Are Inner Cities Retail Deserts?

The influx of new residents, accompanied by a growing number of restaurants, coffee shops, retail outlets, and other amenities to serve them, has transformed many urban neighborhoods over the past decade. A walk through any low-income, inner city neighborhood, however, often reveals a different reality. While many of these neighborhoods have also grown in population, the mix and number of shops serving local consumers seem to differ from other parts of the city.

A difference in retail options across neighborhoods matters if it creates an additional urban inequity: inner city residents that must travel farther than residents in other parts of the city to purchase the goods and services they need. Limited transportation options may literally put some goods and services out of reach for inner city residents. Higher transportation costs and lost time also effectively increase the price of the same goods and services for inner city residents. A lack of competition may also create higher priced goods and services in inner cities.

ICIC first analyzed the inner city retail environment in 1998, in partnership with The Boston Consulting Group. The groundbreaking study “The Business Case for Pursuing Retail Opportunities in the Inner City,” compared retail environments in six markets: Atlanta, Boston, Chicago, New York City, Miami and Oakland. It found inner cities had significantly fewer retail options than surrounding areas.

Across the six inner city markets, nearly a quarter of retail demand went unmet. This unmet demand was most acute for basic, high-demand retail categories, such as food and apparel. Residents in New York City voiced their concerns over the lack of adequate and affordable retail options in their neighborhood, stating that they had to travel as far as New Jersey to shop. In addition, the lack of competitive retail options adversely affected retail prices in inner cities. For example, inner city shoppers paid up to 40 percent more for basic grocery items than their suburban counterparts in Boston.

An important new study by the JPMorgan Chase Institute, “Going the Distance: Big Data on Resident Access to Everyday Goods,” provides additional insights into urban retail markets by comparing consumer transactions in New York City and Detroit between 2013 and 2016. The comparison of these two cities is particularly interesting because of their starkly different retail environments. New York City has one of the highest levels of resident access to retail in the U.S., due to its population density and abundant public transportation options, while Detroit has relatively low levels of retail access due to its lower population density and recent economic difficulties.

The study found that the majority of purchases for residents in both Detroit and New York City were made at retail outlets that were not within easy walking distance (more than 20 minutes away, or just over one mile), but lower income residents traveled the farthest. In Detroit, the distance traveled was 15.4 percent greater for low-income residents than it was for high-income residents. In New York City, the distance traveled was 33.3 percent greater for low-income residents.

However, the JPMorgan Chase Institute study also found that the distances all residents traveled to retail outlets in both cities have actually been decreasing over time. In New York City, the distances traveled to retail for low income residents decreased 7.8 percent between 2013 and 2016. In Detroit, the distances traveled for low income residents decreased 6.5 over the same time period.

This trend may reflect an improvement in inner city retail environments. Some large corporations such as Starbucks and Whole Foods are opening new stores in inner city neighborhoods. For example, in 2016, Whole Foods opened a new retail store in Englewood, an inner city neighborhood in Chicago’s South Side. The store purportedly offers more than 30 items at cheaper prices compared to other Whole Foods stores in the area, in part because of cheaper rent. The Whole Foods store anchors the new Englewood Square shopping complex, which boasts several retail stores and restaurants. In addition to the Englewood location, Whole Foods has also opened stores recently in inner city neighborhoods in Detroit, New Orleans, and Newark. Starbucks also plans to open 14 additional stores in inner cities across the U.S. by 2018, including locations in Ferguson, MO; Queens, and Milwaukee.

Large corporations may be recognizing the large, untapped consumer market in inner cities. ICIC’s study in 1998 calculated that the 7.7 million households living in U.S. inner cities at the time possessed over $85 billion in annual retail spending power, amounting to nearly seven percent of total U.S. retail spending. Although household incomes tend to be lower in inner cities, the income density creates a demand for retail products that can exceed demand in surrounding neighborhoods.

Attracting retail to inner cities may require some additional incentives and public investment. A follow up retail study by ICIC in 2007 found significant differences in inner city retail environments across the country. Marked increases in inner city retail options occurred in cities that had implemented aggressive public strategies to attract retail establishments to inner cities. These included Boston, Columbus (Ohio), Denver, New York City, Oakland and San Diego.

The construction of the $20 million Englewood Square shopping complex in Chicago that supports the new Whole Foods store was supported with $10.7 million in subsidies from the City. Such public investment will have the greatest impact if it is targeted to those neighborhoods that face the largest gaps in retail options. More research is needed to understand the extent of retail deserts in America’s inner cities.

Expanded retail outlets in inner cities would mean residents would have the same access to goods and services (at equivalent prices) as residents in other parts of the city. This simultaneously would create new jobs and economic growth in inner city neighborhoods and catalyze additional development and property improvements.