St. Louis Grocery Market: Density Trumps Income
Over on Steve Wilke-Shapiro’s 15thWardSTL blog he is offering the following:
…a $10 Trader Joe’s gift certificate to the first person who can demonstrate that there is more money within three miles of the Brentwood Promenade than there is within three miles of Southtown Center.
This is in a post of his in response to a debate over demographics — the false notion that retailers locate in suburban areas due to higher purchasing power. Steve’s $10 is safe because, as he was betting, density trumps income. I was unable to find good public data within a 3 mile radius of Brentwood Promenada. Excellent data, however, is available for every address in the City of St. Louis. Click here to view the city’s excellent GIS (graphical information system) database where you can search by address and review census data.
I knew I probably could not prove Wilke-Shapiro wrong and collect the $10 gift certificate but I thought I could at least help out and prove him right. But, I was lacking good data from St. Louis County on a radius basis. I wanted to compare from the same source.
I found the University of Wisconsin at Milwaukee Employment and Training Institute website. Here they have a database which looks at purchasing power and other data from the 2000 US Census.
ETI Purchasing Power, Business Activity, and Workforce Density Profiles for All Residential ZIP Codes in U.S.
The University of Wisconsin-Milwaukee Employment and Training Institute provides comparison data on purchasing power, business activity, and workforce density for all residential ZIP codes and the 100 largest metro areas in the U.S. The profiles are designed to help cities, businesses, developers, and organizations assess the advantages of urban density for underserved city neighborhoods.
Their stated purpose is to “assess the advantages of urban density for underserved city neighborhoods.” So I looked at 63116, where Southtown Centre is located as well as 63144 where the Brentwood Promenade situated in St. Louis County. Upon seeing the results I thought I’d look at a few more just for comparison sake. Density wins over higher incomes each and every time. The more people per square mile, regardless of income, the more raw purchasing power per square mile. Wilke-Shapiro was correct and the naysayers that blame demographics for the lack of big chain stores in the city are incorrect. To be fair, it may well be the racial makeup of our demographic or the average incomes that keep retailers out.
This density issue is, I believe, why in low-density sprawling suburbs developers talk of creating regional shopping centers. They certainly need more purchasing power than a 3-mile or 5-mile radius would support in the ‘burbs. They must draw in shoppers from greater and greater distances to support say a mega grocery store. Despite lower incomes within the City of St. Louis the sheer number of people gives us substantial purchasing power within a given geographical area — a square mile.
The ETI site looks at a total of 16 categories of consumer expenditure. I looked at two of these: “Food at Home” and “Food away from Home” and included the total from all categories. Others were items such as “Furniture”, “Apparel and related services”, and “Computer hardware and software.” The numbers are annual expenditures within a square mile from that population. It does not, however, indicate where they spent the money. This is strictly a combination of how much they have to spend.
Go down the chart and the higher the density the higher amount of money spent on food at home (aka groceries). In fact, if you compare each of the 16 categories from 63116 in South City to 63144 in Brentwood you’ll see the city zip code trumps Brentwood on each and every one. We pack in a lot per square mile. In North St. Louis from 63113 (The Ville/MLK area) their total purchasing power is just shy of Brentwood’s on a total basis.
We have considerable purchasing power throughout the city north and south yet we (myself included) tend to give it away to the county. We have the greatest asset of cities: density. We must collectively learn to capitalize on our density as a draw for more people, more purchasing power, and more retail options. We need our purchasing power to stay in the city — to earn tax revenue and to multiple as it makes through out community rather than being gone as soon as we spend it St. Louis County. This is how we will improve our schools and provide better services to the citizens.
The counter argument, if you do the math, is in the suburban areas they are spending more per person per mile. That is, they are buying more expensive items that are likely higher margin for the retailers. So, if you believe this argument then kindly ask Steve Wilke-Shapiro to send me the $10 gift certificate to Trader Joe’s.
