Normal Grocery Study 2013_201306181532252909

8/13/2019 Normal Grocery Study 2013_201306181532252909

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Town of Normal

Uptown Normal Grocery Feasibility StudyMay, 2013


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Town of Normal

Uptown Normal Grocery Feasibili ty Study

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Table of Contents

Section One: Introduction and Overview......3

Section Two: Market Assessment and Analysis.....4

Section Three: Site Evaluat ions.13 Site Overview Site Evaluations Development Budget Operating Statement

Section Four: Next Steps Implementation Strategy..21

Section Five: Appendix....22 Grocery Study Overview

Demographic Profile Source of Sales Source of Sales Map Development Budget


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Section One: Introduction and Overview

Introduction

DKMallon (DKM) was hired by the Town of Normal,Illinois (Town) to determine the feasibility of a grocerystore in Uptown Normal. The study included performinggrocery store studies including market analysis, siteevaluation and sales forecasting. This study and findingscould lead to the Implementation Strategy which isdiscussed in further detail in Section Four.

Study Process

The assignment consistedof three phases. The firstphase was the FactFinding Review. DKMhad several meetingswith the Town staff andother stakeholders tohelp develop anunderstanding of thelocal and regionalmarket area as wellas the history ofUptown. DKM metwith members ofthe Green Top

Grocery Cooperative to

discuss their vision and plans for a cooperative grocery

store within the market. A study of a proposedcooperative grocery store was commissioned, howeverwas unavailable for DKMs review at this time.

The second phase was a Market Assessment andAnalysis to determine what type and size (if any) ofgrocery store is supportable in Uptown Normal. Theanalysis encompassed the entire grocery storelandscape for the Bloomington Normal metro area andthen focused on three potential locations in UptownNormal, IL near the Illinois State University campus.

The last phase was the Site Evaluation. DKM workingwith Town staff identified three potential site locations foran urban type grocery store in Uptown Normal. Theselocations included the College Avenue Parking Decklocated at the NWC of College Avenue and ConstitutionBoulevard, the Ace Hardware store at the NEC ofCollege Avenue and Linden Street and the Town parkinglot at Linden Street and Parkinson Street. This phaseincluded evaluating the sites and providing an estimate ofconstruction and development costs. A proposed grocerystore operating statement for years 1 3 was developedto determine the viability of the store based on theproposed sales and development cost.


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On a macro level the Bloomington-Normalmetro area actually generates more in grocerysales than the total potential dollars availablewithin the metro area. The following 2012

market share table documents the averageweekly sales by store and the combined totalamount of sales. Using a standard formula oftotal population multiplied by the Per CapitaWeekly Expenditure (PCW) (130,835 X$44.30) the total weekly sales potential for theBloomington-Normal metro area is$5,795,991. The total for McLean County(172,281 X $44.53) is $7,671,673. Based onthe sales tax receipts for the year 2012 from

the Illinois Department of Revenue the 17primary grocery stores within the market atotal combined sales of $7,296,000. For all ofMcLean County the total sales were$8,092,813. In both instances the amount insales was greater than the total potentialbased on population. This indicates that thegrocery stores in the Bloomington-Normalmetro area draw 20% to 25% of their businessfrom rural areas and some of the other

surrounding counties. Therefore if anadditional grocery store were developed in the

PCW is the estimated potential dollars that a person has availableon a weekly basis to spend on food. The number is derived by thecombination of household size, income, ethnicity and spendingpatterns from the Census of Retail Trade.


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Bloomington-Normal metro area it most likely wouldntincrease the amount of overall sales coming into themarketplace but rather capture its business from thecurrent base of existing stores.

Although the Bloomington-Normal metro area capturesmore in sales than its total potential the overall supply ofgrocery stores is sufficient but not overwhelming. Tocalculate the supply versus demand, a logical method isto calculate the amount of retail square footage dedicatedto food divided by the population (per-capita squarefootage). The general rule is to use the gross squarefootage of an establishment, sales area plus backroomand prep area, to calculate the ratio. When accounting

for supercenters, the gross square footage used is thesales area plus 25% of the backroom space and not theentire size of the facility. The total square footage of the17 regional stores and the two smaller stores combinedis approximately 794,435 square feet. Divide thatnumber by the population of the metro area (130,835)and the per-capita square footage for the Bloomington-Normal marketplace is 6.1 square feet per person.Generally a market or trade area with a per-capita squarefootage of less than 4.0 is considered underserved or

non-competitive. A grocery store that is located in anunderserved area will typically generate strong salesregardless of how well the store is operated. It will mostlikely charge higher prices due to the lack of competition.A per-capita square footage of 4.0 to 8.0 depicts a tradearea with an adequate amount of competition and

