Economic and Demographic Trends that Influence Retail Decisions

In real estate we hear the words, "location, location, location." What this means for a retailer is population density, buying power, and average household income.

Oswego is on the edge of Chicago urbanized area where the land use patterns turn from urban densities of more than 2,500 people per square mile to rural, where populations are below 500 people per square mile. Retailers however, generally avoid edges and would rather locate inbound of a population base. Oswego unfortunately, is not large enough to draw a sufficient rural population to its downtown area. That is, it does not have enough retail gravity to be much of a draw.

Retailers also want to be where there is buying power. Buying power is the aggregate of population density and average household income. The area surrounding Oswego has good buying power, and some areas to the north of Oswego rank in the top 20 percent of the two-county metropolitan areas of Aurora and Elgin. In spite of low population densities, the household incomes are sufficiently high to bring most of the area in the various trade areas around Oswego into the middle range compared with the Aurora/Elgin metro area.

The third element retailers look for when siting a business is average household income. The average household income is above $70,000, annually, in large areas surrounding Oswego. Lower household incomes, that is, those below $45,700 (as defined as 80% of the median) are found in areas north of Oswego. The average household income is useful in defining what, as the British call it, "pitch," that is, at what price points should merchant's target their goods.

Another important demographic factor is the population trend. The top growth areas in the Aurora-Elgin metropolitan area are in Oswego and running north of Oswego along the Fox Valley (see maps and analog tables that follow).

In addition to these three location criteria, retailers are also interested in the visibility, accessibility, and traffic counts on road ways near the site. They are also concerned about the availability, accessibility and visibility of parking for their store.

At the property level, they also want to know about the functionality of the space, that is, the stores' width to depth ratio, its ceiling heights, and condition of the property.

Identification of Commercial Market Niches

One method of identifying market niches is through understanding how retailers physically cover a market area. This requires identifying their current locations and looking for holes in the market and then learning if the demographic characteristics are sufficient to warrant a store location. This can frequently be learned through analogies. That is, comparing the demographics around existing stores with the Oswego location trade area.

Demographic profiles were developed for three different drive times around downtown Oswego. A five, seven and ten-minute drive time from the downtown area defines most of the typical drive-times that retailers are now using to cover the market in Chicago.

Within five minutes of Oswego, there are only 12,917 people with average annual household incomes of $62,317. Within seven-minutes, there are 23,402 people and average incomes of $60,467 and within a ten-minute drive time, there are 64,772 people and average annual household incomes of $52,429.

The following sets of maps and analog tables show how the appropriate Oswego trade areas compare with the demographics surrounding existing selected store locations. The stores that were selected are types that frequently anchor retail projects in the suburban locations

The specialty retail niche, which includes crafts, art, antiques, etc. was also examined. The thirty-minute drive time around Oswego was compared to the thirty-minute drive times around Geneva, Lockport, and Woodstock.

Recommendations

Oswego should take advantage of its natural resources and history and develop a destination-based market niche. This draw is based on a developed aesthetic of the Fox River, the potential for development of park land, a celebration of the history of Oswego as a river crossing and southern route to Galena. The creation of destination restaurants is part of this supporting development, along with the stores and services that meet the needs of local Oswego residents and the broader public that may wish to share in the experience.

The key to the development of this niche is the ability to develop an "aesthetic marketing" place strategy that will draw residents to the downtown area and create an environment for great restaurants and shops to service the local community and broader public.

Other demographic data and support documentation for conclusions reached in this market analysis are presented in the appendix of this report.