American cities are on the rebound and supermarket retailers are increasingly attuned to the fact that cities offer opportunities as a new retailing frontier. At least they should realize that, and many do. To cite just two previously reported examples of such activity, Shaw's Supermarkets opened a store in the Dwight section of New Haven, Conn., last month and Pathmark Stores plans to open a store in the Harlem section of New York City in December.
American cities were largely abandoned by all types of retailers about a generation ago because of the seemingly intractable problems that arose in connection with city life and city business. These included the complexity of real-estate dealings, regulations, taxes, the fear of crime and poverty.
But, perhaps more important, as affluent customers migrated to the suburbs, it was much easier to open stores there. Many supermarket operators, especially those in high-growth suburban areas in the Southeast and the Southwest, could grow by simply buying a remote tract of land, waiting for some evidence that population was approaching and then build a store. In short, costs were low and success virtually guaranteed.
That scenario is now changing, and not just because American cities are on the rebound. Now, in many suburban locations, there are few building sites left and overstoring and overmalling are the new realities.
These factors have caused supermarket operators to take a new look at urban retailing, including retailing in economically distressed areas.
The obvious advantage is that urban areas contain a large pool of potential shoppers who may have few shopping choices and who, in the aggregate, have a great deal of money to spend. That's good for retailers but there's more: Retailers who take the trouble to return to the inner city are offering valuable support to their core population center around which the suburbs grew.
Notwithstanding all this, though, the challenges to urban food retailing are numerous and formidable. Here, thanks to a newly issued publication from the Food Marketing Institute titled "Urban Supermarkets," are a few of them:
Land acquisition: Assembling a parcel of land in an urban area can be daunting since it may be necessary to piece together a tract by dealing with numerous sellers, assuming the land holders want to sell at all. And, in general, development costs will be high and progress slow.
Negative reaction: People in the neighborhood may not look favorably on a supermarket project, especially if it is seen as a threat to established small grocery stores and bodegas.
Merchandising: It's not good enough to drop the content of a suburban supermarket into a city area. Often, urban communities are multicultural and a supermarket has to be merchandised accordingly.
Regulations: The complexities of dealing with zoning and other approval processes can be daunting. It can easily take twice the expected time to deal with these matters in a urban area.
Infrastructure: Access to the proposed supermarket may prove to be a difficulty. Local roads and sidewalks may not be sufficient to carry additional traffic and attention must be paid to other means of access too, such a bus and subway stops.