consumer choice. The grocery stores are typically moreprice competitive and will be more inclined to providegood service and a clean shopping environment. A per-capita square footage greater than 8.0 depicts a trade

area that is over served or over saturated withcompetition. Oversaturated areas initially benefitconsumers as the stores must maintain low prices inorder to attract customers. Long-term, an oversaturatedarea can be detriment to the community. Weaker storeswill close and the community can be left with a number ofvacant stores and shopping centers. At the present timethere are a few shopping centers within the Bloomington-Normal metro area that are mostly vacant or less than50% leased. Since the current demand ratio of per-capita

square footage (6.1) is at a competitive but not overlycompetitive level, the need for another large grocerystore is limited.

According to the U.S. Department of Agriculture, there isa food desert within the Uptown Normal Area. A fooddesert is a low-income census tract where either asubstantial number or shares of residents has low accessto a supermarket or large grocery store. Low incometracts are defined as those where at least 20% of the

people have income at or below the federal povertylevels for family size, or where median family income forthe tracts is at or below 80% of the surrounding areasmedian family income. The food desert in Normal isoutlined in green on the attached page. The low access


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to grocery stores would support the need for a grocerystore to serve the immediate trade area.


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The balance of grocery stores in the metro area inrelation to where the population lives is rather poor.More than 70% of the total grocery square footage andtotal sales within the marketplace are concentrated in two

sectionsalong

VeteransPkwy on theeast side ofthe metroarea. Thesection of

VeteransPkwy between Fort Jesse Rd and Vernon Ave accounts

for more than 40%. The section along Veterans Pkwybetween Empire St and Oakland Ave accounts for a littlemore than 30%. As a result the population in the westernhalf of the metro area does not enjoy the convenience,quality or numbers of options are provided with. Storeslocated in the western half of the metro area dontperform as well as their counterparts on the eastern half.The stores arent as large and lack the additional retailsynergies of the stores along Veterans Parkway.However, the data suggests that even if a new store were

to open on the west side of the metro area, west sideresidents may still travel to the east side to shop. A goodexample of the current situation is Schnucks #729located at Main St and Raab Rd on the north end of theCity of Normal. The store is only five years old and amodern state of the art facility but does $100,000 a week

less in sales than the other Schnucks in Bloomington.The additional retail shops that were developed withstore are still mostly vacant. Therefore, a large retaildevelopment on the west side of the market would

probably be a bad investment at this point in time. Theonly exception would be if a complete interchange werebuilt at College Ave and I-55/74. A development near thatinterchange would have good regional access and thepotential to be successful in future years.


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Competitive Environment

Based on the sales of each grocery store in the metroarea Wal-Mart is the market share leader with a 20.9%

share followed by Jewel/Osco 14.3%, Kroger 13.3%,Meijer 11.2% and Schnucks 10.6%. In total, these fiveoperators capture 70% of the market dollars while theremainder is captured by the specialty grocers or othersmall grocery stores. Based on format the traditionalfood & drug stores (Cub Foods, Jewel/Osco, Kroger andSchnucks) capture 42.6% of the market, supercenters(Wal-Mart, Meijer and Target) 34.4% and the limitedassortment operations (Aldi, Fresh Market, SamsClub, etc) capture the remaining 15.1%. A detailed

review of each grocery store is included in SectionFive Appendix.

Although the traditional food & drug stores combinedcapture the most market share, on an individual storebasis the numbers could be of concern. Kroger,Jewel/Osco and Schnucks all operate a store thatperforms well but also operate one or two stores thatwould be considered mediocre or poor in terms ofsales. In comparison the three supercenters do more

in sales than any of the other traditional food & drugstores by a rather wide margin and on a sales persquare foot basis some of the limited assortmentoperators also do much better. The numbers arentthat surprising. The decline in the traditional food &drug stores and the growth in the supercenters and

limited assortment type stores has been increasing mostnoticeably in the past five years. Based on the currenttrends one shouldnt be surprised if one of the traditionalfood & drug stores ends up closing in the next few years.

Again, the lower performing stores are mostly located inthe areas that are not as well served.


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Trade Area / Estimated Sales

The Town of Normal has proposed three locations nearits downtown and the Illinois State University campus.

The three sites are all in very close proximity to eachother so one common trade area was defined for all threelocations. The trade area outlined in blue encompasses24 square miles and includes the entire Town of Normaland the northern half of the City of Bloomington. Thetrade area boundaries extend north 1.9 miles to I-55, east2.3 miles to Hershey Rd, south 2.5 miles to Oakland Aveand west 2.3 miles to I-55/74. The trade area has a 2012estimated population of 73,835, is predominantlyCaucasian (78%) and has a rather low average age due

to the influence of the University and its studentpopulation. A detailed demographic profile for the tradearea is included in Section Five Appendix. It shouldalso be noted that close to 10,000 of the trade arearesidents live in dormitories or some other form of grouphousing and that the household income levels are veryevenly dispersed across all spectrums, wealthy, middleclass and poor.


