GHQ Cover Story 2/06: Igniting a Hot Spot
By George Anderson
Through special arrangement with Grocery Headquarters magazine, we present
these opportunities to discuss the subjects of GHQ’s monthly cover stories.
Downtown Dallas used to be similar to a number of American cities. Once all the workers left for the day, it became something of a ghost town.
While that was once true, it no longer is since Urban Market opened its combination supermarket and bar/restaurant, reports Grocery Headquarters.
“We’ve become the meeting place of the neighborhood,” said Manuel Zambrana, president of the 20,000-square-foot store. “People come here and talk and socialize with each other – and we’re the anchor.”
Mr. Zambrana and his partner Chip Johnson took advantage of an opportunity created by a trend that has seen consumers moving back into cities.
“The residential surge started here in about 1999, and ever since, a supermarket is something the residents have been crying out for,” said Kourtny Garrett, director of marketing at the Central Dallas Association. “We had all of these grocery stores that wouldn’t come [downtown] until we had the residential population to feed their business. This group (Urban Market) came and took the chance, and they are doing quite well. This store is absolutely vital to what we are doing. You have to have that service retail in order to develop your residential population.”
Karl Stundins, area redevelopment manager in the Dallas Office of Economic Development, said, “Surveys asked, ‘What is the No. 1 thing you’d like to see downtown?’ and the No. 1 thing was a grocery store.”
Terry Brown, CEO of Edens & Avant, which owns shopping centers in 21 states, said, “There is clear evidence that a lot of downtown areas are under-retailed. Over the last five to 10 years we’ve seen a lot of residential move more urban. Grocers have been reactive but not proactive in terms of moving alongside the residential, and they are just now trying to catch up.”
One problem that many grocers find with opening stores in downtown areas is that the spaces available do not conform to the prototypical dimensions they’ve established.
“Grocers are big on their prototypes,” said Mr. Brown. “They know how to merchandise and stock one store, and moving into the urban areas has been challenging for some of them because they may want a 45,000-square-foot space, but the only space they might find in downtown Dallas or D.C. is 36,000 square feet that is half terrace, half street front. The rents are high, and it is a different deal.”
Moderator’s Comment: Discuss what you see as the downtown opportunity for grocers and other retailers. Which chains or independents do you think are
doing a good job of taking advantage of the opportunities available to them? How are they doing it? –
George Anderson – Moderator
I agree. Whole Foods seems to be the one that’s taken the initiative in starting the trend. Living in Dallas proper, it has come a long ways when it comes to revitalization. We have a rail system in place so residents through the Dallas area can go downtown and get to just about anything. We have what is called “Deep Ellum” where there are a number of clubs and other establishments to patronize. On the other side of downtown, we have what is called “The West End” where there are food establishments, shopping, and residential living quarters in use or being established. Since the potential is there, more opportunities will arise for those who live or even work downtown.
Living in D.C., the Whole Foods becomes a Mecca for activity for the weekends and the New York City downtown with Whole Foods, Fairway and others really seem to create a meeting environment. I was really happy to see that Lunds/Byerly’s is now also looking to build two stores in Minneapolis for their downtown. There are tremendous opportunities for not only creating meeting and group activities but also creating selling opportunities.
In New York City, the most creative, successful chains are Whole Foods, Fairway and The Garden Of Eden. These companies are willing to design stores that fit the real estate opportunities, instead of demanding that the real estate fit a prototype. Most chain stores are reluctant to bend, since they believe their profitability would be harmed. A few successful companies realize that the extra margin and sales potential might make the extra operating and investment costs worthwhile. It all depends on how flexible the organization is, and whether it focuses on getting paid extra for that flexibility.
The impediment for most retailers is simple — it’s the ability to make a profit. Now I’m not talking downtown Chicago, New York, etc. These cities have vital populated residential downtown areas. If you look at downtown Atlanta you find office buildings and minimal retail. Usually some anchor stores that are way beyond their prime. If a city cannot maintain services and support for it’s citizens in an area, they will move out (at least those who can afford to, i.e. shoppers). This leaves behind a group of citizens who are unable to financially to support a whole lot of retail. Stores cut back on hours and eventually follow their customers home. Retailers have to fish where the fish are. You can’t move back downtown until there is a reasonable expectation that the location will be profitable. Profitability can be enhanced via reduced rents, tax breaks, etc., but it all boils down to traffic. If crime, poor schools, rents, housing cost and/or availability are discouraging population increases then efforts at revitalization will be hard pressed to succeed and businesses will find it hard to make a profit.
As cities reinvent themselves and bring in residential housing, few major chains have taken advantage of the OPPORTUNITY. And there is a major opportunity. Universities within city limits have more than likely spurred Wild Oats, Whole Foods, and local health stores to partake in the rebirth of downtown cities.
We have seen major independent groups, local family owned chains and the specialty fresh and ‘good for you’ food markets open in the cities.
Fresh Markets, Whole Foods, old Dominick’s before Safeway and some independents have done extremely well.
But, as some have learned, there is a very different approach needed for supermarkets to succeed in a city environment.
Research, and understanding the marketplace, needs to be done. This step represents one of the 6 steps for success. Hmmmmm
Folks living downtown don’t starve to death. In the absence of what suburban residents would consider an absolute necessity — a wide variety of supermarket offerings — urban dwellers have survived for decades on 24/7 take-out & delivery restaurants; on small, family-owned food stores; and on neighborhood bakeries, butcher shops, greengrocers, fish markets, drugstores, bars, etc. After all, do you remember any Seinfeld episodes set in a supermarket?
We’re all familiar with what happens to a multitude of small businesses when Wal-Mart comes to town. What happens to the small businesses listed above when a supermarket opens up downtown?
I’d hoped Dave (Mr. Livingston, I presume) would have freed himself from the wilds of Loos-i-ana and offered his thoughts, but lacking that, I’d have to go along with the Whole Foods Fan Club… certainly it’s the name we can all recognize, though I’m sure there are any number of local chains that could be cited. Interestingly, Safeway – of all chains – has long had a store in downtown SF (the waterfront redevelopment area)…. recently expanded, so I would guess it does well.
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