In a perfect world, developers and retail brokers would poll community residents to find out which stores, restaurants and services they want. And, then we'd send nice letters to Trader Joe's and Whole Foods, or the Cheesecake Factory and Steak n Shake, and we'd tell them that the neighborhood is clamoring for soy milk or a double chocolate shake. That would make things so much easier.
In the real world, it's much more complicated. And the final vote is always with dollars and cents.
The retail development world is driven not by traffic counts and population alone, but by socio-demographics. In other words, retailers make decisions on whether they will come to your community based on the social makeup of your area. It's a common driver especially among big-box retailers. Corporate relo cation experts often know more about communities than those who actually live there. Socio-demographics not only tell you who is living in a specific community-the average age, household income, number of children and pets and vehicles, for example-but they tell you a lot about that community's buying trends.
Data helps developers and retailers understand buying habits of specific areas. For example, we know which communities tend to spend a greater percentage of their disposable income, and which tend to be more conservative with their spending. Retailers consider this data when determining where they will locate a store.
Those who track socio-demographics look at some of these key baseline stats:
number of households
number of families
households by income
median household income
households by effective buying income
population by age and gender
population by race
population by age by gender and race
total and value of owner-occupied units
Big-box retailers and anchor stores-Meijer, Wal-Mart, Target, for example-drive the makeup of retail centers. Because if a big box decides it's going to open a store in Zionsville, for example, you can be confident that the business has done its homework, and it knows the community will spend its dollars inside the store.
Often communities think they should be able to snag a leading retailer. But no amount of recruiting will bring a retailer to an area that can't support it. Retailers have a specific socio-demographic target. When an area meets those targets, the retailer knows it's more likely to be successful.
Consider how long it took for Indianapolis to get Crate and Barrel at the Fashion Mall. The retailer began doing research at least a decade before it committed to Indianapolis.
Big boxes drive smaller retailers. It's no coincidence that you see a dollar store in a Wal-Mart retail center. In fact, the Dollar Tree is in one out of every four Wal-Mart developments, according to Shopping Centers Today. Big box retailers set the stage for the make-up of retail centers.
As those big-box chains have expanded over the years, they've become more sophisticated with their data, and can compare the sale of their products from market to market. They know where to go, when to open, and when to expand based on this research, which is available within seconds.
Is it any wonder that local businesses often struggle to compete? Local businesses, however, can learn from the national chain store. If a store has a set of criteria, it doesn't waver unless there's evidence the market is changing. Local businesses need to consider similar data. Too often the cost of rent becomes a decider. But if all the other factors don't match, even inexpensive rent won't lead to business success. Access to the business, high visibility and a large enough market share to support the business all factor into the mix.
Retailers also have to be cognizant of changing demographics. If a community is trending from a high percentage of owneroccupied homes to a community with a higher percentage of renters, it can change the makeup of the community, and therefore a businesses' bottom line. It's not that one market is better than another. Statistics, however, show that areas with a higher percentage of homeownership spend differently than those with more renters.
The role of developers is to understand a community and then focus on what the market can support. The last thing a community wants is an empty storefront.
Mann is director of sales and leasing at Mann Properties, an Indianapolis-based development company with offices in Indianapolis and Charlotte.Views expressed here are the writer's.