Infographic: Supermarket Redlining Consequences and Choices

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H-E-B: South Dallas Overlooked Again by New Supermarket Introductions

 

Yes, we should all celebrate the arrival of two new H-E-B supermarkets in North Texas – one in Frisco and a second one in Plano – both suburban communities that have been in the national spotlight due to significant population growth.[1] [2] The H-E-B brand has proven successful in markets throughout Texas and existing competitors have reason to worry about their diminishing market shares once the two stores – both 110,000 square feet -- open in the Fall of 2022.

One wonders, however, why H-E-B chose to open two new stores in communities that already included at least 6-7 other supermarkets while overlooking other communities that continue to have fewer or no supermarket choices.  To obtain some insight on this issue, I retrieved relevant demographic and economic information [3] to compare the opportunities in the two locations chosen by H-E-B with two other zip codes in South Dallas that remain under-served.  Following is the resulting table that profiles these four communities.

The two zip codes in South Dallas – 75215 and 75216 – were chosen as comparison points because interest has been shown by community advocates to establish the groundwork for a mainstream supermarket in these two communities.  In zip code 75215, the Cornerstone Community Market has received financial support to open this Spring, while efforts to introduce a store in zip code 75216 are continuing.  Interestingly, the statistical information presented in this table suggests that the two South Dallas communities should have caught the attention of H-E-B as potential sites for their supermarket brand. 

Let’s study this table to understand why this makes sense.

A significant income gap was clearly observable. Median household income is perhaps the most frequently used metric in retail to measure disparities in economic standing.  Clearly, the sites chosen by H-E-B revealed significantly higher median household incomes ($112,930 and $117,707) than the ones in South Dallas ($30,865 and $27,288). Similarly, aggregate household income (that is, the sum of all income earned by employed persons in a household) was distinctly greater for the H-E-B sites ($3.1 and $5.8 billion) compared to the South Dallas sites ($314 million and $724 million). Although SNAP benefits are not considered income, they nonetheless supplement a household’s ability to pay for food. Since the South Dallas sites had substantially more households receiving SNAP benefits (34.5% and 31.2%) than Plano (0.1%) or Frisco (2.9%), substantially greater SNAP benefits were observed for the South Dallas sites ($8.5 million and $20.9 million) compared to Plano ($614,484) and Frisco ($3.9 million).    

Demographically, the communities differed significantly. Perhaps it is only coincidence that the two sites chosen by H-E-B were predominantly non-Hispanic white (66.2% and 60.6%) and secondarily non-Hispanic Asians (16.4% and 16.2%). By contrast, zip code 75215 in South Dallas was predominantly Black (68.1%) while zip code 75216 included mostly Blacks (54.9%) and Hispanic (21.0%).  About two thirds of the households in the Plano and Frisco zip codes were homeowners (63.7% and 67.0%); by contrast, most of the residents in zip code 75215 were renters (67.5%) while zip code 75216 was more evenly split between homeowners (49.0%) and renters (51.0%).

Despite these wide disparities, the potential demand for a mainstream supermarket was observed in each of these  communities. Using our own formula for estimating food-at-home expenditures (FHE), we estimated annual FHE for the   H-E-B sites as $136 million for Plano and $295 million for Frisco, while the FHE for zip code 75215 in South Dallas was $46.6 million and $132.8 million for zip code 75216.  Importantly, South Dallas zip code 75216 shared some similarities with zip code 75093 in Plano -- FHE, total population and total households – which could have made zip code 75216 a suitable substitute for zip code 75093.   

Adjusting for the existing number of supermarkets in each zip code, however, differences in the potential demand for a supermarket become more uniform across these four communities.  Zip code 75093 in Plano, for example, already includes SIX supermarkets that currently share the estimated annual food-at-home expenditures of $136.6 million. Assuming that the six stores have equal shares, their individual shares would be approximately $22.8 million. Of course, this does not include the new H-E-B store which will likely diminish this share even further.  Similarly, the share for the seven stores in zip code 75034 in Frisco would be approximately $42.2 million assuming equal shares.  With no supermarkets currently operating in zip code 75215, however, the potential share for one supermarket would be $46.6 million, while the share for zip code 75216 would be $132.8 million with one existing supermarkets. Of course, with H-E-B’s entrance into the Plano and Frisco communities, the potential shares are expected to change dramatically and perhaps lead to some store closures as well. Thus, competition or the lack of competition can make a big difference in the performance of a supermarket.

