Location, Location, Location

Part 1: Location characteristics are key to getting started

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When selecting a natural food co-op store location, there are a number of characteristics that can add to, or detract from, the store's opportunity for success or failure. This article is the first in a series discussing issues to be considered in locating a natural food co-op store.

The first of these, location characteristics, includes such things as population density, target demographics, lifestyle characteristics, trade area accessibility, and retail synergy. Parts 2 and 3 will discuss site and facility characteristics.

Population density can vary considerably depending upon the type of natural food co-op store being planned. For example, a convenience-oriented store typically would have a relatively small trade area, such as a neighborhood or a cluster of neighborhoods in the immediate vicinity of the store (with a relatively small population base); it would not need a high degree of regional accessibility. On the other hand, a large natural food store with a full complement of specialty departments and a large selection of products would tend to have a trade area that is considerably larger, both in geographic size and population density. But in either case, the fact that the store is a natural/organic food store suggests that its trade area is larger than would be served by a conventional food store at the same location.

Target demographics play an important role in the location of a natural food co-op store. In general, these stores have their greatest appeal to people who are better educated (college or graduate school), with incomes that are slightly above average, with occupation types that are more white-collar and professional in nature, and in age groups that run from the 30s through the 50s. To the extent that the proposed natural food co-op store is situated at a location that is either in the midst of such target demographics or is readily accessible to such groups of consumers, the store will benefit from its level of convenience to these consumers.

Lifestyle characteristics (including interests, activities, and opinions) are also key considerations in the location of a natural food co-op store. The traditional customer of a co-op is more likely to be politically active and to be socially and environmentally responsible. They are typically very independent, and they value being informed. But as co-ops expand into more suburban areas, the lifestyle characteristics differ somewhat from that of the traditional co-op customer. Lifestyles shift toward dual-income families with children and with busy lifestyles that leave little time for them to educate themselves more about the benefits of shopping at a natural food co-op store. Nevertheless, these consumers represent a significant pool of co-op shoppers. In fact, they actually desire healthy and nutritious foods but generally have "less-healthy" eating habits because it's easier or more convenient given their hectic lifestyle. Therefore, they require more education about the benefits/value of shopping at a natural food co-op store, which can be accomplished through a more "targeted" marketing approach than has been typically used by co-ops.

PCC Natural Markets (based in Seattle) operates successful stores that are located in suburban areas. PCC, unlike most food co-ops, uses an aggressive direct-mail marketing campaign upon a store's grand opening—distributing store coupons with an outstanding value to prospective shoppers who reside within a store's trade area. While this type of marketing approach can be relatively expensive, it is a very effective means of enhancing consumer awareness of the new store and, most importantly, drawing them inside the store to experience it.

Trade area accessibility represents the ease or difficulty with which consumers in the trade area can get to, and leave, the store. Because natural foods co-op stores typically have relatively large trade areas (often reaching eight or more miles from the store), they need relatively unimpeded access to and from the many parts of the trade area. Such access might include major arteries (surface streets designed to carry large volumes of traffic), expressways, or even interstate highways. On the other hand, neighborhood streets typically do not provide widespread access.

Good accessibility also includes favorable traffic controls: traffic signals, protected turn or acceleration lanes, curb- and median-cuts, etc. On the other hand, trade area access can be limited by natural or man-made barriers: bridges, cemeteries, industrial belts, parkland, rivers, railroad tracks, etc. In short, trade area accessibility needs to be unhampered, thereby making it as easy as possible for co-op shoppers to get to and from the store.

Retail synergy often benefits natural-food co-op stores. For example, there is a food co-op located in the southeast region of the country that experienced a 16 percent increase in sales when a 500,000-square-foot retail center opened nearby. In addition, a survey at another food co-op indicated that 20 percent of its sales were being generated from customers who were already in the area shopping at other nearby retailers. Generally speaking, the greater the selection of retail stores in the general vicinity of the natural foods store, the stronger the allure of the store and the greater the amount of convenience it will offer to consumers. This is particularly true when many of the nearby retailers have the same type of demographic appeal as does the co-op.

For example, because natural food co-op stores typically appeal to better-educated, higher-income, middle-aged consumers, stores that appeal to similar consumers will provide considerably more benefit to the co-op than would stores that have a different demographic appeal. On the other hand, a food co-op that has little or no nearby retail synergy will, of necessity, be a destination retailer, and will thus have little "help" in attracting shoppers to its location.

In summary, location characteristics can play an important role in helping a natural food co-op store achieve profitable levels of sales. The natural food co-op store should be able to adequately serve its trade area consumers and generate satisfactory levels of sales to the extent that the store has the following location characteristics:

  • A large enough trade area population, with sufficient levels of demographically in-profile consumers;
  • A marketing approach that is most appropriate, given the lifestyle characteristics exhibited by the trade area population; and
  • A location that is convenient with respect to trade area access and nearby retail synergy. ■
See other articles from this issue: #154 May - June - 2011