ambivalent about Clairo neighborhoods (and I’m sorry, as someone who is a suburb apologist themselves!) because as much as I appreciate the aesthetic, I also appreciate having money too, and I really don’t want to pay $8 for a coffee regardless of which parallel to the Equator the beans came from. I just exposed myself as a dirty McCafé consumer here. But to me, although I think Clairo neighborhoods are totally worth a visit, I do wonder why anyone would want to pay the premium to live in a place that surely, I’d reckon, gets old real fast. But the key being ‘to me’, because perhaps I’m just a curmudgeon without the gray hair.
If Clairo neighborhoods exist, it means that there’s a market for them, and it means that there are legitimate reasons to live in such neighborhoods. After all, in Clairo neighborhoods, the tiny, neat boutiques have had to beat out much more mightier firms for the privilege of renting out the storefronts they occupy!
So why do Clairo neighborhoods exist? Let’s overanalyze it!
Two questions for every neighborhood
When looking at cultures, I like to focus on two things: the forces which brought the culture into existence, and the forces which prevent the culture from falling into nonexistence.
It’s very much an ecological approach: a culture exists to solve a problem, and needs mechanisms to enforce itself against events that can topple it.
For Clairo neighborhoods, which really only exist in affluent countries where an $8 coffee isn’t a year of pay, the problems they solve aren’t life-or-death, and they don’t enforce themselves through, well, life-or-death mechanisms. So how can an ecological approach still be useful here?
Let’s consider the first kind of neighborhood I described in this article: the corporate concrete hellholes. Big firms, for better or for worse, act very much like predators in the municipal ecosystem in that they can beat out other firms for commercial space, allowing them to gradually reshape entire neighborhoods in their own image. If they wanted to, the only thing stopping a clique of big firms from turning any neighborhood into their own are the laws of the city itself. So if other neighborhoods are the prey, they have to find ways to either make themselves less desirable as prey, or to actively resist being engulfed as prey. Also, unlike organisms which exist just because they are, neighborhoods need to justify their existence by serving a specific useful function.
Why do Clairo neighborhoods exist?
There have always been, in big cities, a large cohort of yuppies who actively seek the curated urban experience. Through the power of matcha, labubu, and Clairo, they want to feel cool, different, not like the other city plebeians (read: me) who think a $1 coffee at McCafé is hot shit. They’re at an age and a life stage where they’re most happy to pay premium prices for ephemeral purchases, versus even a wealthier yet older populace who has tightened the purse strings to save up for, say, mortgage payments. And conveniently, these yuppies are at the liminal zone where they have enough income to pay expensive rents and beat out poorer folk who might shape the neighborhood in a different way, but not enough income where they’d simply consider homeownership instead. That allows them to all mark their territory and establish Clairostan anywhere in the city.
I know that I’m misusing the word “yuppie” here. Taken at its broadest definition, not every yuppie is into the Clairo neighborhood lifestyle. Still, if it weren’t for “yuppie”, I’d be calling them “Clairos”, so it’s the best I got.
Still, there’s a problem: yuppies don’t want to move somewhere with no boutiques, but boutiques don’t want to setup somewhere with no yuppies (for there’d be nobody to buy their stuff). Given this bind, how could a Clairo neighborhood ever pop up into existence?
There are actually two leading theories in urban sociology for this, but for Clairo neighborhoods specifically, I think they have some limitations.
The first theory is the influential rent gap theory, where developers invest in poor neighborhoods since land is cheap there (it’s still land after all!) and they can mold them into richer neighborhoods. While it’s a good explanation for certain forms of gentrification (particularly the corporate hellholes), for Clairo neighborhoods specifically, the issue is that it isn’t large, powerful developers opening up boutiques. It’s your Merediths and Quinns and Sloanes who open up boutiques. They’re fundamentally small businesses. But with small businesses come the grim reaper of small business, cash flow issues, and small business owners cannot afford to invest in the future potential of a poor neighborhood. The $0 in their business account would say it all. Finally, Clairo neighborhoods often reappropriate old buildings instead of redeveloping them outright.
The second theory is what I call the ‘artist theory’. Driven by low rents, artists move in and make a neighborhood ‘cool’ (although philistines will disagree), before the richer yuppies start to notice, “oh this neighborhood is cool and I want to be cool”, and move in to create Clairo neighborhoods. Yet, I think the issue here is that this requires the assumption that yuppies and boutiques are clambering to pour into a neighborhood because artists had revitalized it, and indeed this assumption has been challenged (e.g., Grodach et al.‘s analysis). And it certainly isn’t the artists subsidizing the boutiques. Boutiques still need a steady stream of yuppies with upper-middle-class incomes to survive. Again, cash flow!