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The estimated sales were derived using a gravity modelwhich projects the sales of a future store within a tradearea based on a variety of factors. In order to build themodel a trade area needs to be defined. The population,PCW and total potential within the trade area areestimated and then, based on the current amount ofsales being generated at the existing stores serving thetrade area the model can calculate how much of the total

current sales within the trade area the new store willcapture. The estimated amount that the new store willcapture is based on four variables the size of the store,how strong of a draw it will have across the trade area

(curve), how much business it will capture from within thetrade area (percent explained) and how well received thestore is amongst the trade population (image). Forexample the

Kroger storeon Main St inBloomington,Kroger #856,has a limiteddraw due to itssmall size and location in a congested area. As a result ithas a high curve of 92 (75 is average), a high percentexplained of 85% since its located in the center of thetrade area and wont attract much business from a far

distance and a lower image of 90 (100 is average) sinceits an older store that does not provide the amenities thatmany other stores in the trade area provide. Incomparison Meijer #500 located on College Ave has alower curve of 60 since its a very large store and has aregional draw location, a lower percent explained of 40%since the store is on the periphery of the trade area and ahigher image of 132 since it offers a wide selection ofspecialty departments and is assumed to have lowerprices. In summary a large store, low curve, low percent

explained and a high image will yield a high salesestimate, while the opposite of those variables will yield alower sales estimate.

Trade Area 1 mile radius 2 mile

radius

3 mile

radius

POPULATION

2012 73,835 25,640 54,407 87,910

2017 est. 75,761 26,424 55,960 91,454RACE & ETHNICITY %

White 78.3% 85.6% 81.8% 78.6%

Black 11.0% 6.1% 8.8% 9.9%

Hispanic 5.4% 4.3% 4.5% 5.0%

Asian 2.7% 1.9% 2.4% 3.9%

Other 2.6% 2.1% 2.5% 2.6%

HOUSEHOLDS

Totals 27,424 7,625 18,907 32,828

INCOME

Median HH. Income $46,085 $44,860 $46,346 $48,471

GROCERY DOLLARS

Grocery PCE $43.97 43.35% 43.86% 44.06%Total Potential $3,246,525 $1,111,494 $2,386,291 $3,873,315


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The estimated sales for the proposed Ace Hardware siteassumed a higher than average curve of 80 since thestore is located in a higher density Uptown location and issmaller in size than the majority of stores within the trade

area. A percent explained of 85% and, since we dontknow exactly what type of format the store will be animage rating of 105. Based on these factors the site

yielded a sales estimate of $267,000 per week.Assuming your average neighborhood grocery store itwould be safe to assume that the store could do between$250,000 and $300,000 a week in sales. DKM believes

that a full line grocery store would be the ideal format forthe proposed location. The store might be limited in sizeto approximately 25,000 to 30,000 square feet; howeverit could carry most products that you might associate withthis type of format. Given the limited size, DKM doesntbelieve that a pharmacy would be included.

There are a few other issues that could affect theproposed site that a gravity model does not take intoaccount. First a large majority of the Illinois State studentpopulation, those living in the dormitories, wouldnt really

patronize the store since most of their meals are providedfor. Outside of soda, snack foods, microwaveable itemsand health and beauty aids the population living in thedorms wouldnt have much need for the remaining itemsin the store. The second issue would be how toeffectively merchandise the store to attract both theUniversity population and the permanent population. Thestudent population not living in the dormitories wouldbenefit from having a convenient grocery store. However,since most students are on a limited budget the store

would have to offer lower quality, lower priced items orprovide a student discount in order to attract thatbusiness. On the other hand the store wouldnt surviveon the student population alone so it would also have tobalance to the wants and needs of the residentpopulation as well. Finally the store would experiencewhat are considered seasonal shifts in sales. Essentiallywhen the University was in session sales could beanywhere from 20% to 30% higher than when theUniversity is not in session especially during the summer

and winter breaks.


