Retail Ecosystem: The Power of Location

A retail market "power center" is like a country that exports more than it imports within an urban space.  More money is brought into the power center (e.g., a zip code) than leaks out.  The economic footprint significantly influences the retail ecosystem -- that is, contiguous and regional markets.  Grocers, restaurants, clothing boutiques, movie theaters, musical instrument stores, and niche service providers (e.g., interior decorators) are drawn to the space in the form of retail "ribbons" and "cottages".  Spill-over effects to other areas of the city support new retail development centers and urban "infill" projects.

In other words, the market economics of a retail power center broadly impact the local and regional employment, income, spending, traffic flow, population migration, residential and commercial development, and tax revenue dynamics.

Retail power centers attract smaller niche shops.

As an illustration, the retail market power center in Lincoln is SouthPointe Pavillion with half-a-million square feet of retail space.  Notable tenants include Von Maur, Scheels Sporting Goods, Bed Bath and Beyond, and Barnes & Noble Booksellers (in order of square feet space).  SouthPointe is located in the dark blue area of the map -- a market denoted by the zip code 68516.

Retail "ribbons" are tethered to this core with tenants such as Trader Joe's, Michael's Crafts, Dress Barn, and Office Max.  These ribbons are the first economic concentric ring from the core.

That this market area has a high concentration of both large retailers (e.g., Von Maur) and small retailers (e.g., Bagels & Joe) is attributed to agglomeration economies.  Small independent retail shops benefit from the consumer-pull of the large retailers.  These niche or boutique shops take advantage of the higher customer volumes, traffic flow density, consumer lifestyles and preferences, and higher levels of economic (spending) activity.

This retail market space has spill-over effect in other areas of the city in the form of new retail development centers or "infill" projects.  Specifically, the contiguous zip code markets of 68512 and 68526 represent the influence of the retail power center within a four-mile radius.  

Eight-miles away the flow-and-delivery of sales, employment, income, and tax revenue of the 68516 market is inter-related to the new development of the West Haymarket area (zip code 68508).  That synergy is associated with shared pyscho-graphics of the non-contiguous market space (i.e., lifestyles, preferences, attitudes).  For example, a more sophisticated consumer drawn to the retailers at South Pointe is correlated with attendance at Lied Center for the Performing Arts events and participation in the general cultural milieu of the Haymarket area. 

The following is a simplified way to measure the retail ecosystem impact on the community of Lincoln.

The zip code market in which SouthPointe Pavillion is located has a higher density of retail establishments (70 to 79) each with over $1.0 million in annual sales revenue.  Conservatively, this retail power center contributes either directly or indirectly:

  • At least $70 million in annual retail sales;
  • Over $1.0 million in sales tax revenue for the City of Lincoln (rate is 1.5%);
  • $3.8 million in sales tax revenue for the State of Nebraska (rate is 5.5%);
  • 546 part- and full-time jobs (using national industry estimates);
  • $1.9 million in labor income (using national industry estimates); and,
  • $23.3 million in gross state product.

This illustration is only meant to underscore the retail market dynamics that influence the broader economic system.  Influences from the broader retail ecosystem should be strongly considered when determining the site selection array.

Hoffman Strategy Group LLC's (HSG) economists, economic geographers, and geo-spatial business intelligence analysts model the flows and deliveries within and between the market space -- herein termed the retail "ecosystem".  That model is used to forecast the economic influences on the broader economy, and community, associated with a development project.

We conduct intelligent in-depth systems analysis to guide developers recruiting retail establishments and preparing applications for public finance options (e.g., tax increment financing); and retail establishments seeking market location optimization.

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Jerry L. Hoffman

Hoffman Strategy Group LLC, 4424 Hallcliffe Road, Lincoln, NE, 68516, United States

Jerry L. Hoffman is owner of Hoffman Strategy Group LLC, a firm nationally known for strategic development, economic analysis, and market location consultancy.