Krispy Kreme in Koreatown? Starbucks in South Central?
There was a time when such things were unthinkable, but change is afoot in corporate America.
Having over-saturated suburban centers, chain retailers now smell a goldmine of opportunity in under-served communities throughout the nation, and a number of companies have set their sights on inner-city Los Angeles. Chains that are hanging their shingle in these local ethnic enclaves include Rite Aid, Wal-Mart, Walgreens and Home Depot.
It’s easy to figure out why. As the economic boom lifts all boats, it’s hard for retailers to quibble with telling figures.
According to a 1998 study by the Boston-based Initiative for a Competitive Inner City, consumers in America’s inner cities have more than $85 billion in annual retail spending power, which accounts for nearly 7 percent of the total retail spending in the United States. But that demand has been largely ignored, until recently.
“You’re seeing the tide change,” said Deirdre Coyle, the organization’s director of communications. “You’re seeing more and more grocery chains and pharmacies moving in, which is the first venue in this market. Theaters and apparel stores are following suit. If you talk to any large discount department store, most of them have an inner-city strategy.”
Wal-Mart, which opened a store in Panorama City last year, is opening its first central-city L.A. store at the Baldwin Hills Crenshaw Plaza in the space formerly occupied by Macy’s, and plans to explore other redevelopment opportunities in the Los Angeles area. Carlson Restaurants Worldwide Inc., parent of T.G.I. Friday’s, has partnered with Earvin “Magic” Johnson and his company, Johnson Development Corp., to open Friday’s restaurants in urban communities, including Ladera Heights.
Old Navy is also eyeing sites in the Los Angeles area, as its monitors its success at Harlem USA, a shopping complex in Upper Manhattan that opened in February.
“We want to serve markets that we’re not serving effectively,” said Cynthia Lin, a Wal-Mart spokeswoman.
Another catalyst driving retailers to these communities is a pair of well-known athletes turned real estate developers: Magic Johnson and Tampa Bay Buccaneers wide receiver Keyshawn Johnson.
Magic Johnson’s company has allied with Starbucks Corp. to open six stores in Los Angeles County including in El Segundo, Gardena and at Jefferson Boulevard and Hoover Avenue near USC. Keyshawn Johnson, a USC graduate, is investing in Chesterfield Square, a $65 million shopping center that will open later this year at Western and Slauson avenues. That 225,000-square-foot center will feature Home Depot’s debut in the Los Angeles inner city, alongside a Ralphs, Hollywood Video and Pacific Bell Wireless outlet.
Of course, retailers still aren’t queuing up in droves to move into these areas. For instance, Starbucks has more than 1,200 stores worldwide, but only about 15 of those are in urban cores. Locally, there is a real shortage of high-profile restaurant chains, electronics stores, bookstores, office supply stores and apparel retailers in the inner city, especially in the corridor bounded by the Santa Monica, Harbor and Long Beach freeways. Notably, however, the lone Circuit City in Compton and the Sears in Boyle Heights are among the top performers in their chains.
“There’s still the fear of the ghetto in corporate America. Maybe McDonald’s and Taco Bell have learned, but most feel that the inner-city customer is dangerous and still on welfare and drugs,” said Rev. Willie Ivory, minister at West Angeles Church of God and Christ at Crenshaw and Jefferson boulevards, which is working to revitalize communities with retail partnerships.
Brokers agree that luring tenants to sign on to new projects is difficult, despite the area’s climbing household incomes and dearth of competition.
“There’s a lot of education. People are constantly surprised about the income of this area,” said Kyle Arndt, president of Capital Vision Equities, the developer of Chesterfield Square.
