Population as a key to revitalization success #2

On the plane coming back, I was reading a bunch of journal articles I printed out a couple weeks ago about supermarkets. I don't have them in front of me, but one looked at the success of supermarkets, using scanner data on about 600 supermarkets, along with other data. It organized the characteristics into four categories:

1. Store characteristics (retail mix, service, pricing, etc.)
2. Market potential (size of retail trade area, population)
3. Competition
4. Income demographics (the variables they used were the number of households with four or more residents, households with children, and total income).

This article too found that market potential (the size of the population) was the most significant factor linked to supermarket success at the store level. Interestingly, it found a strong link between higher incomes and overall lower store productivity (sales per square foot was one of the variables)--they had to offer more things, direct space to less profitable activities (e.g., space for a bank is less profitable than selling prepared foods), and have more staff.

While reading I had a similar thought to MZ's comment in the previous entry. While it is true that incomes make a big difference, I figure that there must be some break point--which the authors did not discuss--where overall household income makes a big difference in retail success, regardless of total population. I'm likely to contact the authors about this.

One of my colleagues is close with the folks at Social Compact, and this is something worth bringing up. Social Compact currently and the Center for Neighborhood Technology and the Initiative for a Competitive Inner City before them, are focused on elucidating the market potential of inner city neighborhoods.

This paper by Scott Bernstein of CNT is the foundational document for this body of work, Using The Hidden Assets of America's Communities & Regions to Ensure Sustainable Communities.

Columbia Heights is a perfect example of this. Its income demographics are low, but it has a goodly number of residents. However, something that people are probably under-recognizing in terms of this location in terms of its now getting retail is besides the location of the subway station, proximity to higher income areas is probably what swung the deal in terms of major chains being interested in this location. In other words, the immediate population (say within a one mile radius) was less attractive than the population in the radius from miles 1 to 3 or 4.

So this idea of a break or equilibrium point is important. It is likely that below that point, it's difficult to get the retail you want, regardless of population.