Help! Our community bucket is leaking sales tax revenue!

Stop sales tax revenue leaks!

Develop a retail strategy now!

I had a conversation recently with an economic developer for a vibrant community with just over 30,000 residents located near an interstate.  Economic developers have a difficult job.  They are almost always responsible for business recruitment efforts to help bring more jobs to their community.  After a decade or more some can point to success -- a local manufacturing plant, a beef processor, an ethanol plant, etc.  

To bring balance, more economic developers are adding or have added entrepreneurship and small business development to their portfolio.  They find ways to support individuals who want to create a new bottled salsa product, open an artisanal brewery or restaurant, and export herb-infused sunflower oils.

Concerned by the loss of retail sales tax revenues because residents shop in a nearby larger trade area, this particular chamber and economic development corporation conducted a retail trade survey.  The survey findings are predictable: younger residents want local what is available in larger towns; residents mature in age are fine with the price-competitiveness of local stores.  Net result is retail sales leakage and a loss in tax revenues.

Retail Typology

Community survey's gauge the attitudes of local households.  This is a good start toward a more proactive engagement of local residents in retail development campaigns.  But, now what?  What are the next steps for this economic developer, the retail committee of the chamber of commerce, the local retail real estate developers, tenants, and residents?

A growing number of economic developers, the one I spoke with included, are concerned by an inadequate retail industry.  The days are fading when economic developers view retail as a secondary industry formed as a consequence of primary industry attraction.  Retail development is being added to their economic development portfolio.

My suggestion is to use a four-step retail strategy framework that is based on a shift in perspective from community resident to consumer household.   The four-steps include:

  1. Define Trade Area: Develop the trade area based on key characteristics such as competition, population distribution, and economic and demographic profiles at the block level.
  2. Consumer Profile: Determine the consumer lifestyle profile for residential households, daytime workers, college students, and tourist population.
  3.  Retail Typology: The above graph presents key retail types commonly found in cities and towns throughout the U.S.  (An early blog post introduced this graph in the context of retail trade life cycles.)  Use this to match lifestyle profiles with retail typology.
  4. Tenant Mix: Develop a strategy that matches supportable retail type with tenants, which may include a mix of retail, quick- and full-service restaurants, accommodations, and non-retail (e.g., medical clinic, bank, child development center). 

Hoffman Strategy Group (HSG) uses Experian's Mosaic® USA for consumer household profiling.  Mosaic® USA profiles over 113 million households into 71 consumer lifestyle segments and 19 groups.  It is also part of a global network that profiles consumer lifestyles of more than 1 billion people worldwide!  This is tremendously useful in retail strategy, targeting, and predictive insights related to revenue projections for an optimal array of retail development typologies.


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.