Dive Brief:
- After analyzing the top 50 TV markets in the U.S., Barclays Capital found that 19% would see food retail square footage growth outpace population growth between 2015 and 2018, according to Supermarket News.
- Some of the areas that are most problematic include Denver (2.1% population growth but projected 2.7% retail area growth); Austin, TX (3% population growth, but 4.8% retail area growth); and Tampa-St. Petersburg, FL (1.8% population growth, 4.1% area growth).
- Favorable markets include Las Vegas (2.1% population growth but a 6.5% decrease in retail area) and Cleveland, OH, where stores are decreasing faster than the population.
Dive Insight:
When retail space expands quicker than population growth, it can hurt a retailer’s bottom line because the consumer base isn't keeping up with the amount of products that the store needs to sell.
The report that Supermarket News cited, written by Deutsche Bank analyst Karen Short, noted that markets where population is growing faster than square footage are most attractive since they have more capacity to support growth.
While stores rely on shoppers to be successful, population figures alone aren't the sole factor that determines whether a retail location will be profitable. A better store — with an upgraded layout, better selection or lower prices — can pull people away from the places they are used to shopping. There are some ethnic populations that would also help make a store that caters to their culinary needs prosper.
Some groceries are anchoring residential developments, bringing more retail space and population at once. Balfour Beatty, a luxury residential mixed-use development in downtown Atlanta, will soon have a 72,000-square-foot Whole Foods store as the complex’s anchor.
But more brick-and-mortar stores may not be the way of the future anyway. As online grocery shoppers and basket sizes increase, it might not make sense for many areas to expand the size of their stores.