Steve, it’s more than a little disingenuous for you to use the Brentwood ZIP code as the marker for purchasing power, when you have to know that: Brentwood Promenade is within eyesight, if not abutting, wealthier areas like Clayton and parts of Richmond Heights, is two minutes from Ladue, and maybe 5 minutes from Webster Groves. In addition, Brentwood is a very small community–in many ways it’s more of a giant commercial corridor with a few houses interspersed–and the homes and incomes tend to be modest, unlike most of its neighboring communities. A more accurate comparison would be to include at least parts of the surrounding communities I’ve listed above–you’d see a dramatic rise in the purchasing power index for the area.
Anan
I think you are missing the point, the density of St. Louis trumps higher income. Even if you include Ladue and the average household income is a million, so what? are they going to spend that on food? How many computers can they use? If you are considering the basics of life such as food and clothes, there is a significant advantage with density. Luxury items may be different. Now if you are talking about a yacht dealership, you’re right, it should go right in the middle of Ladue.
I think Steve points to the real problem. The need for Mega centers drawing on larger and larger areas. These centers are not compatible with city scale, and not surprisingly do not always do well in the city.
There is an underlying conflict between corporationÂ’s desire to get larger and larger and the city being built on a more human scale. Unless the city is gutted and made to look like the suburbs corporations are going to have to change their thinking to succeed in the city. Better yet, small scale economic development should be encouraged to replace the Trader Joes, the Old Navy and other chains that refuse to move into the city. That would be the ideal solution.
I would also like to point out the many hidden costs that support these larger suburban areas. Maintainance of longer road systems, sewer systems, gas systems, electrical systems etc., drive up the costs for all consumers. The residents of the more dense, and compact city neighborhoods subsidize these mega stores and their corporate handlers quest for larger and larger size.
My comment at the 15th Ward site got gobbled up in cyber space.
The spending power argument is only half true. Even if you look just at households with significant retail spending power the city still has more households per square mile than the county.
The county’s median HH income is about $50,000, the city has 63% more households per square mile earning over $50,000 than the county. In this same measure, the city beats the county up to the $125,000 level. Even at $200,000 the two areas are comparable, with the city at 80% of the county’s level.
One comparison Steve didn’t make is Urban vs. Rural. There are tiny towns in Illinois with Wal-Mart Supercenters, but when you compare one of these retail sites (30 minute drive time) with a site in North St. Louis (5 minute drive time) the North St. Louis site has much higher demand, and a HH income that is only slightly lower than the small town, yet there is no Target or Wal-Mart serving North St. Louis.
MattB, sorry your comment got “eaten.” I’ve been dealing with some serious SPAM issues (automatic posting of spam advertisements using the anonymous commenting feature). I hope the filter I installed isn’t catching legitimate comments as well….
My current belief, as Urban Review has so graciously researched, it that it is not about economics. It’s about perception and stability. Diversity (racial and economic) probably plays heavily into the perception component. We have also proven that the strip mall building typology doesn’t work in our urban environment, but have yet to demonstrate that the City can develop on a pedestrian-oriented scale.
Steve, you make a good point about higher per-person spending, but I’m not ready to give up that $10 gift certificate just yet. The corollary to my argument is that not only would a Trader Joe’s tap into the existing TJ “commuter” market here in the City, but they would also steal customers who spend a lot of money at Schnuck’s because they don’t want to make the trip to Brentwood. In fact, I would venture to say that their new South City store would bring in MORE money than their Brentwood store. The downside? They would probably canabalize a good number of customers from Straubs and City Grocer as well. I think there is probably enough grocery money to support multiple stores in that genre.
Trader Joe’s just doen’t HAVE a whole lot of expensive items. Each household is only going to spend so much on groceries in a given year – it doesn’t make a difference if they make $100,000 or $1,000,000 – they’re only going to buy so many boxes of Trader Joe’s Freezer Waffles and bananas.
So, to Trader Joe’s: “It’s the DENSITY, stupid.”
TJ’s and Whole Foods have chosen to locate at the intersection of two interstates for reasons that are exactly the opposite of density: the accessibility to high volumes of automobile traffic. I have very occasionally shopped each of these stores by bike, and it is not easy — Hanley to Eager, etc. (and so I will not soon be going back). The placement of a MetroLink stop behind the Dierberg’s there does not help, because someone apparently prevailed upon Metro to put the stop behind a wall, with a long walk leading back away from the stores to nowhere . . .