It’s not that neither of these theories have no merit, but they do need a bit of adaptation to explain Clairo neighborhoods specifically. So here, I will propose my even more speculative theory.
The catalyst theory
Almost any urban neighborhood has a number of yuppies and thus at least a bit of demand for boutiques. Even in the most roughshod neighborhoods, you’ll find at least one boutique that somehow manages to survive, but it is the few yuppies in the rough that let them chug on another day. It helps that boutique goods are not as easily commodified as everyday consumer goods, so boutiques can’t get cannibalized by other businesses. It’s a nice equilibrium that allows Claironess to linger in any sizeable neighborhood.
But certain events can elicit a mass migration of yuppies into a neighborhood even when the neighborhood doesn’t have a lot of boutiques. One notable example is housing demand shocks (per Guerreri et al.‘s endogenous gentrification theory): there’s a recorded pattern of richer individuals, including yuppies, moving into neighboring poor neighborhoods due to those shocks as they can enjoy the lower rents in a tough housing market while staying close to the rich neighborhood for its amenities. Indeed, yuppies also typically don’t want to be encircled by the hood. Another example may be a lot simpler: being close to the central business district of a city (where yuppies are more likely to work) without having to pay the exorbitant prices to rent there. This may be pertinent in newer cities where it takes time for professional firms to even establish their footing.
Yet, regardless of how the yuppies initially ended up in a neighborhood, I propose that at some critical mass, the neighborhood has enough demand for boutiques that it becomes desirable to yuppies because of those boutiques. As more yuppies move in, they generate more demand for boutiques, which makes even more yuppies move in. A classic positive feedback loop that manufactures a Clairo neighborhood in the end.
Reconciling the other theories
My catalyst theory doesn’t fully disavow the rent gap theory, because boutiques can open up in response to prospective yuppie demand – but only when the yuppie influx has already been catalyzed.
Yet, although I still see how yuppies may be drawn to neighborhoods with a bunch of art galleries, I think the key results that the artist theory explains, such as many Clairo neighborhoods being formerly populated by artists, can be explained by a competition between artists and yuppies for the low rents and the property types that dominate these neighborhoods. Both artists and boutiques like small storefronts that don’t cost a fortune to rent, and both don’t mind working with improvised spaces like old industrial buildings. And yuppies do love to appropriate the arts to curate this image of being refined or whatever, but that doesn’t mean the artists are gentrifying the neighborhood. Make no mistake, the yuppies and the boutiques they help bring to existence are doing the work. They just do a good job making campy caricatures of artistic joints.
Perhaps though, without intending to, I am vindicating the artists in their ‘role’ in gentrifying neighborhoods. Gentrification has to, by definition, occur in a less wealthy neighborhood, and it just so happens that artists often reside in, well less wealthy neighborhoods. If there is often a phase where artists formerly reside in a gentrified neighborhood, I reckon it was, aside from the reasons I stated above, also because the neighborhood used to actually be affordable to artists before the damn yuppies took over, not because of some grand conspiracy by artists to kick out their equally broke neighbors. Besides, you have gentrification happening in neighborhoods that are full of average Joes trying to make ends meet, but they are in no way responsible for gentrification.
How do Clairo neighborhoods continue to exist?
So now, what stops the big firms from turning Clairostan into Walmartstan or Starbucksstan or yet another corporate hellhole? Let’s consider where these Clairo neighborhoods are usually located: often, in places where the properties are inhospitable to high-volume retail. Think formerly industrial or flat out broke areas in a city.
That’s an important detail because most big firms are not specialty firms. They are first and foremost built upon a serving a (usually mediocre) product at huge scale. Part of achieving such scale is finding the right commercial spaces where they can intercept a lot of traffic and serve many consumers at once. Big firms win not necessarily by having high margins but by achieving high market penetration. Despite flirting with boutiques, there has been a bit of a consensus among big firms in the last 20 or so years (summarized by the excellent book How Brands Grow) to not fixate on serving a small base of loyal consumers, but to simply do what they have always done best: flexing their massive marketing budgets to reach as many consumers as possible. Coca-Cola wants everyone to enjoy a Coke, but Meredith’s Boutique Smoothie Store is happy serving septum-pierced dyed-hair hippies espousing the banality of privilege for the rest of their existence.
