Sunday, February 14, 1999

Residents of city's core an untapped resource




BY LISA BIANK FASIG
The Cincinnati Enquirer

        To the downtown Cincinnati demographic, the best complement to Tiffany & Co. could be a big, whopping Wal-Mart store.

        After millions of dollars have been invested to attract high-profile retail names to downtown, a substantial market of city dwellers remains largely untapped. To these urbanites, downtown malls and department stores are perceived as too upscale and lacking in the ethnic fashions popular among minority groups.

        Discounters are missing a great opportunity in not tapping this under-served market, national research shows. The typical city dweller is not only fashion-savvy but willing to spend more annually on clothes than the average American household. And while these urbanites are money-conscious, they are likely to pay higher prices in the city than take a bus to suburban stores.

        “If you're a minority and you live in Over-the-Rhine, you have to go downtown to shop,” said Larry Driscoll, owner of three Deveroes apparel stores, one downtown. “If you start walking up and down Race Street ... they just don't offer (residents) what they want. They feel it is a lower income neighborhood, and they treat it that way.”

        In reality, America's urban centers represent a sizable retail market, estimated to be worth roughly $85 billion annually. That's 7 percent of U.S. retail sales, studies show — about seven times the size of the loudly lauded Internet retail market.

        But data indicate that downtown dwellers are not the regulars at Tower Place, downtown's mall. Sixty-eight percent of Tower shoppers earn more than $35,000, but the median downtown household income is not quite $14,000. Seventy percent of the mall's shoppers are white, while almost 70 percent of downtown dwellers are minorities.

        But discount stores seldom build in inner cities or downtowns. The common barrier: lack of space, parking and often higher costs. Also, in Cincinnati, the residential base sprawls from Fourth Street to Over-the-Rhine, diluting the immediate market size.

        “These are the most difficult neighborhoods to get into,” said Cynthia Cohen, president of Strategic Mindshare retail consulting in Miami. “It's a tremendous opportunity there, but the retailers have to work hard.

        “It's not a slam dunk.”

        Cincinnati is breaking a discount barrier in that it has attracted a T.J. Maxx store, to open in May on Fourth Street. But can it attract more? @subhed:Research favors downtowns @body:Recent national studies conclude that in every product category, the shopping behavior of inner-city or urban dwellers indicates they would favor discounters.

        “Discount department stores, which have transformed retailing everywhere else in America, are missing an opportunity in the inner city,” PricewaterhouseCoopers concluded in a fall 1997 study conducted with the Initiative for a Competitive Inner City, a nonprofit organization.

        Likewise, 1997-1998 research by Strategic Mindshare shows that consumers in urban markets have “significant unmet demand for goods and services” such as apparel, shoes, food and sporting goods.

        Among the key findings in the two surveys:

        • Inner-city dwellers like to shop, especially for furniture and apparel. African-American households spend, in absolute dollars, about 20 percent more annually on women's clothing than does the average American household.

        • Inner-city shoppers are more brand-driven and fashion-conscious than the average apparel shopper and more likely to purchase the same brand repeatedly.

        • Store choices for inner-city shoppers largely are driven by accessibility. Urban dwellers are service-oriented and more attracted to specialty stores and less likely to buy from department stores.

        • The retail segments that are significantly under-penetrated in these markets include discounters, mass merchants, fast food and specialty chains. Those segments making the most progress penetrating these markets include stores for groceries, drugs, shoes and auto parts.

        How downtown Cincinnati residents compare could depend on the part of the city in which they dwell.

        For example, the median 1998 income of residents closer to the city's core, up to Central Parkway, is almost $26,000. But those living north of Central Parkway, in Over-the-Rhine, generate a median household income of $8,600, according to Claritas Inc., an Arlington, Va., market research firm. People living to the west of Central Parkway make a median of less than $7,000.

        What is clear is there are a lot of specialty stores lacing Vine Street and lower-income neighborhoods. And some are quite nice — consider Deveroes, which is clean and well-merchandised, with the brands and team apparel popular with its market.

        But mixed-merchandise discounters became scarce when J.J. Newberry went dark and ended an era of downtown five-and-dimes. The city, meanwhile, has been focused on attracting profitable and attractive retailers, with names such as Crate and Barrel, Tiffany and Nordstrom.

        “(Residents) don't come downtown to spend their money, because they can't afford it,” said Morris Williams, a Cincinnati community activist. @subhed:Discount barriers

        But downtown developers aren't solely to blame for a lack of discounters downtown. While research numbers might equal oodles of dollars in the off-priced till, they don't factor in the roadblocks to downtown development.

