Using Retail as a Tool for Broader Revitalization

This article was originally published on June 27, 2014.

When it comes to strategies for job creation, retail gets a bad rap. It’s too low paying, people say. There’s no room for upward mobility, opponents argue. But what some people fail to realize is that retail development can play a major role in the revitalization of inner city neighborhoods.

A recent Boston Globe article notes the resurrection of retail in Dudley Square, one of Boston’s most underserved neighborhoods, and the home to ICIC’s offices. In the mid-19th century, Dudley Square was the retail center of the city. At the heart of the Square was the Ferdinand Building—a prominent baroque structure that once housed a popular furniture store. As Dudley Square fell into a state of decline, so did the retail outlets. Thriving stores were boarded up, storefronts were covered in graffiti and crime proliferated in this inner city area, just a short distance from downtown Boston.

Recently, there are signs of revival. The City of Boston is moving its Boston Public School administrative offices to the refurbished Ferdinand Building. A police station and new library have opened. Developers of nearby parcels are building hundreds of residential units in the surrounding area. And now, a number of new retailers are interested in moving to Dudley Square.

In March, the City of Boston and neighborhood representatives hosted a pre-bid meeting for 22 interested companies, all of which are pitching to open in the Ferdinand building’s six ground-floor retail spaces. Companies range from national chains (Starbucks, Dunkin’ Donuts and Tasty Burger) to local, independent restaurants (Parish Café, Bon Me and fashion boutique Touch of Class).

The desire to open in an inner city location may seem counter-intuitive. The very definition of an inner city indicates that average median incomes are low and poverty rates are high. Discretionary income per household is limited. However, ICIC research finds that inner cities are actually exceptional locations for retailers because while average household income might be low, income density is high. Moreover, even those with low incomes have to buy certain types of items, such as groceries, household supplies and clothing.

At an ICIC conference on inner-city retail, Henry Cisneros, former HUD Secretary and Founder of CityView elaborated: “Inner city residents have incomes. They have spending aspirations and buying power and that spending, out of necessity, is now going outside their neighborhoods.”

Research by ICIC also finds that in the 100 largest U.S. inner cities, restaurants, bars and apparel shops are well represented, but grocery stores, pharmacies and building supply centers are in short supply.

“The inner city retail opportunity is immense,” says Michael Porter, a Harvard Business School professor and ICIC Founder and Chairman. “Retail is one of the biggest economic development opportunities in the inner city. It has tremendous win/win potential for both the community and retailers. But the potential remains unheeded.”

After numerous interviews with inner city retailers, ICIC identified four key strategies for creating successful inner city retail:

1) Believe in the market’s potential and commit to a long-term endeavor.

2) Adapt format and operating methods to local conditions.

3) Tailor product selections to a diverse customer base. Quinoa and kale may give way to mangoes and quipes.

4) Hire employees from the community and customize training and retention programs. Inner city neighborhoods are diverse; hiring employees from a range of ethnic backgrounds make local customers feel comfortable.

As demographics shift – with more people moving to the urban core in search of walkable, transit-oriented neighborhoods – inner city retail can serve to draw new customers to the area and create the critical mass necessary for residential and office space to be successful. Moreover, retail provides entry-level positions for local residents, who then, through further education or workforce development, can move into higher-paying jobs.

Boston’s approach to recruiting development into Dudley Square is an important first step towards bringing more retail and business into the community.