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Market feasibility overview
RAILROAD STATION RETAIL CLUSTER December 2012 Prepared for: Renaissance Downtowns, LLC Plainview, NY By: Community Land Use + Economics Group, LLC Arlington, VA
Market feasibility overview RAILROAD STATION RETAIL CLUSTER Huntington Station, NY Overview Members of Source the Station have nominated and shown strong support for development of a cluster of retail businesses at the Huntington Station LIRR train station. The Source the Station retail campaign website describes the cluster this way:
“Stationery store, cleaners, coffee shop, bank, etc. located at the Huntington Station Railroad. A collection of convenient shopping and service businesses to accommodate commuters. Could include take out food, a coffee/wine bar, and snack shop.”
This report explores the feasibility of such a retail cluster and provides suggestions on how a retail cluster at the train station might operate. Concept profile Four key factors shape transit station-‐based retail development: 1. Retail shops and service businesses located at transit stations are almost wholly dependent
on the patronage of transit passengers and, in particular, on the patronage of rush hour commuters. Passengers represent a captive market for station-‐based shops and offices – but, unless the shops have direct access to and high visibility from a primary street, the businesses’ market is effectively limited to the number of passengers who use the station.
2. Transit passengers buy convenience-‐oriented products and services at station-‐based shops –
but they rarely buy other things there. Stations serving very large numbers of passengers
can support more specialized businesses (the Apple Store at Grand Central Station, for example). But for stations like Huntington Station, with an average of 5,500 weekday passengers, market opportunities are much more limited.
3. Transit passengers buy small things – things that will not be difficult to carry onto a train.
Commuters are somewhat more willing to buy larger things at the end of the day, when heading home, than in the morning, when heading to work.
4. Transit station businesses are busy during the morning and evening rush hours – but not so
busy in the hours in between. There are plenty of ways that businesses can use their time productively, though. For example, a laundry / dry cleaner can do laundry, ironing, and tailoring during the day, when customers aren’t coming in. A gift store might sell things online, in addition to selling things in the shop, and can fulfill orders during the daytime. This could be a key to attracting one or two specialty businesses to Huntington Station’s railroad station.
There are, however, a number of ways in which transit station based retail shops, restaurants, and offices might find innovative solutions to broaden their markets and increase their sales. For example: § Tesco, a UK-‐based superstore, launched a virtual store on a subway platform in Seoul, South
Korea last year. The virtual store consists of a lifesize, backlit photo of the store’s actual grocery shelves, featuring about 500 of the store’s most popular items, with a barcode on each item on the shelves. People waiting for a train can place an order by scanning the barcodes with Tesco’s Homeplus smartphone app. Orders placed before 1pm are delivered to customers’ homes at the end of the day.
§ Kroger, a national grocery chain headquartered in Cincinnati, is experimenting with placing
refrigerated vending machines in locations with 24-‐hour traffic, like college dorms.
§ The owner of a pack-‐and-‐ship store in downtown Martinsville, Virginia conducts most of his business during morning and evening rush hours. But, he also restores vintage automobile dashboards for car collectors around the world, doing his work from the back room of his pack and ship store between the morning and evening rush hours.
§ Oxxo, a green dry cleaner and custom laundry, is able to serve its customers 24/7 via an
automated storage and retrieval system that functions sort of like an ATM machine for laundry. Each customer is given an Oxxo card encoded with his or her identification information. The conveyor rack with cleaned clothes is attached to a door on the front of the automated retrieval machine. When a customer swipes his or her card to retrieve clothing, the automated retrieval system scans through the rack and deposits the completed laundry order inside the machine store for the customer to pick up.
Existing retail services The station currently offers a newsstand, food truck, and vending machines. There are several other retail businesses within several blocks of the station, but nothing else that is readily accessible to passengers waiting at the station for a train. Market demand In estimating market demand for a railroad station retail cluster, we explored market demand for these products and services: § Auto detailing: Commuters could drop their cars off in the morning before boarding a train,
then pick up their cleaned, detailed cars in evening.