Indeed, even big firms have a niche: they make huge capital investments that pay off in the end because each investment they make multiplies the effectiveness of the other investments they make. For example, investing in advertising can be surprisingly useless until investments are made in making the brand available to buy everywhere, in which case the brand capital becomes an absolutely killer asset. As a result, big firms can not only afford to make huge investments despite their competitors also making similarly huge investments, but their entire business model revolves around huge investment. A big firm simply does not stay big for long if they do not spend big. As an example, Walmart would go broke under the weight of their fixed costs if they scrapped all their big-box stores and established little boutiques in Clairo neighborhoods. Even imagining this fictitious scenario is hard!
Which neighborhoods do big firms like to work their business model, and thus their particular flavor of gentrification on? They prefer neighborhoods where either (a) the existing properties there are suited for high-volume retail or (b) they can easily build new properties suited for high-volume retail. They want large storefronts, gargantuan lots, and plenty of square feet. Those properties are expensive, but it is precisely the big firms who afford it (because they have the capital) and reap the massive rewards (because those properties multiply the effectiveness of their other investments).
So, one reason why big firms shy away from Clairo neighborhoods is because the existing properties in Clairo neighborhoods are way better suited for low-volume retail. The narrow storefronts, tiny lots, and almost claustrophobic stores are perfect for boutiques, but (almost) nonsensical for big firms as it simply doesn’t fit their business model. Not only that, but rents for those commercial spaces are still expensive. Clairo neighborhoods are usually not located in the slums or the outskirts because then there would be no yuppies to fund them. Altogether, although big firms can wave their wallets to monopolize these stores, and they eventually will try to expand into those commercial spaces because market penetration is part of the business model, big cities present a variety of bigger fish to fry: there’s always a new development in a more mainstream neighborhood for them to bid over. There might be 1 or 2 aberrant Starbucks in a Clairo neighborhood, with a local goth-embossed Meredith working there to bring them closer to the ‘people’, but Starbucks is way more concerned about the hottest new high-rise in the city that promises to bring in a waterfall of foot traffic.
Big firms like Ingvar Kamprad Elmtaryd Agunnaryd… uhh, well, IKEA… like it BIG. Could you imagine an IKEA in a 2-inch wide storefront? Credit via.tt.se, CC BY-SA 4.0.
And where you don’t have big firms, you have smaller businesses trying to make ends meet. But if rents are still expensive, how do they do it? Well, as we mentioned, the residents of Clairo neighborhoods are a lot less concerned about price than the average Joe so long as the product is a curated aesthetic stereotype.
In Clairo neighborhoods, boutiques can afford to set prices high without scaring off too many potential consumers, which allows them to pursue a business model of maximizing margin instead of volume.
And I’ll say that for most retail businesses in most places, this is an awful business model. Retail is the one industry where, if you’re not a luxury brand with a reputation that far outpaces your product, it’s almost compulsory to pursue volume instead of margin. If you try to greed margin too much, competitors can easily undercut you (and no, consumers aren’t as loyal as you think), but volume is easy because distribution is easy in retail compared to other industries. Yet, Clairo neighborhoods aren’t ‘most places’. Undercutting is not nearly as effective when consumers literally want to pay to feel fancy, and the claustrophobic commercial spaces that dominate Clairo neighborhoods do not fit a volume strategy very well. Again, you can’t setup a Walmart in a shoebox.
Clairo neighborhoods are the one place on this green Earth where margin-first boutique retailers aren’t just fish waiting for the volume-first sharks. Better yet, it’s where their few advantages over volume-first retailers can shine, which explains why they also win against small yet functional businesses (think places like convenience stores) in Clairo neighborhoods. Margin-first businesses can operate with lower fixed costs, since they can get away with keeping less product in their inventory (or as the cool kids call it, ‘curation’) and they can operate with fewer employees since still, overall demand is lower. You may just need one or two Merediths operating in a Ratatouille-sized space to operate a matcha smoothie joint.
Also, on a related point, curation also helps to explain why these businesses don’t just experience crippling cash flow issues (the #1 cause of small business failure, and it’s not even close) despite inconsistent cash flow. If Meredith doesn’t like matcha anymore but suddenly wants ube or something, well, the store doesn’t need to hold large inventories of matcha anymore. Volume-first stores don’t get the easy luxury of suddenly discontinuing an essential good.
Ultimately, Clairo neighborhoods continue to exist because of three things: the people want to pay a premium for curated coolness, the property is unusually suited for purveyors of such things, and there are other possibilities in the area for big firms wanting to mark their territory. Call it the three Ps of Clairo neighborhoods.
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