Why Do Some Neighborhoods Get Overrun With Chain Stores, While Others Don't?

Researchers are working on better understanding the interrelated shifts of retail, demographics, and hyperlocal economies

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The public services of a neighborhood tend to be pretty standard from place to place. Streets, sidewalks, sewers. The private services – the stores, the restaurants, the entertainment venues – are of course more varied. One neighborhood may have a large supermarket and a strip of Indian restaurants, while another may have blocks of high-end boutiques. Why these two neighborhoods differ is both clear and cloudy. The first is likely a residential area, while the second is probably in a posh part of town with a fair amount of street traffic and a lot of foot traffic. And, over the course of years, when a neighborhood’s demographics or fortunes turn and its population changes, the private services provided by retail stores and commercial entities can undergo a similarly significant shift.

The process of gentrification, for example, is often most visible in the sort of new retail that opens. There are plenty of assumptions as to why certain types of retail emerge amid various economic and demographic situations, but not a lot of hard research. Two researchers have set out to create a better understanding of the interrelationship between retail and changing neighborhoods.

“The literature and even a lot of the public attention is really focused on the residential part of it: what happens to the residents as these places change – in terms of displacement, in terms of those that stay, what do they look like, et cetera. There’s been very little focus on the commercial side of things,” says Rachel Meltzer, assistant professor at the New School, who co-authored the study with Jenny Schuetz, an assistant professor at the University of Southern California. It was published online in December in the journal Economic Development Quarterly.

What causes these shifts in retail requires understanding what, exactly, is shifting. So Meltzer and Schuetz examined 208 New York City ZIP codes between 1998 and 2007 to see how retail options evolved over time as demographics shifted and economic prosperity changed, based on property values and land use records. Nearly 90 percent of all residential space in the city is within a quarter-mile of a retail corridor, making New York a particularly interesting, if unique, subject. In examining the city, Meltzer and Schuetz track access to a variety of commercial services, from grocery stores to gyms to laundry facilities to chain restaurants. As incomes grow and racial concentrations shift, access to different types of retail establishments varies significantly.

Not surprisingly, neighborhoods that become more affluent over time gain greater access to retail and a greater variety of retail outlets. Both “upgrading neighborhoods” and “stable/lagging low-valued neighborhoods” see a net increase in retail activity over time, but the upgrading neighborhoods see significantly more of an increase, specifically in food service and clothing stores. The study notes that “low-income neighborhoods have lower densities of both establishments and employment, smaller average establishment size, and less diverse retail composition,” but that in some categories, like grocery stores, low-income neighborhoods actually have higher amounts.

“The less affluent neighborhoods, while they’re changing or upgrading or however you want to refer to it, they are getting more businesses, but they tend to be smaller establishments,” says Meltzer. “The larger businesses still tend to be attracted to the relatively more affluent areas. Our interpretation of that is what we’re picking up in these places are the chains.”

Another study co-authored by Meltzer, Schuetz and Jed Kolko of Trulia, Inc., looks at neighborhoods within 58 metropolitan areas in the U.S. to see how retail patterns vary due to neighborhood characteristics. That study, published in September in the journal of Regional Science and Urban Economics, found that higher poverty neighborhoods had lower concentrations of retail overall, and specifically lower concentrations of supermarkets, drugstores, food services and laundry. These findings are based on employment density, much of which can be explained by the lack of chain stores or larger establishments offering more employment.

Meltzer says that these studies show that multiple dimensions affect the makeup of retail choices in a neighborhood. It’s not as simple as saying a poor neighborhood has less while a rich neighborhood has more. The category of service, the type of store and the quality of goods are all affected in varying ways as economic situations shift.

“It’s not just about the number of establishments that are there, but how big are they, what do they look like, what products are they providing,” Meltzer says. “It’s about a package of services that you get in the neighborhood.”

What’s included in that package may make one neighborhood more attractive to a certain type of person, or a certain type of person may make elements of that retail package seem to business owners like viable options in those neighborhoods. Which (and if) one drives the other isn’t clear, and may never be.

“I think there’s still an assumption that businesses will go in when there’s a critical mass of people that can support it, both in quantity and type of person or consumer,” Meltzer says.

But that’s only part of the picture.

“There are market driven factors, and there are policy driven factors as well,” Meltzer says. “The city is doing stuff to encourage or discourage this kind of activity. They zone or rezone areas, they target money into certain neighborhoods differentially, and that’s going to affect the composition of the retail in these neighborhoods.”

The data on all this is somewhat limited, but Meltzer says more study will follow. She’s interested in learning more about why these shifts happen as they do, and, especially, how lower-income areas are affected as they change. By better understanding the tendencies of specific types of retail to emerge in certain situations, cities may be able to detect gaps in services and encourage businesses to fill them.

Photo credit: Jessica Rinaldi / Reuters

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