§ Laundry/dry cleaning: In addition to providing laundry and dry cleaning services (which could perhaps be conducted in one of the small industrial buildings nearby, therefore keeping the footprint of the station based store relatively small), a dry cleaning shop could also offer leather repair, tailoring services, and seasonal clothing storage.
§ Coffee, pastries, and other quick-‐service breakfast food § Non-‐subscription newspapers and magazines § Greeting cards and small gifts § Non-‐prescription drug store items, like over-‐the-‐counter medications, hair care products,
chewing gum, batteries, and other sundries § Restaurants/bars, primarily providing dinner service § Carry-‐out meals: Customers might place orders online, by phone, or by text message during
the day, then pick up there ready to go meals on their return commutes in the evening. § Fresh fruits and vegetables § A gym Using data from the 2010 Census of Population and the 2010 Consumer Expenditure Survey, we examined the market demand for these products and services by Huntington Station LIRR riders, Huntington Station residents, and other LIRR commuters from stations east of Huntington Station on the Port Jefferson branch1. For each of these business categories and market groups, we developed estimates of how much market demand these new businesses located at the train station might be likely to capture 1 Because of the somewhat unique nature of transit serving retail clusters, people whose rail trips originate at Huntington Station represent the most significant customer segment. If the retail cluster were designed in such a way that its shops and businesses were easily accessible from New York Avenue, in addition to being immediately accessible to transit riders, Huntington Station residents would then constitute a more significant customer segment for a station based shopping area.
(assuming good management and marketing, adequate capitalization, and other sound business practices), based on minimal, moderate, and aggressive levels of market penetration. “Minimal”, “moderate”, and “aggressive” are relative, but some rough benchmarks include: § Minimal:
o Typical store hours o No special marketing activities o Static window displays, clean but rarely changed
§ Moderate: o Extended morning and evening hours o Some special marketing activities
§ Aggressive: o Extended morning and evening hours o Numerous special marketing activities, including customer loyalty programs o Window displays frequently changed
Product/service Minimum Moderate Aggressive Auto detailing $ 4,900 10,300 18,600 Dry-‐cleaning and related services 40,300 74,400 108,400 Coffee, pastries, other breakfast snacks 53,500 85,400 119,700 Non-‐subscription newspapers and magazines 5,700 9,200 13,000 Greeting cards and small gifts 38,000 71,000 100,800 Nonprescription drugstore items 68,300 119,700 170,900 Dinner restaurants/bars 157,000 239,200 390,600 Carryout meals (primarily dinners) 107,700 246,600 398,700 Fresh fruits and vegetables 97,300 194,700 291,900 Gym 30,900 68,200 130,600 Table 1. Summary of likely market demand for ten potential store categories for the Huntington Station
Discussion We found that, with moderate marketing efforts, there are several product lines and business types that could likely be supported at the Huntington Station LIRR site (Table 1). In particular, it seems that demand may likely be strong for restaurants and carryout dinners. There are several product lines that would most likely be desirable to LIRR commuters, but for which it does not appear that enough market demand exists to support freestanding stores. However, some of these could be combined into one or more viable new businesses. For example, a business selling coffee, pastries, and other breakfast snacks in the morning might also sell fresh fruits and vegetables during the evening rush hour. Or, a sundries shop offering nonprescription drugstore items might also sell greeting cards and small gifts. The viability of a retail cluster at the train station would be greatly enhanced if the retail cluster were visible from New York Avenue and therefore readily accessible to non-‐LIRR customers. For commuters, this could make an even wider range of products and services available than could likely be supported by commuters alone. A few additional suggestions: § Although it does not appear that enough station based market demand exists to support a
gym, the gym could potentially be combined with another compatible business line. For example, a gym might be very compatible with a bicycle commuting center offering secure bike storage for people who bike to the station, along with shower/changing facilities, bicycle rentals, a full-‐service bicycle repair shop, and access to a small pool of Zipcars (or other car shares), making it easier for people to commute to work by bike/train, rather than by car/train.