Concluding Thoughts:  A company like H-E-B with a track record of successful supermarket performance in Texas is probably quite comfortable with their site selection strategy and may not see a need to change it.  It is unfortunate, however, that such a successful supermarket brand has opted to overlook the opportunity to change the historic supermarket redlining practice in South Dallas, which has left this community without healthy and nutritious food choices for decades.   

H-E-B’s decision to overlook the South Dallas community is especially difficult to justify given the documented economic assets in this community. Collectively, the two zip codes in South Dallas included 71,145 residents who spent an estimated $180 million annually for food-at-home.  Only two supermarkets serve these two communities, which means that their food dollars are being spent on dollar and convenience stores which reinforces the practice of unhealthy eating. In addition, much of their food dollars are spent at supermarkets outside of these communities --- referred to as “retail leakage” – which contributes little to the economic vitality of their own communities.  H-E-B executives --- are you listening? 

An Alternative Strategy:  Community groups have grown tired of the redlining practices by supermarkets and the absence of any decisive action by public officials to change this trend.  Consequently, some community groups are developing their own solutions along with the support of private industry and foundations that share their vision for healthier food choices. For example, Cornerstone Baptist Church in South Dallas was successful in obtaining start-up funding by The Real Estate Council, City Square, St. Phillips School and Community Center, and Cornerstone Baptist Church – clear evidence that the store concept has merit in the eyes of these community stakeholders.[4]  

Arlington Woods, Indianapolis is a food desert with a predominantly Black community of 100,000 residents without a full-size grocery store within 4-mile radius. A medical device manufacturer – COOK Medical – is building a plant in this community and adding a grocery store based on feedback from community residents.[5]  Importantly, two local Black convenience store owners were hired to operate the new grocery store and provided training on store operations as well.  Future plans call for these two young men to assume store ownership as well.

In my opinion, these are two excellent approaches to the persistent practice of supermarket redlining.  Community groups can achieve their goal of establishing better food options through creative partnerships with the private sector, foundations and other community groups that share their vision. Eventually, supermarket brands will recognize that their highly selective site selection strategies also reinforce redlining practices – whether intentional or not – and cannot be justified with the available evidence.  Indeed, our recent research [6] using an innovative urban site selection model revealed that (a)  perceptions of higher crime rates were not supported by actual analysis of crime data, (b) traditional metrics used in site selection formulas, like household median income, have little relationship to the dollars spent annually on food-at-home, (c) SNAP benefits are a significant component of food spending, and (d) various food deserts show sufficient economic assets to support the annual sales of a mainstream supermarket.

Access to healthy food choices is a right, not a privilege that prioritizes communities with a more attractive economic profile. Food providers, especially large supermarket brands, should re-evaluate their site location strategies and place more weight on the inclusion of under-served communities that show promising economic potential.  H-E-B has an impressive record of community support in areas related to disaster relief, diversity, education, celebrating first responders and hunger relief (i.g., food banks and holiday dinners). [7] However, it is time for H-E-B and supermarkets in general to take the bold step of also reducing the number of food deserts in under-served communities. While the various areas of community support are valued, they cannot fulfill the role of a full-service supermarket. 

 Reference Notes

[1] Halkias, M. (2021, June 3).  H-E-B is underway on its Frisco and Plano stores, the popular grocer’s first in North Texas. Dallas Morning News, Accessed at:  https://www.dallasnews.com/business/retail/2021/06/03/h-e-b-starts-construction-on-its-frisco-store/#

[2] Department of Agriculture Environmental Food Atlas, Accessed at: https://www.ers.usda.gov/data-products/food-environment-atlas/

[3] American Community Survey 2019 5-Year Estimates, Accessed at https://data.census.gov/cedsci/

[4] Dand, S. (2021, May 6).  Cornerstone Baptist Church is launching a grocery store to address food insecurity in South Dallas.  Cornerstone, Dallas Morning News,  Accessed at: https://www.dallasnews.com/news/2021/05/06/cornerstone-baptist-church-is-launching-a-grocery-store-to-address-food-insecurity-in-south-dallas/#:~:text=Now%2C%20in%20an%20effort%20to,set%20to%20open%20this%20spring.

