Downtown Shoppers Lure Big-Box Chains

Discount retailers see high-volume sales from urban big spenders.

March 26, 2002

Big-box discount retailers are looking beyond the boundaries of their traditional suburban turf and staking claims on downtown real estate. They're seeking to cash in on the high per customer sales volume of upscale young professionals and baby boomers in revitalizing urban neighborhoods.

In addition to gaining huge sales volume, retailers such as Target, Best Buy and Toys"R"Us get a high-profile location that boosts their brand visibility with a broad range of shoppers—office workers, tourists and downtown residents. City shoppers get a chance to snag bargains without traveling to the suburbs, and smaller retailers located nearby benefit from the increased foot traffic. Many smaller stores can offer a higher level of personal service and a different mix of products that allow them to compete with the big discount retailers.

Tax abatements and eased zoning restrictions offered by municipal governments seeking a diversified downtown retail mix are sending the discount stores back to the drafting board to squeeze their sprawling suburban store layouts into tight urban spaces. For example, Target's downtown Minneapolis store, which it opened last October, anchors a mixed-use development cluster that includes an office tower, space occupied by other retailers and an underground parking garage. Modifying Target's typical one-story suburban store layout, the Minneapolis store spreads its displays over two levels. Special German-made escalators called Vermaports transport customers and their shopping carts from floor to floor.

To accommodate sudden spikes in lunchtime shopping volume, the store uses mobile wireless cashier stands that can be moved anywhere in the store on short notice. The store also provides sturdy, flat-bottomed paper bags to make it easier for shoppers to carry their purchases back to their offices and homes. Target spokesman Douglas Kline confirms that the chain is scouting out potential sites for additional downtown stores, but he won't say exactly where.

Locating stores closer to urban centers also is bringing electronics discounter Best Buy closer to its ideal customers: technology-savvy trendsetters who are more likely to live in hip urban neighborhoods or near a university than out in the suburbs. "Because our customers are more tuned in to trends, we also get better ideas from them sooner," says Pat Matre, Best Buy's vice president of real estate. Best Buy will soon open a new store in the Chelsea section of Manhattan and is laying plans for downtown stores in Washington, D.C., Chicago and Boston.

Another example of a suburban retailer moving downtown is Toys"R"Us, which last November opened an eye-popping, three-level flagship store in Manhattan's Times Square—complete with a Ferris wheel, a 20-foot-tall animated Tyrannosaurus rex model and a two-story dollhouse. "Opening on this site was like buying a huge billboard—it's very important for the brand," says Faith Hope Consolo, senior managing director of Garrick Aug Worldwide Ltd., the nation's largest store leasing firm. Since its opening, the store has become an entertainment destination for families with kids, rather than just a place to pick up a birthday present, Consolo says.

Even though they're being ardently wooed by urban developers nationwide, chain stores aren't finding it easy to locate the right downtown store site. Zoning restrictions, high rents, difficult delivery access conditions and the lack of customer parking all have to be factored in. But "communities are getting more savvy about what it takes to bring in a suburban retailer," says Kline. They're offering help with parking and delivery requirements, accommodating the stores' signage requirements and doling out financial and tax incentives to soften the logistical problems and compensate for the higher cost of land in urban areas. "We're being courted by cities partly because we're providing a convenience for the downtown worker. We're today's version of the old five-and-dime stores," Kline says.