Strategies for a successful corner market

One of the basic tenets of the retail industry is that a store must be located near high levels of automobile traffic. Foot traffic can take the place of cars — but usually this is only the case where pedestrian counts are very high, such as in tourist locations. New urbanists found in the 1990s that if you place a grocery store in the middle of a traditional neighborhood development, the business often dies.

It comes as a surprise, then, to see Marsala’s Market thrive in the neighborhood center of New Town at St. Charles, Missouri — far from any drive-by traffic or tourist destination. New Town, while growing steadily, still has fewer than 900 households. It usually takes 1,000 households to support a neighborhood store, according to retail expert Bob Gibbs. Marsala’s opened in April of 2006 when only 350 households lived in the development.

In a development that has many amenities — pools, parks, beach volleyball courts, bocce courts, a fitness center, and playgrounds, for example — the corner grocery store is the most important, says town architect Tim Busse. “The idea that someone can walk to buy a loaf of bread, milk, produce, or other items is central to the concept of New Urbanism,” he says. Getting a store running early on was a key part of the plan, Busse notes.

Feeding off the mail pickup

One strategy was to place the town mail center — where all households go every day to pick up letters and packages — next to the market. The two facilities are connected by an inside door and share bathrooms. “They come in here with their letters and buy a loaf of bread or a six-pack of beer,” says store co-owner Mark Hohenshell.

The regular events at New Town also help sales at Marsala’s. Weddings take place every weekend in the warm months at the town chapel, and Marsala’s gets some of the catering business. There are festivals on the town green and a popular beach volleyball league includes teams that mostly live outside of New Town. Outdoor movies are shown on Friday nights across from the market. Hohenshell estimates that 20 to 25 percent of the market sales are from outside New Town.

For a while, New Town developer Greg Whittaker offered home buyers a $200 to $400 monthly credit — depending on the size of house purchased — at the store. This 12-month credit was popular with buyers, who began making purchases on move-in day and got used to shopping at Marsala’s. This program had to be discontinued, Whittaker says, because banks want builder incentives to be directly related to the house — free blinds or appliances are acceptable, for example.

The rent is a combination fixed fee and percentage of sales. The percentage helps a start-up business because it is based on revenues. But the developer told New Urban News that the rent was being waived until store revenues are adequate — which they expect to happen sometime this year.
Despite incentives, Mark Hohenshell knew it would be tough to get the business running. He and his wife, Debbie, ran a newsstand on St. Charles’s historic Main Street. When Whittaker approached them, they liked the concept and saw a good long-term business opportunity.

“The first years were tough, but we never considered giving up the store,” says Hohenshell. “In the long run, when there are 15,000 people living in New Town, this store won’t be big enough.” The Hohenshells pay themselves a small salary, live above the store, and reduced their living expenses to get the business going, he told New Urban News.

Sales started out at about $40,000 per month and rose to $60,000 to $65,000 per month in 2008, he says. That translates to sales of close to $300/square foot per year — a key watermark of retail profitability. That level of sales lasted through December, but sales slowed in January and February. That’s partly the result of the weather, but construction has also slowed, bringing fewer workers in for lunch. Hohenshell believes business will pick up again in April, when the event season gets underway.
Marsala’s looks and feels a lot like Modica Market in Seaside, Florida, a new urbanist icon. Modica Market, which opened in 1989, was the first grocery store in a new urban development. Marsala’s and Modica are both family run stores of 2,500 square feet packed with specialty items and quality prepared foods. The seafood, baked goods, and beverages are similar to what you would find in a Whole Foods Market, but on a small scale.

The resemblance to Modica is not a coincidence. Whittaker has a house at Seaside. When he recruited the Hohenshells to open a store, the couple went to Seaside to talk to Charles Modica. “He’s the one that got us started on smaller-size, single-service items,” says Hohenshell. “He told us to stay away from what you can get at the big-box stores. You can’t compete with them anyway.”

Marsala’s has high-quality fresh produce. The store sells wine and beer — an advantage for a small grocery store. You won’t find Coke or Pepsi — the soft drinks are premium varieties not available in every supermarket. Marsala’s soft drinks sell for about $1.25 for a bottle — not too expensive — which is indicative of the prices throughout the store.

Marsala’s offers a small selection of everyday dry goods — including toothbrushes, shampoo, and light bulbs. “We buy from Kehe Food Distributors in Chicago — that’s where we get about half of our items.

We focus on natural foods products — we go green as much as possible,” Hohenshell says. It was helpful, he said, to research the merchandise that is sold in markets around the country that offer premium Boar’s Head meats.

The merchandise is a big part of the equation — the other is the personal relationship with residents, and it helps that New Town is a close-knit community and the Hohenshells live there. “We try to provide exceptional service. People know that they can park in front, they don’t have to walk around a big store to find what they want, and we will even help them to take the bags to the car. We do that without even asking.” He adds that the merchandise selection has changed to fit customer requests.

The location obviously works for Marsala’s, but it is highly unusual in its isolation. The town’s main street, Rue Royale, where Marsala’s is situated, not only has little traffic but it dead-ends in both directions. Busse explains that eventually this street will be extended to connect with other thoroughfares at the edge of the 739-acre development.

Still, most new urban developments put shops at the edges to capture traffic and customers from outside the development. Planner Andres Duany explained that the roads immediately surrounding New Town don’t carry a lot of traffic, and residents of preexisting developments were more willing to support the project if single-family houses were located on the edges. “New Town is a hopeless spot for retail,” Duany said at an August seminar held there. “So we decided that we might as well put it in the center where everybody can walk to it.” The retail in such a location must be well managed so that people will go out of their way to get to it, Duany said.