[5]  Yousry, F. (2021 May 22).  This neighborhood badly needs a grocery store. A medical device maker will build one. National Public Radio,  Accessed at: https://www.npr.org/2021/05/22/998646579/medical-device-maker-building-plant-in-a-food-desert-adds-grocery-store-to-its-l

[6] Rincon, E. T. and Tiwari, C. (2020 March 23). Demand metric for supermarket site selection: A Case Study.  Papers in Applied Geography, Accessed at: https://doi.org/10.1080/23754931.2020.1712555

[7] H-E-B: Giving back to our communities. Accessed at https://www.heb.com/static-page/Community-Involvement

News Coverage of Food Insecurity in South Dallas Falls Short

Recent local news coverage about food deserts and community efforts to address food insecurity in areas like South Dallas have been informative, but to audiences that are more familiar with the topic of food insecurity, news coverage has been incomplete. As the following map illustrates, food deserts are disproportionately distributed in the southern and northwest areas of Dallas – a pattern that has changed minimally in past decades.  

Two recent stories in the Dallas Morning News provide a good example.  One story [i] covered local efforts to address the food insecurity problem by local community groups who would like to emulate the experience of a store in Waco, called Jubilee, that has served lower-income residents in an identified food desert.  The story provided valuable insights about the challenges faced by non-profits in creating a food store to serve their residents and the challenge of achieving profitability. 

The second story [ii] discussed a new grocery store – Southpoint Community Market -- founded by Cornerstone Baptist Church in South Dallas that is scheduled to open this summer on Martin Luther King Blvd.  The proposed store has a small footprint – 800 sq. ft. – and accompanied by a community kitchen and other sources of support provided by the church. The store received start-up funding by The Real Estate Council, City Square, St. Phillips School and Community Center, and Cornerstone Baptist Church – clear evidence that the store concept has merit in the eyes of these community stakeholders.

Unfortunately, this second story presented a rather grim picture of Southpoint’s likely success by Dr. Michael Fox, SMU Chair of the Marketing Department, who further described the grocery store concept as a “boutique” and “convenience” store that would require considerably more time than projected by the City of Dallas to achieve profitability. Despite this grim evaluation, Pastor Simmons of the Cornerstone Baptist Church remained optimistic that the store would eventually achieve profitability with continued support from its sponsors and increasing consumer demand. Interestingly, Dr. Fox was highly critical of the financial projections presented to the Dallas City Council, noting its many inaccuracies, but had few words about the business plan that had been prepared for store sponsors by the SMU Cox School of Business.

In a recent journal publication that I co-authored in Papers in Applied Geography, [iii] we developed an urban site selection model that identifies food deserts with adequate economic potential to sustain a mainstream supermarket of different sizes. The model is effective in identifying promising food deserts since it relies more on relevant economic indicators rather than the typical household income and social indicators employed by traditional site selection models.  What we discovered using our urban site selection model may surprise the skeptics.

Since the new Southpoint Community Market is located in zip code 75215 (denoted by an "S" on the map), we identified nine census tracts that were included in this zip code in order to describe the store’s potential trade area and customer profile– a step that was not evaluated in the business plan prepared by the SMU Cox School of Business.  We produced the two tables that follow below using the American Community Survey 2019 5-Year Estimates[iv] and SNAP payments reported by Texas Health & Human Services Commission.[v] We derived one variable – Annual Food-at-Home Expenditures – which incorporated the number of people living in a household and the average amount of weekly expenditures for food-at-home estimated in surveys sponsored by the Food Marketing Institute.[vi]   

In reviewing Table 1 Economic Profile, it is readily apparent that households in the 75215 zip code spent an estimated $71 million annually for food-at-home.  These annual expenditures were made possible by an aggregate household income of $606 million earned by all employed persons in 2019 and $10 million in SNAP payments received by qualified residents in 2021.  

