CHICAGO — Build it, and they will come? Retailers across multiple channels, including convenience, have long charted their course for acquiring or building stores based on multiple factors.
Multiunit residential community growth in metro areas is a natural magnet for c-store chains to take the plunge and invest, banking on an influx of new residents as a ready-made customer base. Construction of distribution warehouses, medical centers and strip malls provide similar advantages, providing access to get in the last-mile fulfillment game.
Metropolitan areas that offer retailer-friendly laws and ordinances, and are equipped with solid infrastructure, enhance profit centers such as car washes, diesel fuel expansion and foodservice offers. Similarly, the markets where younger consumers—millennials and Gen Z—put down roots informs retailers they can count on a strong labor pool.
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No doubt, retail site selection is subjective, but one overarching trend is this: During the post-COVID-19 era, motivation to accumulate more stores is compelling as convenience added new customers during the pandemic, many now recognizing high value in the breadth and depth of the retail offer.
“The industry has become more sophisticated each year, with deeper benches (i.e., site selection teams) and deeper pockets,” says Travis Heiser, president of Houston-based IMST Corp., a real estate consultant and site selection strategist for commercial industries. “They really are exhibiting more muscle” to execute expansion efforts.
Heiser points to diverse metrics that underpin where stores go. One emerging opportunity is foodservice, which is “increasing at c-stores, which means chains need the real estate to accommodate more extensive programs, with larger footprints inside and out. Permitting, zoning, infrastructure (sewer, water)—they’re all key determinants.”
Population Shift
Where people move and why prompts retailers to remain one step ahead and gauge their next moves.
“Retailers are noticing the population shifts and want to get in on the action first,” says Heiser, adding that interstate highway traffic growth along corridors such as I-10, I-35 and I-25 are booming and are a natural booster for retail foot traffic.
“I’ve seen chains across the spectrum, from single-store owner opening his second store to a 50-store chain, looking at household market growth as a key new-store motivator,” says Heiser. “Interstate highway traffic patterns are part of that assessment.”
In April, The Wall Street Journal, in collaboration with Moody’s Analytics, assessed 300 metro areas and measured five factors: unemployment rate, labor-force participation rate, job growth, labor-force growth and wage growth.
Renters “make more trips, spend more incrementally and fill the market basket more than a homeowner.”
Marketed as the “hottest job markets in America,” all had common threads: midsize cities with populations of less than 2.3 million and in states with fairly low income taxes or none at all. Another commonality: climates that allow for outdoor activities year-round. The list: Austin, Texas; Nashville; Raleigh-Durham, N.C.; Salt Lake City; and Jacksonville, Fla.
Meanwhile, larger cities—significantly Chicago, Los Angeles and New York—saw many workers exiting, “seeking out jobs they could perform remotely in smaller, more affordable areas in the South and West,” according to the WSJ/Moody’s Analytics report.
The point: Young workers are moving to where the potential jobs are in abundance, and retailers need to take notice.
Workforce Factors
To convenience retailers such as Adam Musa, president of American Petroleum LLC, Miami, the labor factor might be the most pivotal retail expansion benchmark his team leans on.
“When we look at a site, we start by determining if there are competent workers in the market,” Musa says. “South Florida, Westchester County, (N.Y.), and Fairfield County, Conn., are three that we know well, and they guarantee the quality personnel we expect.”
American Petroleum operates and supplies more than 55 retail fuel stations and car washes throughout Connecticut, New York and South Florida. The retailer recently launched a new brand, Fuelco Foodsmart, in the tristate New York-New Jersey-Connecticut area, based on an entirely different site-selection metric: the region has lacked healthy-oriented c-store food and beverage options, suggesting an opportunity for the Foodsmart brand. In another part of the country, Numan Dharani, who oversees the 12,000-square-foot Abbott’s Travel Center, in Abbott, Texas, lists several factors shaping retail site selection, including two key considerations: interstate highway traffic patterns and rural neighborhoods, banking on less competition for labor.
“In larger metropolitan cities, you’re competing from the same pool against hundreds of other businesses,” he says.
Rural areas also have the space for an active housing-start marketing, says Dharani, whose company conducts ongoing market research with third-party partners to obtain “the data we need—daily traffic patterns, fuel throughput projections—to move forward.”
Breaking Ground
New home starts—think single-family homes in multi-house communities—probably represent the most compelling “carrot” that retailers across channels look at for site selection efficacy.
“We’ve seen significant growth of single and multiunit residential developments, and it’s all helping inform chains and independents about pros and cons for new-store/new-market expansion,” Heiser says.
Stronger growth in multifamily rentals vs. single-family may prove an advantage to retailers, he says. “Renters often lack that extra refrigerator in their garage and are more apt to do fill-in shopping throughout the week,” he says. “They make more trips, spend more incrementally and fill the market basket more than a homeowner who stocks up twice per month.”
Workers are “seeking out jobs they could perform remotely in smaller, more affordable areas in the South and West.”
Another site selection factor is last-mile fulfillment for ease of distribution and customer base. “Transportation and warehouse development is still sustaining. The west side of Houston is exploding with new warehouse/distribution centers along Interstate 10,” Heiser says. “You also see retailers or any commercial businesses assessing the upside of seaports and inland ports for similar opportunities.”
Retailers with a diesel-fuel presence can take advantage of these trucking and delivery outlets. “These drivers are habitual in their drives. They go to the same retailers daily and are loyal. You become their office, their restroom, a lot of ancillary services,” Heiser says.
It’s about knowing the market and understanding how a store’s amenities will appeal to a given population of that market. From there, a retailer can configure the store, the offer and the marketing to draw those consumers in.
On Ingress & Egress
The changes that the pandemic forced on consumers and retailers have been well-documented, and two that will play heavily into some retailers’ growth initiatives are delivery and drive-thru services. Both rely on smooth traffic flow and easy ingress and egress to a store.
These require assurance of necessary zoning and set-back permits so that a drive-thru doesn’t become a local nuisance and delivery agents can get in and out quickly.
Those assurances can vary greatly from community to community. In April, for example, a Santa Barbara, Calif.-based Chick-fil-A had a hard time controlling lines of cars spilling onto surrounding streets, and the city council proposed declaring the drive-thru “a public nuisance.” Businesses in Toledo, Ohio, and Beaumont, Texas, have filed lawsuits against quick-service franchises over mushrooming drive-thru queues and tie-ups.
For c-stores seeking to expand foodservice via curbside and drive-thru service, it’s more critical than ever, says Heiser, to have the right plan in place to avoid creating havoc. Municipal leaders, he says, are more likely to approve the necessary zoning if such issues are thought through prior to meeting with community plan commissions.