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Section Three: Site EvaluationsOverview

DKM considered three potential sites for anurban type grocery store in Uptown Normal.The locations were based on discussions withthe Town staff and DKMs review of theUptown market. DKM has not had anyconversations with any of the current propertyowners other than the Town owned properties.The three potential sites are as follows:

SITE A NWC College Avenue and

Constitution Boulevard

SITE B NEC College Avenue and LindenStreet

SITE C Linden Street and ParkinsonStreet


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Site Evaluation Site A NWC College Avenue and Constitution Bou levard

Site A is the 13,000 square foot retail site under the College Avenue Parking Deck located at 101 Mulberry Street. The

property is bounded by Mulberry Street on the north, Constitution Boulevard on the east and College Avenue on thesouth. The location provides an excellent site given its proximity to the University and street network however the size ofthe retail space is limited and wouldnt permit a full line grocery store. The size might accommodate a limited assortmentstore however the sales would be limited. The site has also been mentioned as a potential site for a food co-op. The storeof this size might generate sales of approximately $75,000 to $100,000 per week or $400 per square feet. The site hasseveral development constraints that would affect theoperation and viability of the store. Parking and loadingat the proposed store would present some challenges tothe customers and operators of the store. It is generallyfelt that open surface parking and rear loading/delivery

is the preferred option for this type of store.

Benefits: Excellent Location Low development costs Property owned by Town of Normal Good access/visibility

Challenges:

Limited size Parking challenges for some customers Loading restrictions


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Site Evaluation SITE B NEC College Avenue and Linden Street

Site B is the Ace Hardware store located at 204 East College Avenue. The oblong site is bordered by Mulberry Street

on the north Linden Street on the west and College Avenue on the south. The entire parcel is approximately 68,802square feet that might be expanded to the west. Site B is a viable location within the Uptown Area given its size andaccess to the trade area population. The site could accommodate a 25,000 to 30,000 square foot grocery store withadequate parking. A number of grocery store types/formats would be ideally suited for this site. This size store would berecommended given the immediate trade area population. There are a number of regional/independent grocers that offerthis size and type of format. Based on the sales projection model it is anticipated that the sales would be approximately$250,000 to $300,000 per week or $520 per square feet.

Benefits: Relatively large site

Great access/visibility Available surface parking Best sale projections of options studied Anticipated store size fits the trade area Availability of grocers of this type and format

Challenges:

Development costs Privately held Site is current location of Ace Hardware and

warehouse


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Site Evaluation SITE C L inden Street and Parkinson Street

Site C is the Town parking lot located south of the railroad tracks and west of Linden Street. The parcel is

approximately 46,025 square feet. The site doesnt provide much of the type of access that the other two sites do. Thesite lacks adequate east west access as Parkinson Street dead ends a few blocks in each direction and the railroadcrossing immediate to the north forms a barrier to providing access. Based on our analysis the site could support a storesize of approximately 20,250 sqft. The size would limit the type of format and would not permit a full line grocery store.Based on the sales projection model it is anticipated that the sales would be approximately $125,000 to $150,000 perweek or $385 per square feet.

Benefits: Property owned by Town of Normal Site could be expanded if additional Town property

is allocated to grocery site

Challenges:

East/west access is limited Rail lines to the north may be a barrier to some of

the anticipated trade area Limited store size unless site is expanded


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Site Evaluations Overview


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Estimate of Development Costs

DKM has prepared an estimate of development costs for the three potential sites. The estimates assume a market value

for land and a typical grocery store exterior and interior build-out. DKM has not conducted any due diligence of the sitesother than site visits. The estimates should assist the Town in evaluating the sites and in the potential ImplementationStrategy. The following chart outlines the costs and a more detailed budget for each site is included in Section Five Appendix.


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Proposed Grocery Store Operating Statement


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Section Four Next StepsNext Steps Implementation Strategy

Based on the findings from the Grocery Feasibility Study DKM would recommend that the Town consider moving forwardwith the next step on bringing a grocery store to Uptown Normal. Site B is the most viable grocery store location given itssize, visibility and proximity to the Uptown Trade Area. Sales projections of $250,000 to $300,000 per week with proposeddevelopment costs of $8.6 million will provide for a grocery storeto operate within the Uptown Normal Market. ImplementationStrategy would take the findings from our study to developspecific recommendations on development options and identifyspecific grocery store chains and operators. The tasks couldinclude:

1. Identification by name and contact information of specific

local, regional, or national grocery store operators tolocate in Uptown Normal.

2. Preparation of marketing materials for attracting a grocerystore to Uptown Normal.

3. An outline of various financial, policy, and developmentincentives to facilitate the development of a grocery store.

4. A list of potential county, state, federal, and non-profit funding sources for the grocery store.

DKM is prepared and excited about the possibility of executing on our findings and looks forward to talking further with theTown of Normal about the next steps on bringing a viable grocery store to Uptown.


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Section Five Appendix

Grocery Store Overview Demographic Profile Source of Sales Proposed Grocery Site Source of Sales Map Development Budgets


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Documents

Normal Grocery Study 2013_201306181532252909