Table 2 Demographic Profile shows that the race-ethnic representation in this zip code was predominantly Black (median = 60.2%), followed by non-Hispanic whites (median = 24.4%) and Hispanics (median = 12.9%).  However, the race-ethnic distribution and economic indicators varied considerably by census tract.

Why does this matter?  Because it provides decision makers an assessment of the potential market that is available to Southpoint Community Market.  The specific trade area for Southpoint was not identified in the business plan prepared by SMU, a critical first step for defining the potential sales and competition in a trade area. Moreover, the business plan did not include a survey of community residents that would provide a more specific estimate of demand for the store concept.

According to Dr. Fox with SMU, the City’s assessment of Southpoint’s profitability  “is based on flawed calculations” and that his back-of-the-envelope calculations indicated that Southpoint would need to sell about $80 a day per square foot of shelf space to make the city’s proposed profit margins. Perhaps his assessment is correct, especially given the store’s small size of 800 sq. ft. and its location. The City expected a profit of $34,000 a month by the store to justify reimbursing the investment made by The Real Estate Council.

Current information provided by the Food Marketing Institute reveals the following information about U.S. supermarkets in 2019 [vii] that might encourage a second opinion about Southpoint’s future success:

1.   The net profit after taxes was 1.0 percent.
2.   The weekly sales of U.S. supermarkets averaged $15.15 per square foot

Thus, assuming ideal market conditions for a 800 sq. ft. store, SouthPoint Community Market could achieve approximately $52,520 in monthly sales or $630,240 in annual sales.  These potential sales could be accelerated by expanding the size and inventory of the store and reaching more customers in its defined trade area. Assuming this sales scenario, a profit margin of 1.0 percent may be realistic, especially if consumer demand could be accurately documented.

In summary, the economic potential of urban communities like South Dallas is often overlooked or obscured by the absence of relevant economic data.  Our urban site selection model incorporates more relevant information and has further challenged perceptions of elevated crime rates by analyzing actual crime statistics from police department files. It is curious indeed that a market demand study for a supermarket in South Dallas has yet to be conducted despite several unsuccessful attempts by the City of Dallas to address food insecurity. 

Given the common practice of supermarket redlining that has been evident in North Texas for several decades, it does not seem unreasonable to expect news reporters and experts to provide a more balanced analysis of supermarket potential in urban areas like South Dallas, especially when community advocates and sponsors are struggling to remediate the negative consequences of supermarket redlining practices.    

 

Reference Notes

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[i] Dand, S. (2021 May 10).  Waco store fills void, with help.  Accessed at https://edition.pagesuite.com

[ii] Dand, S. (2021 May 6). Cornerstone Baptist Church is launching a grocery store to address food insecurity in South Dallas. Accessed at https://www.dallasnews.com/news/2021/05/06/cornerstone-baptist-church-is-launching-a-grocery-store-to-address-food-insecurity-in-south-dallas/

[iii] Rincon, E.T. and Tiwari, C. (2020 March 23).  Demand metric for supermarket site selection: A case study. Papers in Applied Geography, Accessed at https://doi.org/10.1080/23754931.2020.1712555

[iv] American Community Survey 2019 5-Year Estimates, U.S. Census Bureau. Accessed at https://data.census.gov/cedsci/

[v] Texas Health and Human Services (2021 April).  Month End SNAP Food Benefits Cases and Eligible Individuals by County - March 2021 Benefit Month. Accessed at https://hhs.texas.gov/about-hhs/records-statistics/data-statistics/supplemental-nutritional-assistance-program-snap-statistics

[vi] Food Marketing Institute (2021). Trended Weekly Household Grocery Expenses,  FMI U.S. Grocery Shopper Trends, 2021. Special table provided by FMI Research Director Steve Markenson.

[vii] Food Marketing Institute (2021) Supermarket Facts. Accessed at https://www.fmi.org/our-research/supermarket-facts