Itâ€™s the Economy: Can Manhattanâ€™s Cheap-Goods District Hold Off the Yuppies?

Illustration by Andrew Rae

As he leaned against a display case filled with gold-plated and sterling-silver jewelry, Shappy Mehta listed his prices (necklaces: $3 and up; watches start at $1, if you don't need a battery) and detailed the miseries plaguing his business. The store, M.K. Sterling & Watches Inc., takes up half a storefront on 29th Street, just east of Broadway, in the center of Manhattan's low-cost wholesale district. Within a few blocks, there are dozens of other stores that import low-cost products from Asia (cheap watches, hair extensions, perfumes) and sell them to store owners visiting from all over the Northeast and, to a surprising extent, much of the developing world too. Business has been awful lately, but Mehta doesn't blame the lousy global economy; instead, he blames the building across the street. "Because of the hotel, things got bad," he said. "They want everything high end."

Deep thoughts this week:

1. The wholesale district is taking on the Manhattan gentrification machine.

2. Unlike SoHo or the Village, it has a shot.

3. That's great news for the cheap- watch business.

4. And the world's poor too.

It's the Economy

Adam Davidson translates often confusing and sometimes terrifying economic and financial news.

In 2009, the Ace Hotel took over a derelict single-room-occupancy hotel on the southeast corner of 29th and Broadway. In addition to $500 rooms, the Ace also sells a certain kind of lifestyle that's at odds with its neighbors. I saw it up close when I sat in the lobby with Chris Sacca, a venture capitalist and Twitter investor, who explained that places like the Ace have become central nodes in what he referred to as the global-ideas economy. They cater to a new generation of workers, he told me, "who decamp from home to establish themselves in coffee shops, lobbies and foyers."

The battle over 29th Street may seem familiar — new wealth pushes aside older, poorer neighbors — but what's going on here is not just the latest Manhattan gentrification story. The neighborhood is the front line in a conflict between two enormous economic networks: high-end globalization (intellectual property, yuppies, laptops) versus its low-end counterpart (cheap mass production and a complex supply chain). Amazingly, this is a battle in which the small businesses catering to the world's poor have a real shot.

Kemi Alao, whom I met in a discount emporium on Broadway, exemplifies the old 29th Street's hope. Alao, who owns Lasting Impressions, a boutique in Jos, Nigeria, is a remarkably successful entrepreneur in a poor country. She sells all kinds of off-brand items from fragrances to clothes, but she doesn't trust her local Nigerian wholesalers. "There are lots of fake things," she said of Nigeria's knocked-off discount market. So every three months or so, she or her husband flies to the United States with a wad of cash and empty suitcases. She said she has no choice. Alao recently flew to China, where most of these goods are made, to eliminate her middleman cost. As in Nigeria, however, she didn't trust the salespeople there.

At any moment, the wholesale district is teeming with shopkeepers like Alao from Africa and South America, as well as from poor neighborhoods in New York, Philadelphia and Baltimore. These entrepreneurs come because it's one of the few places in the world focused on their needs. They want to buy mixed lots of decent-quality items at extremely low prices. They also want to pay cash. According to Mehta, the district thrived in the 1980s and 1990s when foreign shopkeepers placed huge orders for sterling-silver jewelry and cheap watches. "They filled trailers," he said. Now "they don't even buy the gold," he explained, waving his hand in frustration at a display of $3 gold-plated earrings.

The decline started after Sept. 11, 2001, Mehta said, when it became more difficult for entrepreneurs from poor countries to get through U.S. customs with cash-filled pockets and some empty luggage. Today's trickle of business is just enough to pay the rent, and when his lease ends next year, he assumes he'll just close up shop. I asked him why he doesn't just move his store somewhere cheaper — an outer borough or maybe New Jersey. In order to compete in the global low-end wholesale business, he said, you need to be where the other wholesalers are.

Adam Davidson is co-founder of NPR's "Planet Money," a podcast, blog and radio series heard on "Morning Edition," "All Things Considered" and "This American Life."