University of Wisconsin - Extension

Growing communities often attract a variety of new commercial developments including both freestanding stores and neighborhood or community shopping centers.

¿These developments provide a community with products, services and conveniences important to the quality of life for local residents,¿ explains Bill Ryan, University of Wisconsin- Extension business development specialist. ¿The challenge in accommodating these types of developments becomes one of minimizing losses to existing retailers, such as those downtown, while allowing new competition to serve the growing market.¿

To respond to this challenge, community leaders can conduct an assessment of the retail market with a focus on anticipated market supply and demand. The intent is to project how will the market will respond to changes in the number, type and location of retail businesses and to provide community leaders with information to guide future business expansion and recruitment efforts, explains Ryan.

¿Before an analysis of a particular development can be conducted, the economic health of the local retail community must be assessed,¿ he adds. ¿This requires a close look at retail activity, particularly in the central business district.¿

Key indicators of economic health in the retail sector include vacancy levels, property values, store turnover, retail mix, employment, tax revenues, new business incubation, critical mass/concentration of retail, and the availability of goods and services demanded by the community.

Changes in trade area demographics should be estimated. ¿The trade area is generally defined as the geographic area in which three-fourths of current customers reside,¿ Ryan says. ¿A significant increase in population could signal new opportunities for retail expansion or development. The profile of these new or anticipated residents can help you assess future market demand for various types of products or services.¿

Regional retail competition also must be assessed. New retail concepts are threatening traditional retail stores. ¿These concepts include large non-mall stores offering assortment and low prices for selected types of goods like electronics, off-price apparel stores, food and drug stores, outlet centers, warehouse clubs and the Internet,¿ adds Ryan.

By recognizing the changes in competition, both locally and regionally, an assessment of proposed retail developments can offer valuable insight into the changing market and risk facing the traditional retailers in the community.

¿With an understanding of general retail trends, changes in trade area demographics and regional competition, anticipated gaps in specific categories of the local retail market can be projected,¿ Ryan explains.

Two techniques can be used to determine reasonable levels of retail growth in an area with a growing population. Retail mix in ¿comparison¿ communities can be used as a measure of how many and what type of retail stores might be supported in the subject community. Potential consumer spending data can also be used to estimate how much new retail space can be supported.

The UW-Extension Center for Community Economic Development provides assistance to communities on business district market analysis. Retail and service business opportunities are analyzed using sophisticated market information databases and geographic information systems (GIS) technology. The Center brings state-of-the-art market analysis tools to small town Main Streets throughout Wisconsin.

¿Reasonable growth is important to ensure a successful and sustainable business community,¿ Ryan adds. ¿In addition, it helps ensure that necessary goods and services will be available to a growing population.¿