§ If a new concentration of offices were to be developed at or near the train station, these offices’ workers would provide and additional captive market of potential customers for station based retail shops, restaurants, and services. This would likely make almost all of the product lines we evaluated for this feasibility study become more viable.
§ Some of the products and services desirable at the station could be provided almost immediately through vending machines, pop-‐up shops, and mobile vending units that could then be converted into permanent storefront spaces once development is underway. This could help entrepreneurs test the market at the station, build visibility, and grow a customer base.
§ In its heyday, Philadelphia’s Reading terminal market offered a fresh food delivery service to
people who lived along commuter rail lines stretching out from the city. Suburban residents would put their daily grocery lists in grocery baskets and load them on a specially designated train car that would be unloaded at the station. A worker there would fulfill their orders from the market shops and load the baskets back onto the train for delivery to the suburban stations at the end of the day. Should a farmers market be developed at Huntington Station, this business model could potentially serve residents of other stations along the Port Jefferson branch.
Customer segment
AUTO DETAILING HS LIRR
passengers HS
residents LIRR passengers
-‐ stations east Total demand $ 30,300 77,900 34,000 Est. capture rate Minimal 10.0% 2.5% 0.0% Moderate 20.0% 5.0% 1.0% Aggressive 40.0% 7.5% 2.0% Est. capture targets Minimal 3,000 1,900 -‐ Moderate 6,100 3,900 300 Aggressive 12,100 5,800 700 Table 2. Consumer demand and estimated sales capture targets for auto detaIling. Customer segment DRY CLEANING, LAUNDRY, TAILORING + RELATED SERVICES
HS LIRR passengers
HS residents
LIRR passengers -‐ stations east
Total demand 125,200 305,500 149,500 Est. capture rate Minimal 20.0% 5.0% 0.0% Moderate 35.0% 10.0% 0.0% Aggressive 50.0% 15.0% 0.0% Est. capture targets Minimal 25,000 15,300 -‐ Moderate 43,800 30,600 -‐ Aggressive 62,600 45,800 -‐ Table 3. Consumer demand and estimated sales capture targets for dry cleaning and related services
Customer segment COFFEE, PASTRIES, OTHER BREAKFASRT QUICK-‐SVC FOOD
HS LIRR passengers
HS residents
LIRR passengers -‐ stations east
Total demand 429,600 1,051,000 460,600 Est. capture rate Minimal 10.0% 1.0% 0.0% Moderate 15.0% 2.0% 0.0% Aggressive 20.0% 3.0% 0.5% Est. capture targets Minimal 43,000 10,500 -‐ Moderate 64,400 21,000 -‐ Aggressive 85,900 31,500 2,300 Table 4. Consumer demand and estimated sales capture targets for coffee, pastries, and other quick-‐service breakfast food Customer segment NON-‐SUBSCRIPTION NEWSPAPERS AND MAGAZINES
HS LIRR passengers
HS residents
LIRR passengers -‐ stations east
Total demand 46,300 114,800 50,200 Est. capture rate Minimal 10.0% 1.0% 0.0% Moderate 15.0% 2.0% 0.0% Aggressive 20.0% 3.0% 0.5% Est. capture targets Minimal 4,600 1,100 -‐ Moderate 6,900 2,300 -‐ Aggressive 9,300 3,400 300 Table 5. Consumer demand and estimated sales capture targets for non-‐subscription newspapers and magazines
Customer segment
GREETING CARDS AND SMALL GIFTS HS LIRR
passengers HS
residents LIRR passengers
-‐ stations east Total demand 225,100 625,800 290,000 Est. capture rate Minimal 10.0% 2.0% 0.0% Moderate 15.0% 5.0% 0.5% Aggressive 20.0% 7.5% 1.0% Est. capture targets Minimal 25,500 12,500 -‐ Moderate 38,300 31,300 1,400 Aggressive 51,000 46,900 2,900 Table 6. Consumer demand and estimated sales capture targets for greeting cards and small gifts. Customer segment NON-‐PRESCRIPTION DRUG STORE-‐TYPE ITEMS
