November 3, 2005

By:  K.C. Meadows/The Daily Journal

Chain Retailers: What are they looking for?

When Wal-Mart came to Ukiah, a new highway frontage retail shopping center was born.

Redwood Business Park developer Gary Akerstrom has his own version of why Wal-Mart turned its gaze to Ukiah.

"I think what happened with Wal-Mart is one of the old boys in Bentonville says We're going to move to California. One of you guys take one of those big maps of California. I want you to put a white pin in every place there is a Kmart. If there's a lot of cars in their parking lot, I want you to change it to green, if not, change the pin to red. We want to build a store every place we have a green pin.'"

While Akerstrom's tongue-in-cheek version may have a grain of truth at bottom, because Kmart and Wal-Mart have been in a stiff competition Wal-Mart seems to be winning, siting a large retail store today is a sophisticated matter.

Ukiah has attracted a number of large chain stores, many of which still exist and some - notably Big Kmart - which didn't make it. Office Depot also found the competition too stiff here as apparently did La-Z-Boy. Yet the national chains still show interest in our area and one major shopping mall developer, Developers Diversified Realty, plans to bring a regional mall to the old Masonite property.

How do retailers decide Ukiah is a good place to build a new store? It depends on what customer they are looking for, according to Katie Bullard, research manager at Angelou Economics of Austin, Texas. Bullard specializes in teaching communities how to attract the stores they want and knows what the major retail chains are looking for.

"I think at minimum they are looking for either population or household numbers," she said. "Or sometimes population times disposable income."

Population, Bullard explained, is a strict counting of people, while households, in general, are the number of families. A community - say a college town - may have a high population, but not enough households (which also indicate income) to make a store viable.

"Above and beyond that," Bullard said, "each retailer has certain demographics they want to target."

Bullard has studied the habits of a number of large retailers: the Kohl's department store wants a solid population of women 25 to 54 years of age, the Best Buy electronics stores want to know there are plenty of men 18-45 in the area.

"Usually the biggest issue in a location like yours is to meet a minimum population count and household count," Bullard said of Ukiah. "Household usually stands for more money and older."

According to Bullard, any store's decision on where to locate will be based on the demand in the given store's "primary trade area." That area would be expected to generate 60 percent to 70 percent of all sales. These areas are not just five or 10-mile rings drawn around a site. They also include factors such as travel patterns of residents, natural boundaries (mountains, rivers) and the economic conditions in the primary area.

At a minimum, population and household counts plus spending potential will be surveyed. Then the retailer will look at the possibilities for its own merchandise.

Besides age and gender targets, they may look at other demographics. Lowe's and Home Depot, for instance, are looking at the number of homeowners, Bullard explained, to make sure there's a solid market for home improvement merchandise.

Retailers also look at the number of nearby competitors, the amount of space they occupy and their potential impact. Bullard said that a particular retailer may be able to handle one small competitor, but not two or three large competitors.

Siting a retail store also means looking at what the retail center site is like. What size is the retail center, what is available for future development at the site, what's the highway access like, visibility and traffic counts.

Retailers also like to co-locate with stores they know bring in their market demographic. For instance, Bullard said, "A Circuit City or Best Buy wants to be next to a Sporting Authority and perhaps an Office Depot or Staples. Nordstrom's wants to co-locate with a Crate & Barrel or Pottery Barn. As you go across the country you'll see that many shopping centers will have the same mix of stores."

At the Masonite property, DDR has indicated it is looking to build a "regional" shopping center, which has yet another goal.

"Regional centers generally can draw from a much greater trade area than a typical neighborhood center and they can often locate in more rural areas because they can draw from a wider area," Bullard said.

As an example, she said, a Bass Pro Shop in Ukiah would be a destination store and could pull from as far as Santa Rosa or Eureka.

A typical example of a regional center is Geneva Commons outside of Chicago a hour and a half away.

"They built it in the middle of nowhere but it has a draw of hundreds of miles away," Bullard said. "The benefit to the retailer is you can buy the land much cheaper."

More retail outlets are planned in the Ukiah Valley alongside the DDR development in the Ryder Homes project also coming before the county for review. Rick Derringer, the Ryder Homes developer, says he wasn't planning to include retail in his plans for 700 or so homes at first.

"We didn't put any commercial or retail and then changed our mind," Derringer said, emphasizing that his plan does not include big box stores.

"What we need is retail for our housing project. As an example, Banana Republic, Ralph Lauren. We're dealing with higher end retail stores, such as Chico's - not really high, high end, but we're looking also at smaller stores like Nordstrom Rack - mainly not to compete with people downtown, but to meet the requirements of the people living in our housing."

"Banana Republic is interested, looking at the design we created - mixed use design - and the fact that they have 700 homes - 1,500 to 1,800 people living there, that creates its own market," Derringer said.

"(These stores) won't go downtown," he added, "because downtown Ukiah doesn't have new buildings. The city would love to have it downtown, but they can't find the land and they don't want to condemn property."

Derringer said his retail vision is to serve the 30-39 age bracket moving north to Mendocino County from the Bay Area. He noted his housing project would serve the home buyer looking in the "mid-range" from $400,000 to $500,000.

"We're looking at retail, but isn a higher range," he said.