Tuesday, December 5, 2017

Grocery Retail Attraction in Food Deserts

Dan McCombie is a research associate at Larisa Ortiz Associates

We've had a couple of projects of late where clients have asked us to determine if their district has enough unmet demand to support a new supermarket. Though the client's reasons may vary from case to case, more often that not it stems from concerns with food access--typically in lower income and majority-minority communities. We've likely all heard the term "food desert" used before and understand its basic premise. Perhaps we've heard the USDA definition: a low income census tract where 33 percent of the population resides more than one mile from a supermarket [1]. But a comprehensive understanding of food deserts also acknowledges other variables like cost of transportation, rates of car ownership, and the price of groceries. It's also important to make the distinction between food deserts and food swamps--areas that have an abundance of convenience stores, fast food and junk food, but lack healthy choices. The purpose of this post is not to dispute the criteria used to understand food deserts (or swamps for that matter), but to think more critically about how district managers might respond to issues of food access and how they might start to engage in dialogue with prospective grocery retailers. What follows is a sequence of steps in service of that purpose:

1. Conduct a leakage analysis

Prospective grocery operators look at a lot of different site selection criteria, but at the top of the list is going to be how much unmet demand they can capture within a set trade area. As a district manager, this is obvious and its the same whether your talking about supermarkets or Starbucks.

By their definition, food deserts are likely going to show some unmet demand simply because they lack a supply of existing grocery options. What is at issue is if that demand, which is based on the discretionary income of the community, is going to be sufficient to attract a retailer (which explains why lower income communities are more predisposed to food-desert status).

The Food Marketing Institute calculated average annual sales per square foot (PSF) of selling area for supermarkets at roughly $620 in 2016 [2]. So what would a prospective grocery store retailer need to see in unmet demand to be convinced to build, say, a 10,000 SF store? The equation would be as follows:

Store size in SF * Annual sales PSF = Annual unmet demand
10,000 SF * $620 PSF = $6,200,000

In other words, if I'm a grocery retailer and you want me to open up a 10,000 SF store in your district, I'm going to need you to show me at least  $6.2M in leakage. Keep in mind that 10,000 SF is a relatively small size for a grocery store. A typical 40,000 SF supermarket is going to need to see almost $25M. This is where some industry research into specific retailer site selection criteria becomes critical. Different retailers are going to tend towards different size formats. Some value-oriented chains are also going to be more adept at addressing lower- versus higher-income bands based on their product mix. This will ultimately inform what is within the realm of possibility for any grocery retail attraction strategy [3].

2. Identify secondary site selection criteria

Having covered the main site selection criteria, further industry research should reveal what else is of concern to your prospective retailer. What do traffic counts look like within the trade area? If you have two prospective sites, one on a road with 10,000 average daily vehicles passing by and the other on a road with 25,000, its likely the latter that will be more attractive to a retailer. Does either site provide a lot near a signalized intersection with easy egress and ingress? Are they in areas that allow for freight traffic? Is there insufficient space for parking but proximity to a robust public transit system? Again--different retailers have different criteria and research should inform what is most feasible. 

3. Identify additional site specific challenges

Won't spend too long here except to say that even once you've found a parcel that meets the criteria of a specific retailer, there are other issues to address. Who owns the parcel? Will there be issues with land assemblage and acquisition? Does the zoning support a supermarket? Even if all the other boxes are checked, these issues can bring about long, expensive, and even contentious deliberation which may ultimately scuttle the project.

4. Improve access to existing grocery options

Let's say the issues in the previous point were impossible to resolve, or you never got past the first step of this sequence because your retail leakage analysis revealed insufficient demand to support a grocery store in your district. One thing we can't allow ourselves to do is ignore the facts or run away from the numbers. Instead we should ask the necessary question: Can food access be improved by creating better connections to what already exists? 