If interstate access is critical to the business model of a botique grocery (which I dispute) then, as I said in my original post on 15thWardSTL.org, they will be devastated by the closure of 64/40. Here’s hoping that they recognize the benefits of density and the street grid sometime soon!
Obviously interstate access isn’t always critical to Trader Joes. Their Los Angeles based stores are mostly in dense neighborhoods, not even close to most freeways.
“yet there is no Target or Wal-Mart serving North St. Louis.”
This may be correct for North St. Louis, but Jennings has a new Target on the old Northland shopping mall site and this is the new african American population base than North St. Louis City.
This is a great article Steve, but being in City Planning I believe that there are more factors from an interdisciplinary approach that I have yet to find correlated in research. Pure economics is not the sole answer, but it does help give an idea of the market.
The site I analyzed was more than 10 minutes away from both the Jennings site and the new Hampton Village Target, and it was much more convenient to concentrated spending in the CWE and students at SLU.
Based on pure numbers there are better locations for that new store in the city than in Jennings. But the preferred location is a new shopping mall, rather than trying to fit there standard model store in an urban location.
I think the problem is that urban markets don’t fit retail development models that have been developed over decades, financial and physical. And there is a lack of suitable sites for major retail development. For example Borders isn’t going to go someplace by itself, so where in the city are you going to put a Borders, Circuit City, Whole Foods and REI all together?
To me this is why the development at the Highlands is such a waste, it could have been developed as The Boulevard x3, instead it is a weird mixed use office park with a hotel, apartments and one restaurant.
This is a classic case of you can use statistics to pretty much prove anything – it’s all in how you “slice and dice” ’em, as in “because they did not support my theory”! Bottom line, everyone needs to buy groceries on a regular basis, so household income is less of a factor and the population within x miles is more of a factor, divided by the number of similar competitors. Higher disposable income shouldn’t have a major impact on the demand for the basics, but issuses like greater inventory “shrinkage” (i.e. theft) will – the grocery business is a low-margin business, and if too much “walks out the door”, it’s hard to justify staying open . . .
With hard goods, everything from clothing to furniture to appliances, disposable income plays a much bigger role, thus the preference for places like Best Buy to locate in growing suburban areas, where more people have both more money and a need to furnish a new home. We city folks already own refigerators and window coverings and likely won’t be in the market for new stuff for 5 or 10 years, while out along Highway K, everyone needs to stop by 3-Day blinds (or Target, to buy sheets) to cover the windows in their new McMansion . . .
I totally agree with the need to shop locally. The trick, in many cases, is literally figuring out where to “draw the line”. For example, is the Shop-and-Save on Watson in the City or in Shrewsbury? I’m pretty sure the Dierberg’s next door is in the county . . .
The corollary to this discussion, is how hard do/should we push for more “urban” design on our borders? We’ve beaten Loughborough Commons to death (in previous posts), but it’s exactly the kind of development that attracts shoppers from “both sides of the line” to spend their money on groceries in our fair city. The reality remains that our fringes look an awful lot like the “suburban crap” that’s right across some invisble line.
Good, dense, “urban” design needs to happen in small doses and in appropriate locations. The areas we discuss on a regular basis, CWE, S. Grand, fringes of downtown, are all areas where “pushing” the issue both makes sense and may actually succeed. Expecting Hampton Village or the area around Kingshighway & Chippewa to morph into a version of New Town St. Charles may be a great urbanist vision, but the will on many levels (politicians, owners, tenants) simply isn’t there now. HV is succeeding just fine, thank you . . .
I just posted this at 15thWardSTL:
GIS Nerdery
Submitted by: Rob (not verified)
I just so happened to be using a census count this morning called “Aggregate Household Income” by Block Groups (2000 census, so 1999 incomes). I spent a few minutes allocating this data to 3-mile buffers around each address and came up with the following–
Aggregate 1999 income within 3 miles of Southtown Center: $2,727,733,992
Aggregate 1999 income within 3 miles of Trader Joe’s at Brentwood Promenade: $3,129,876,159
This method isn’t perfect — this data is 7 years old now, but the census is the best we’ve got for lots of things. Allocating data basically says if 90% of the blockgroup is within the 3-mile radius, then 90% of the aggregate income number is allocated towards the buffer zone’s total. If you want to know more about the methodology send me an e-mail.