HS LIRR passengers
HS residents
LIRR passengers -‐ stations east
Total demand 1,371,100 3,404,500 1,472,600 Est. capture rate Minimal 2.5% 1.0% 0.0% Moderate 5.0% 1.5% 0.0% Aggressive 7.5% 2.0% 0.0% Est. capture targets Minimal 34,300 34,000 -‐ Moderate 68,600 51,100 -‐ Aggressive 102,800 68,100 -‐ Table 7. Consumer demand and estimated sales capture targets for non-‐prescription pharmaceuticals and personal care products
Customer segment
DINNER RESTAURANTS/BARS HS LIRR
passengers HS
residents LIRR passengers
-‐ stations east Total demand 2,460,700 5,993,800 2,777,800 Est. capture rate Minimal 5.0% 1.0% 0.0% Moderate 10.0% 3.0% 0.0% Aggressive 15.0% 5.0% 1.0% Est. capture targets Minimal 123,000 34,000 -‐ Moderate 137,100 102,100 -‐ Aggressive 205,700 170,200 14,700 Table 8. Consumer demand and estimated sales capture targets for dinner restaurants/bars Customer segment
CARRY-‐OUT DINNERS HS LIRR
passengers HS
residents LIRR passengers
-‐ stations east Total demand 1,204,500 3,049,900 1,342,100 Est. capture rate Minimal 5.0% 1.5% 0.0% Moderate 12.5% 3.0% 0.0% Aggressive 20.0% 4.5% 1.0% Est. capture targets Minimal 62,000 45,700 -‐ Moderate 155,100 91,500 -‐ Aggressive 248,100 137,200 13,400 Table 9. Consumer demand and estimated sales capture targets for carry-‐out dinners
Customer segment
FRESH FRUITS AND VEGETABLES HS LIRR
passengers HS
residents LIRR passengers
-‐ stations east Total demand 1,204,500 3,049,900 1,342,100 Est. capture rate Minimal 2.5% 1.5% 0.0% Moderate 5.0% 3.0% 0.0% Aggressive 7.5% 4.5% 0.0% Est. capture targets Minimal 39,300 58,000 -‐ Moderate 78,700 116,000 -‐ Aggressive 118,000 173,900 -‐ Table 10. Consumer demand and estimated sales capture targets for fresh fruits and vegetables Customer segment
GYM MEMBERSHIPS HS LIRR
passengers HS
residents LIRR passengers
-‐ stations east Total demand 1,204,500 3,049,900 1,342,100 Est. capture rate Minimal 2.5% 1.5% 0.0% Moderate 5.0% 3.0% 0.0% Aggressive 7.5% 4.5% 0.0% Est. capture targets Minimal 39,300 58,000 -‐ Moderate 78,700 116,000 -‐ Aggressive 118,000 173,900 -‐ Table 11. Consumer demand and estimated sales capture targets for gym memberships
General limitations and disclaimer Retail market analyses, their components, and derivative business development plans provide important guidance on how a business or commercial center should, theoretically, be able to perform and on the sales levels businesses should be able to achieve. However, a number of factors affect the actual performance of retail businesses and commercial centers, including the skills of the business operator and property manager, level of business capitalization, the quality of the physical environment, changes in overall economic conditions, the effectiveness of business and district marketing programs, and many other factors. The information in this report is intended to provide a foundation of information for making business development decisions for Huntington Station, but it does not, and cannot, ensure success. Crowdsourcing is an innovative tool for identifying new business ideas and building enthusiasm (and, eventually, customers) for new businesses. However, crowdsourcing participants are a self-‐selecting group and do not necessarily represent a statistically accurate sample of a community’s overall population. We therefore recommend that, in instances in which a prospective business wishes its customer base to extend beyond the crowdsourcing group itself, the business’s owner(s) conduct statistically valid consumer surveys to estimate support and price tolerance for the product and service lines the business proposes to offer.
