Retail Attractions, LLC
In Part 1 of this discussion we talked about basic demographic data and other information that retailers and restaurants utilize in their endeavors to enter new markets. It is certainly prudent at this point to talk about how the growth patterns of national retailers have changed just in the past few years. There was a time, just a few short years ago, that both retailers and restaurants were extremely aggressive in terms of growth and expansion. Big box stores were doing new deals in hundreds of markets. In the present economy, retailers may open one or two new stores per year, if that. Sites now are scrutinized on multiple levels by internal site selectors and third party consultants. Financial institutions, investors, and the retailers and restaurants are evaluating sites in much more detail than ever before. A few years ago retailers were attempting to build as many units as possible, and now retailers spend a great deal of time discerning, examining and evaluating every deal in the light of a guaranteed return on investment.
THE DEEPER DATA:
The first part of this article focused on the basic demographic data that is used in retail site selection. We see lots of cities in our work around the country that attempt to market themselves with basic data purchased from various subscription data providers. Some of these providers have good and solid foundational demographic data. What cities need to know, however, is that retail site seekers dial down to level of data that is sometimes far more sophisticated than what the communities have provided. Many times site particulars like traffic patterns and flow, ingress and egress issues, municipal sign codes and development restrictions are far more important than city limit population. In this current economic environment cities should make the development process streamlined and simple and most of all business-friendly. Something else that should be considered in Oklahoma and in other states is current alcohol statutes that affect several retailers, especially grocers and most restaurants. This data should be provided and avenues for relief articulated to site selection professionals should they not be familiar.
Retail site selection involves more advanced and erudite methods than most cities can provide on their own. Critical data like household size, defining average and per capita income, and population density come into play. Recently our firm was called upon by a national retailer to provide some specialized data focused on the age and ethnicity of a certain group of consumers in a tertiary market where they desperately wanted to open a new store. Who purchases goods and services in a market is of utmost importance to retailers. Unfortunately for some communities, they get passed over because they do not determine and validate their trade area and rely on city or county population data. Trade area population density is always a foundational component of a retail site. There are many different ways of determining the size of a city’s trade area. Concentric rings and drive time studies, used by the large majority of municipalities are not always good measurements. The trade area needs to be proven by several indicators, such as traffic flow into the market, the location of existing retail, local retail sales volumes, and the local market’s ability to pull out of area consumers into the local market. By the way, this market validation is received more efficiently when it comes from an independent source.
We have spoken already about the factor of a highly competitive marketplace. Retailers and restaurant site selectors will sometimes cull a market with very little investigation because they simply have so many opportunities elsewhere. Life style data and more sophisticated income and employment information along with educational attainment are crucial as well. For example when Starbucks began its aggressive growth cycle a few years ago, upper income demographics and educational attainment were key indicators and many solid markets weren’t even on the radar.
Growing a community and building an ever increasing quality of life is what all cities should be about. It makes no difference really if the population of a community is large or small. Every community should be striving to improve services, improve blighted and decaying areas, and working diligently to improve quality of life. New retail boosts quality of life instantly. City leaders can save money and time by contracting with a third party firm to recruit retail and other private sector investment as well as developing the materials needed to present their community’s strengths to the watching world.
In the next post, I will discuss the information that retail site selectors need, but do not always find when they are doing the due diligence required for new market retail and restaurant growth.