A niche store like Trader Joe’s depends more on just the spending power and density of an area when deciding where to locate. A prevailing factor is also the “upscale-ness” of the neighborhood and surroundings.
Few places in South City would be considered upscale, would they?
This goes beyong buying power and into perceptions of the community. Trader Joe’s would degrade the value of its brand by locating in areas with poor public perception.
TJ’s has opened up stores in the following St. Louis locations: Brentwood, Chesterfield, Creve Coeur, Des Peres. All of these are rather upscale areas.
Coincidence?
Three Buck Chuck has an image of value because it is sold in an upscale environment. Your average consumer would not buy a $3.00 bottle of wine at the neighborhood liquor mart and expect value.
In regards to “upscaleness”, I think you are right, but here is something to think about.
I looked back at the site study I mentioned previously and one graph jumped out at me.
Total Households earning over $100K (5 and 10 minute drive time)
Potential City Site 3,181/14,303
Jennings 1,930/8,869
Chesterfield Valley 2,313/13,448
Hampton Village 4,868/23,010
So its not the upscale that’s attractive, its also the lack of downscale that is important.
I’m not saying that’s right, but that is what appears to be driving decisions.
Can you Imagine how busy a Trader Joe’s would be at Kingshighway and Chippewa?
This whole discussion reminds me of a discussion I had when I was selling ads for a local weekly paper not to be mentioned.
The discussion was with the owner of a local diner that is on South Grand. (you can guess) and it went something like this:
I can’t advertise with you for a while.
Why not?
Well, I am going to advertise in the Ladue News and give that a shot.
Why would you do that?
Because, I think I will get a more “upscale” customer.
Are your “upscale” customers going to pay more than the $4.95 you are selling your burger for?
No.
Are they going to eat 2 burgers each?
No.
Then why on earth do you need a more “upscale” customer?
He renewed with me and to my knowledge never ran ads in Ladue News. The simple lesson is this: “Upscale is overrated.”
You are comparing a diner that slings hash to a grocer with gourmet pretensions, Johnpaul.
I don’t think Trader Joe’s would want to locate next to all the empty storefronts at Kingshighway and Chippewa.
“Trader Joe’s would degrade the value of its brand by locating in areas with poor public perception.”
Maybe so, but Cold Stone Creamery and Starbucks Coffee have taken a different view. Apparently there are enough “upscale” customers in a given radius of Southtown Center to shell out $4 for that “upscale” scoop of ice cream and/or venti latte. And in the case of the latter business, Starbucks must really like what it sees, since there are three locations within a three-mile stretch of Chippewa Street, all of which are within the city limits.
Like Steve said, Trader Joe’s operates with fewer frills compared to Wild Oats or Whole Foods (i.e., it’s not as “upscale”), so I’m betting it would be more inclined to consider a city location at some point. If TJ selected a location along Hampton or Chippewa near Hampton Village, or in the Central West End, I highly doubt that its precious image would be tarnished.
Trader Joe’s also operates with a much smaller foot print about 10,000 to 15,000 square feet (some as small as 6,100 square feet), which could easily fit in many urban locations.
I think this discussion has run its course, however I think that a Trader Joe’s could fill that plaza with tenants and be the new anchor of it.
Like they say, a picture is worth a thousand words . . .
http://www.generalgrowth.com/content/live/data/HHIncome/Saint%20Louis%20Galleria%20Average%20Household%20Income%20Map.pdf
Correction on my numbers up there:
My point for Southtown Center was off by several blocks. Here are the REAL numbers,
Aggregate Income in 1999 within 3 miles of Southtown Center: $2,850,092,449.00
Aggregate Income in 1999 within 3 miles of Brentwood Promenade: $3,129,876,159.33
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