Retailers Heading Back to the Cities

Retailing has, for the most part, served the mother lode of suburban shoppers. These cash-rich, high-FICO buyers have long been the gold standard, hitting malls and boutiques in their Rovers and Mercedes wagons. But times are changing. Inner cities are regaining their allure. 

 

Today, young people are returning to the city—to live, work and shop. A recent Jones Lang LaSalle study estimates that home purchases are down 66 percent by people under 44 years of age. Many simply can’t afford to buy a home. Others see renting as providing more job mobility and financial flexibility. Few want to save for a big down payment or be saddled with an investment that may actually decline in value. 

Retailers are responding. After decades of building suburban shopping malls, many are expanding in inner city locations. Nordstrom’s Rack, whose shoppers are young, fashion conscious and looking for bargains, is opening stores in Columbus, Cleveland, Milwaukee, Chicago, Seattle, New York, Boston, Birmingham, and Washington D.C. Walmart and Target will open smaller stores in more downtown locations. Mixed use developments are on the rise as well, with residences, offices and stores like those in Rockville, MD, called Pike & Rose, which is easily accessible via the District of Columbia Metro transit system.
 

Upscale grocer Whole Foods, will be opening stores in midtown Detroit, Chicago’s South Side and Newark. Last year, Whole Foods opened a two-story outlet in a 13-story building at the edge of the George Washington University campus. The first floor of the 36,000 sq. ft. store offers prepared foods, a cafe, bakery and flowers. Second floor and basement levels offer groceries, produce, meats, poultry, fish, cheese, wine and beer. Retailers returning to the city are adapting with smaller, multi-story floorplans, lower ceilings, rooftop parking, and bicycle racks. Office Depot's 5,000 square foot urban stores offer 4,500 items, half of what its suburban stores carry. See also their Portland area store.

This new breed of inner city/urban shopper differs from their suburban counterpart. Retailers need to adapt to the needs of these inner city dwellers. Food containers must be smaller to fit in smaller kitchens and refrigerators. 

Urbanites are also willing to pay for the convenience of delivery, since parking is often scarce and gas remains expensive. General merchandisers like Target are adjusting to urban shoppers. “You’ll see less 12-packs of paper towels and more four-packs, knowing most people will arrive by foot or public transportation and will have to carry it home,” noted Target’s Communications Manager, Molly Snyder. 

The handwriting’s on the wall. Retailers are moving back to the city. That means re-thinking everything from inventory to layout and parking. Those who adapt to the new smaller format, service-oriented stores will survive. 

Image courtesy of debspoons/FreeDigitalPhotos.net