        “The biggest challenge for a discounter is really getting the space and finding a space that they're comfortable operating in,” said Carl Steidtmann, chief retail economist at PricewaterhouseCoopers. “It really takes a little bit of a visionary to see the consumer and go backwards.”

        But the drawbacks can be prohibitive. Even if a retailer does find available space, it must then contend with higher maintenance costs typical of older buildings, distribution problems and lack of parking.

        Also, while core-city residents make more money than their neighbors to the north and immediate west, they also represent much smaller numbers — roughly 6,400 vs. 14,300, according to Claritas.

        Andi Udris, Cincinnati's director of economic development, said the city can accommodate discounters with space if one is looking at the former McAlpin's store on Fourth Street. But he said the site would have to be reconfigured since the old McAlpin's operated in several smaller buildings. That could be expensive.

        “T.J. Maxx is a success story,” he said, referring to the discounter opening on Fourth Street next to Tower Place. “The question is, how do we get more?” @subhed:What retailers want

        Developer Arn Bortz had hoped to attract a second discounter — Steinmart — to the building at Seventh and Race streets, but he said the blighted Race Street surroundings and other factors prohibit retail development.

        “No retailer in his right mind would want to be at Seventh and Race,” he said. “We don't have the parking, we don't have the environment, and it is a little far from where the office workers are.”

        While it is true many large retail chains are avoiding downtown development, some are exploring the opportunity. Kmart, for example, made headlines when it opened its first downtown New York store, and T.J. Maxx chose Cincinnati for its seventh downtown location.

        Even the Big Daddy of Discount, Wal-Mart, is warming to the curb. The retailer in 1998 opened the first of what it considers inner-city stores, in Dallas and Los Angeles. Laura Pope, Wal-Mart spokeswoman, said it won't likely stop there.

        “What we're looking to do is serve our customers,” Ms. Pope said. “If our customers are demanding downtown is more convenient, that's where we want to be.”

        Mark Fallon, who is handling leasing with T.J. Maxx for Jeffrey R. Anderson Real Estate Co., said the retailers he speaks with want two things: a residential population and an employment base.

        As T.J. Maxx spokeswoman Laura Cervone put it: “We want a thriving retail environment whether it be in a strip mall or a downtown setting.”

        Some think it's a matter of time before discounters turn to Main Street and urban corners. David Ginsburg, senior vice president of Downtown Cincinnati Inc., the downtown marketing group, said superstore chains ultimately will have to seek a “new frontier.”

        “What you need is a critical mass of all kinds of retail,” he said. @subhed:Room for Wal-Mart?

        While a paucity of land prohibits discounters from many urban markets, downtown Cincinnati actually has block-sized real estate to fill. As Mr. Bortz pointed out, the problem is a lack of parking, distance from the office district and smaller residential counts near center city.

        Getting back to the old Lazarus building: Mr. Bortz doesn't think the residential base could supply the volume to support the store. Sure, all of downtown might house more than 15,000, he said, but only about 2,000 people live near the retail core.

        But Mr. Steidtmann, who used to live in Columbus and knows Cincinnati, thinks that the former Lazarus building would make a good spot for a discounter. In such a case, he surmised, volume is determined if the retailer perceives Over-the-Rhine as part of the viable downtown market.

        “Most retailers have a very set pattern of real estate development,” Mr. Steidtmann said. “And it doesn't look like inner-city locations.”

        Mr. Fallon expects a change with the T.J. Maxx opening. In the next two years, he predicts Old Navy, Bed Bath & Beyond, Marshall's and Steinmart will open downtown.

        For smaller retailers such as Deveroes, the downtown market is a hot one. Mr. Driscoll, Deveroes owner, said his downtown store is his smallest, yet it yields the highest volume.

        “There's no business people, it's all people from Over-the-Rhine,” he said. “I'm sure they wish there was more down there.”

DOWNTOWN, BY THE NUMBERS
        Downtown demographics for 1998 (ZIP codes 45202, 45203 and 45210):

        • Population: 20,741

        • Households: 9,492

        • Median household income: $13,720

        • Households earning less than $15,000: 5,824

        • Population by race:

        — Black: 14,098

        — White: 6,466

        • Median years of school completed: 12

        • Household compositions:

        — With one person — 5,401

        — With two people — 1,947

        — With three to four people — 1,517

        — With five + people — 627

        Source: Claritas Inc.

       



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