Thursday June 11, 3:24 pm Eastern Time
Inner City Consumer Said Neglected
By RACHEL BECK
AP Business Writer
NEW YORK (AP) -- Mimi Rodriguez loves to shop. Each year, she shells out about $2,000 on clothes, filling her wardrobe with the trendiest styles and hottest brand names.
While she spends her weekends shopping, she never buys anything from stores near her Harlem home.
''There just aren't good stores around here,'' said the 25-year-old New Yorker. ''If I want good clothes, I have to go downtown or to malls in New Jersey or Long Island.''
Rodriguez joins many inner-city residents nationwide who yearn for better stores in their local communities. These consumers have money to spend and are eager to shop in well-known retail chains.
But many national merchants have shied away from the urban centers, overlooking the demand and profit potential there. As a result, inner-city consumers are forced to shop mostly at small, specialty stores, where they pay higher prices and find a limited variety of merchandise.
''I travel down to Kmart, like 45 minutes on the subway, just to get my kids socks and underwear and stuff for my house,'' said Sunny Diaz, who lives in an inner city neighborhood north of Harlem. ''I get better stuff for cheaper prices.''
Two studies released Thursday by the Boston-based Initiative for a Competitive Inner City (ICIC) found that cities are largely underserved by retailers, who favor rural and overseas expansion to urban development.
One study focused primarily on Atlanta, Boston, Chicago, Miami, Oakland, Calif., and New York's Harlem. A second study surveyed 1,205 inner-city households nationwide.
According to the studies, consumers in America's inner cities possess more than $85 billion in annual retail spending power, which accounts for nearly 7 percent of the total retail spending in the United States.
But that demand is largely unmet. Only a handful of national retailers, such as Sears and Pathmark, operate stores in urban America; virtually no discount chains, like Wal (NYSE:WMT - news)-Mart, are located in inner cities.
''Prejudice in this country exists beyond social circles, it extends into business,'' said John Konarski, vice president of research at the International Council of Shopping Centers, a New York-based trade group. ''For many years, there have been stereotypes that cause retailers to shy away from opening stores in inner cities.''
''But there is good money to be made in the inner cities,'' he said. ''People there need to eat, they need clothing, they need things for their homes and they have money to spend.''
In fact, inner-city consumers spend about 21 percent more each year on men's clothes and 24 percent more on children's clothes than the average American shopper, the studies found.
Grocery store sales can be as much as 40 percent higher per foot in inner cities, while sales at drug stores in these areas can be as much as twice the regional average, the studies reported.
''Incomes in inner cities have grown dramatically, and people want to shop,'' said Drew Greenwald, president of Grid Properties, which is building Harlem USA, a large shopping complex in upper Manhattan that will include a Disney store, the Gap (NYSE:GPS - news), HMV Records and Old Navy.
''Give them good stores, and they will come,'' he said. ''But when they can't find them, they take their shopping elsewhere.''
There's already some evidence of major retailers recognizing the buying power of inner-city consumers. Rite Aid (NYSE:RAD - news) has found great success with its Harlem store, where more prescriptions are filled than at any of the 110 other Rite Aid stores in New York City. Kmart's South Bay store, in Boston's inner city, is the highest grossing store for the chain in Massachusetts, according to the studies.
In Harlem, at least two major shopping projects are planned. Besides Harlem USA, developers are working on a retail complex in an old factory that will be anchored by Home Depot (NYSE:HD - news) and Costco (Nasdaq:COST - news) stores.
''For a long time, there was the myth that you couldn't make money in inner cities because of crime and people made less money,'' said Konarski, of the shopping centers trade group. ''But some smart retailers are beginning to realize the huge potential that's been virtually untapped in the inner cities.''
The studies were coordinated primarily by the ICIC, The Boston Consulting Group and Management Horizons, the retail consulting unit of Price Waterhouse. The ICIC is a not-for-profit organization established in 1994 to encourage inner-city development.
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