Inner Cities Have Middle Income Population…. Untapped market For Retailers.

America’s inner cities have a significant moderate to middle income population that offers a remarkable concentration of spending power, yet retailers continue to bypass this largely untapped market, according to a study released by the Initiative for a Competitive Inner City (ICIC).

“State of the Inner City Economies” is a multi-phased project of the ICIC to benchmark the economic health, performance, and assets of inner cities in the 100 largest U.S. central cities. The study is the first comprehensive analysis of census data on the nation’s inner city economies and reveals that 38 percent of inner city households are classified by “moderate to middle income,” meaning they earn an annual income ranging from $20,000 to $50,000. That is slightly more than the national average of 36 percent.

With a total population of 21 million people, the national inner city population — roughly the size of Texas — represents a retail market of $90 billion, rivaling that of Mexico’s entire retail market. Moreover, inner cities have the highest rate of available retail spending per square mile in the country: $25 million per square mile compared to $3 million in metropolitan areas.

As an example, a grocery store in the suburbs of New York City requires a 20-mile radius to achieve a customer base with the same buying power as a 10-block radius in Harlem. Supplementing the retail density numbers is the fact that 77 percent of inner city jobs are filled by commuters, providing a fertile market beyond inner city residents themselves.

“Over the years, we have come to see inner cities not only as attractive business locations for some companies, but as a window into the future American economy,” said Michael Porter, a Harvard Business School professor who founded ICIC. “Many companies assume that inner cities are not attractive markets because the average income per household is only $24,900 versus

$42,000 per household for the nation. These averages, however, miss the power of the density of dollars in inner cities and the indisputable fact that inner cities are home to a considerable number of middle income households.”

The major difference between the inner city and national income distribution pattern is found at the extreme income ranges: 42 percent of the nation’s overall population is classified as “upper income” earning more than $50,000 annually, while 42 percent of the nation’s inner city population is classified as “low income” earning less than $20,000.

Dr. Porter cited Home Depot as a company that has capitalized on the retail spending density of an inner city. The home improvement giant recently opened a store in Dorchester, a Boston inner city neighborhood. That location now has one of the highest gross sales figures in the Home Depot chain.

As well, some retailers and businesses that began in the inner city have blossomed into national chains or publicly traded companies such as apparel store Ashley Stewart, which started by catering to African-American and Hispanic women, and is now a 300-store chain; and Molina Healthcare, a publicly traded Medicaid HMO serving the needs of inner city residents.

Other findings from the ICIC study include:

Highest population density: The median density of inner cities in 2000 was 6,113 residents per square mile, compared to 327 persons per square mile in the rest of the metropolitan surrounding areas.

Minorities are majorities: The share of the non-white population (including African Americans, Hispanics, Asian Pacific, and other groups) in inner cities increased to 80 percent in 2000 from 66 percent in 1990, versus the national minority share of 31 percent up from 24 percent.

Retail employee-to-resident ratio: This critical indicator shows that inner cities have only nine retail clothing workers per 1,000 residents compared with 18 per 1,000 in their surrounding metropolitan areas. Grocery stores employ 10 people per 1,000 inner city residents, compared with 13 per 1,000 for the metropolitan area. And inner cities are particularly underserved by eating and drinking establishments, with half as many employees per resident in the inner city (39 per 1,000) than in the metropolitan area (86 per 1,000).

ICIC defines inner cities as concentrations of U.S. Census tracts having a 20 percent poverty rate or higher, or two of these factors: a poverty rate or unemployment rate one-and-a-half times or higher than their surrounding metropolitan area or medium household income one-half or less that of the surrounding metropolitan area.

For more information at http://www.icic.org