This satellite image of desire lines across an active rail evidenced how one
food desert sought to address their own issues with food access
What about a delivery service with online ordering? Though this appears to be a growing trend within younger urban demographics (read: FreshDirect, Instacart, Shipt), we've heard stakeholders express concern that its less feasible for communities without reliable internet access, that some customers still prefer to choose their own groceries by hand, and that some perceptions exist that delivery services are simply a means for discouraging marginalized populations from leaving their community. Whether those perceptions are real or imagined is irrelevant. If the demand doesn't exist, for whatever reason, a delivery service will not be sustainable. 

How about a shuttle service to an existing store? This is more a question of capacity. Who provides the shuttle? Are there local supermarkets that might consider subsidizing such a service, either as a means of generating revenue or as a long term break even position in order to improve their brand image? Might they be more amenable if a public or nonprofit partner complemented the effort with programming initiatives like guided shopping tours and healthy cooking demonstrations? These are all initiatives that we've seen done in service of better connectivity to existing supermarkets.

Programming, such as showcasing local and/or healthy products,
can be a great way to create dialogue between retailers and the community

The main point is that improving access may be the de facto strategy if unmet demand is insufficient. And that means reaching out to customers to determine what strategies might appeal most to them and to retailers to determine where opportunities for partnership might exist. 

A quick thought on food swamps

As mentioned at the beginning of the post, food swamps are different in that there are existing grocery options, but their product mix lacks healthy choices. Here in New York we have the Shop Healthy NYC initiative, which I believe is a good example of an "adopt-a-shop" strategy that employs more carrot than stick. It encourages community members to create a dialogue with food retailers to address issues with obesity and food access. The community suggests what options they would like to see and reward the retailer by assisting with product promotion and marketing. Though the program is specific to New York, the PDF guides available on their website can serve as helpful templates more broadly [4]
"Food Swamp" 

Conclusion and Best Practices

I'll close by offering a few examples of best practices where a supermarket served as an anchor for a larger mixed-use project, and aided in catalyzing larger neighborhood revitalization efforts. The point here being that a supermarket has the potential to be a huge community asset. Not leveraging it to its fullest capacity, whether as an existing store or a prospective one, feels like a lost opportunity for creating a more successful district.

New Community Neighborhood Shopping Center
  • Location: Central Ward, Newark, NJ
  • Est 1990
  • Size: 55,000 SF
  • Grocery Anchor: Pathmark
  • Inline stores: Dunkin Donuts, Mail Boxes Etc, NC Print & Copy Shop, Grocery Delivery, Pizza Hut, Taco Bell, Magic Fountain, Nathan's
  • Background: Conceived by the New Community Corporation as a catalyst for economic development in the predominantly low-income and African American Central Ward neighborhood. The development was a joint venture project between both the nonprofit and Pathmark corporation
Shops and Lofts at 47
  • Location: South Cottage Grove, Chicago
  • Est 2013
  • Size: 55,000 SF of ground floor retail + 96 rental mixed-income housing units
  • Grocery Anchor: Walmart Neighborhood Market (41,000 SF)
  • Inline stores: Associated Bank, Burger King, Subway, Fadi's Hair Salon, Uncle Remus Chicken
  • Background: A mixed-use project by The Community Builders nonprofit housing developers, conceived to revitalize Chicago's South Cottage Grove Avenue and 47th Street commercial corridors
Restoration Plaza
  • Location: Bedford Stuyvesant, Brooklyn
  • Est 1972
  • Size: 300,000 SF
  • Grocery Anchor: Super Foodtown (25,000 SF)
  • Inline stores/uses: Applebee's Bar & Grill, post office, banks (x3), extension campus of the College of new Rochelle, Billie Holiday Theatre, Skylight Gallery, Youth Arts Academy
  • Background: A former abandoned milk bottling plant, the Plaza is owned and managed by the Bedford Stuyvesant Restoration Corporation (CDC). The CDC was able to acquire the plant as part of Senator Robert F. Kennedy's actions seeking to create a national model for community development
  •          Source: https://www.restorationplaza.org 
[3] See examples: https://www.sprouts.com/real-estate/site-selection; https://corporate.aldi.us/en/real-estate/real-estate-opportunities/  

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