No More Supermarkets?: Major Grocers Flee Detroit - Part II
CHERYL CORLEY, host:
We turn now to Michael Curis, a developer who builds retail centers in urban neighborhoods. His company, Curis Enterprises, is based in Detroit, and he's joining us from Royal Oak, Michigan. David Livingston is a supermarket site analyst, the head of DJL research, who is speaking with us from Wisconsin Public Radio in Milwaukee. Welcome, gentlemen.
Mr. MICHAEL CURIS (President, Curis Enterprises): Thank you.
Mr. DAVID LIVINGSTON (President, DJL Research): Hello.
CORLEY: Well, we've been talking with a resident of Detroit who told us about the challenges that she and her family and her neighbors face there since there is no major supermarket chain in the city. Kroger Supermarket, which bought the area Farmer Jack stores, said in a statement that it would take a pass on Detroit because it had tested the market for three years unsuccessfully and then left. David Livingston, what are the challenges grocery store chains face when they enter a market like Detroit?
Mr. LIVINGSTON: Well, they do have quite a few challenges. The first challenge is they have a lot of difficulty in making a profit. They're having a lot of difficulty in finding store managers willing to come down and work in the store. A lot of times, these areas will have a perceived high crime rate. Even if the crime rate isn't high, as long as it's perceived as high, that tends to scare away both sometimes employees and customers.
Another issue that is not often talked about is the fact that a lot of children are given free breakfast and lunch at schools, and this sort of eats into the supermarket's business. This is a situation that often is not encountered out in the suburbs.
CORLEY: Interesting. Very interesting. Okay, and so that would really scare a supermarket away from an area?
Mr. LIVINGSTON: Well, it lowers the potential of sale - sales potential in a given area when you've taken some of the food demand away from the supermarkets.
CORLEY: Michael Curis, your company is based in Detroit. Your focus is on building urban retail centers. How have you been able to meet some of the challenges that David describes?
Mr. CURIS: Everybody wants these businesses to be profitable because then they'll stay and thrive and expand. And it's been a very big struggle. So what we do is we try to solve those problems. For instance, the crime problem, we do police mini-stations on site. So we actually sign leases with the police department, obviously, for no rent. They don't pay a rent. But they have the availability to come in to the shopping center, sit at a desk in an air-conditioned office, do their reports. They're computerized back to the headquarters. And it creates a police presence. They may not be there all the time but it is a deterrent. We have security cameras in the parking lot. We build the center with safety in mind. For instance, we'll have decorative fencing on a perimeter rather than razor wire or barbed wire. But it solves -it does the same thing. It's tall enough not to jump over, yet it's a beautiful design so that it's pleasing to the eye.
CORLEY: Let's talk a little bit about those security measures that you describe. Wrought iron fences, I understand, are part of this as well, these onsite police mini-stations, security cameras. What's to keep people who are shopping there to feel like they're - to keep them from feeling like they're distrusted?
Mr. CURIS: Well, the reason that we do the wrought iron fencing, for instance, is it's decorative. Now, it just happens to play a dual role. It's four-foot tall. So they're not easily scalable. They are pointed at the top, but it doesn't look like it's razor wire. So it solves a dual purpose. The security cameras in the parking lot aren't real visible. It would give a feeling of safety, not of distrust.
CORLEY: Well, a recent report we study said that Detroit is a food desert in the sense that food-shopping options are severely limited. You have, predominantly, fast food joints in the area, liquor stores that have a small number of food options available, corner grocery stores, that sort of thing.
Michael, you're working to bring in a grocery store into Detroit and - I'm not going to do a commercial - but it is Aldi, as I understand it. Can that type of low-frills kind of bargain supermarket address some of the concerns that residents have about the lack of fresh produce and other fresh products? Is that type of store a good fit?
Mr. CURIS: It absolutely is. We've discussed with Aldi the issue of their product line. For instance, different parts of Detroit will have different ethnicities, whether they're African-American, whether they're Hispanic, and you need to tailor your store, your mix to those areas. So maybe 80 percent of the store can sell the same product as all the other stores, but they should have 20 percent that's tailored to the neighbor that they're in. So we've been working with Aldi. And again, Aldi is based in Germany. They have 5,000 stores around the world, a thousand of them here in the U.S. And they are now coming into Detroit. They've asked us to do numerous stores for them in the city of Detroit, and we're working on those stores right now. And again, this issue of shrinking population. The city of Detroit still has roughly 850,000 people. If you told a retailer that he could go into an area that was void of competition and 850,000 people, they would jump at it. They should be jumping at it.
CORLEY: Well, it's interesting that you say void of competition. I don't want to give people the idea that there's no supermarkets at all. It's just not any of the chains; there are a number of independent stores. And I was wondering if you could talk about the tension between independent stores and residents over pricing. And are we going to see a big battle with a store like Aldi coming in with independent supermarkets?
Mr. CURIS: That's a very good point. And I don't think you're going to see a battle. Typically, some of the urban retailers will charge more for their product because they have to have security. The taxes are higher. They have more shrink than suburban stores. And to offset all that, to do business in an urban area, they'll charge higher prices. A company like Aldi coming in has set prices whether it's a suburban store or an urban store and doesn't' charge that extra cost. So we believe that competition is the best thing for the residents of the city of Detroit to get a great product at a great price.
CORLEY: Well, last question to both of you gentlemen. In other cities which might be experiencing the same sort of problem in neighborhoods, not on the same sort of scale as Detroit but in their neighborhoods, there's a call for government to step in and help. And Detroit officials are trying to lure business and supermarkets to the area. Have you seen instances where the steps that city governments, the actions they take, are they helping or are they a hindrance in some sort of way? And have you seen examples that Detroit can use?
Let me start with you, Michael Curis.
Mr. CURIS: Geez, I was going to defer to David.
(Soundbite of laughter)
Mr. CURIS: You know, we've worked with the city for over 30 years in doing developments in Detroit, and there's only so much that the city can do to help development. And a lot of it is really developer-driven. For instance, site acquisition, site assembly. There's always environmental issues. There's always title issues on the property. Vacation of streets and allies, rezoning. So the cities can help facilitate development. They can even help by signing leases, for instance, for these police mini-stations to help that out.
So, yeah, I believe that they're doing everything that's asked of them. And maybe we just need to ask a little more or a little differently of the things that retailers want to go into urban areas.
CORLEY: And Mr. Livingston?
Mr. LIVINGSTON: Well, assisting the retailers with the rent. No retailer wants to get stuck with a long-term, expensive lease. So if they've got an option to walk away if things don't work out at a low cost, that's an attractive option. Also, I agree with putting the police substations into the supermarkets. The city can help in that way. That's a benefit. And also I've seen in other parts of the country where they will make the supermarket and put it a classified as special tax zone where no sales tax is charged at all in that particular store.
CORLEY: Michael Curis is a Detroit-based retail center developer. He was speaking with us from the suburbs in Royal Oak. And David Livingston is a supermarket analyst based in Wisconsin. He joined us from Wisconsin Public Radio in Milwaukee. Thanks to you both.
Mr. LIVINGSTON: Thank you.
Mr. CURIS: Thank you.
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