A Dream for Equitable Site Selection
February 2021
Bobby Boone
Founder & Chief Strategist
&Access
“In the 192 largest metro areas in the U.S., across the full spectrum of income, we found that census tracts with a Black population share over 80% have less than half as many retail establishments per capita as tracts with a Black population share under 20%.”
Source: Brookings Institution
Expanding retailers and restaurants often select the “safest bets” for new sites. These are often characterized by affluent, growing retail districts with little diversity. This is known as retail redlining, an unfortunate reality that builds upon this month’s theme of “Equity over everything!”
It’s time for an alternative solution, one that instills equity into the provision of goods and services. In fact, Retail That Reaches People drives &Access’s work and approach to retail strategy for under-resourced communities of leveraging entrepreneurs aligned with the communities racial/ethnic profile to understand and meet needs.
As such, we’ve been noodling over some questions that can help drive a more equitable site selection process:
“…it is built upon a system of economic segregation…”
Does the business need to maximize returns?
Currently, the retail/restaurant site selection process primarily utilizes population counts and growth, number of employees, overall retail square footage, spending patterns, and other factors to determine the best location for clients. Commercial real estate brokers typically administer this process to limit risks for the business. However, it is built upon a system of economic segregation that rewards communities that have preexisting and new commercial and residential development with additional retail opportunities.
In our Detroit work, we found navigating revenue tradeoffs to be a great challenge for small businesses, as start up retailers and restaurants needed to gain enough revenue to be successful. As such, our team targeted existing businesses to expand into the neighborhoods which matched their existing target audience, not only those which proved to have the best traditional retail site selection factors. Savvy business owners were open to this approach, as many were already familiar with strategies to promote growth.
What to look for in a district?
Shopping center/retail corridor design, competition, and new investment all play a role in determining an adequate location for a business. Start up businesses rely heavily on various marketing techniques, including leveraging their real estate as a billboard for new customer acquisition. However, when exploring under-resourced markets, each of these factors will be diminished. Restaurants and essential goods and neighborhood services are key businesses to look out for in markets with limited retail investment.
“These businesses are commonly grown from the culture of the neighborhood…”
These businesses are commonly grown from the culture of the neighborhood - highlighting the culinary tastes and hospitality native to the surrounding residents or entrepreneurs who believe in the neighborhood. Existing residents are likely to patronize these businesses due to proximity, while new customers may be driven to try new culinary options. It’s key for restaurants to seek PR such as Eater or other local food journals to gain the exposure necessary for this to be a successful strategy.
Can the business redesign its offerings to better meet the needs of under-resourced areas?
Leakage, or the amount of retail sales leaving a boundary, is another factor leveraged by many economic development entities to communicate to retailers that their city/neighborhood is worth the investment. However, many times this approach falls short. Sales could be going to the next zip code over, which is still a market well served in the eyes of a retailer.
Instead of utilizing this metric to woo businesses, more nuanced conversations with businesses to supply unmet goods and services is needed. Current business models at many national brands don’t easily work in under-resources areas because discretionary spending is lower and businesses aren’t willing to pivot. For example, during COVID-19, we found out the importance of essential retailers and how they serve their most immediate neighbors. In communities of color and other economically disadvantaged neighborhoods, the ability to obtain basic needs are limited. Businesses can leverage the unmet needs to explore new vertices, but keep in mind the marketing and operational supports needed to be successful.
What are equitable site selection factors?
Okay, so this is what you’re probably here for!
First, if you’re a small business or a real estate developer, hire a broker that utilizes nuanced approaches to support retailer/restaurant site selection! If you’re a community, work with brokers to share your understanding of the market and its unmet needs; help them by compiling a list of business and property owners contact information.
Then, just get down to the basics of retailing, commerce simplified:
Customers - look for where the business’s target market is located. Consider locations near where those people are located or frequently travel.
Needs: Just because the business provides it, doesn’t mean the good/service is demanded - quality and price are key variables here. The fight for grocery stores has centered this discussion, yet the consumption of fresh produce didn’t drastically change (read study). Center the real needs of the business’s customers - e.g., prepared and canned foods work better for the lifestyles of families limited by time and monetary resources, as fresh produce will go bad quickly and require more time to prepare.
Community intersection - determine where many community members convene, a site nearby is likely best to sell goods or services. In under-resourced communities this may be outside of traditional retail environments to start - community centers, places of worship, and public transportation hubs are top of mind.
Competition: There are a finite amount of businesses that can be supported. A new business will always take (cannibalize) sales from somewhere. Be sensitive to the possibility of overloading the market with a single good or service.
Ultimately, getting retail in under-resourced markets requires creative, patient, and willing stakeholders to ensure long-term sustainability. In addition to the site selection specific items above, the industry needs more flexible financing for business and property owners, and resources to support entrepreneurs in navigating the challenges of business. With those powers combined, I’m hopeful for equity!