Philadelphia: Tech expansion seen as bright spot
Unemployment has lingered above the national average in the Philadelphia region, which is the seventh-largest metropolitan area in the United States with a population of about 6.1 million.
The metro market had a gross domestic product of $433.9 billion in 2017, the eighth largest in the United States, according to the U.S. Commerce Department’s Bureau of Economic Analysis. Economic growth last year was less than 1%.
But there are signs that employment in the area is improving, however, with unemployment at 4.7% in the fourth quarter of 2017, compared with 5.1% in the fourth quarter of 2016, according to a report on the market by Chicago-based real estate firm Cushman & Wakefield.
A new technology hub is coming to Philadelphia in the form of the Comcast Technology Center, a 60-story tower opening later this year in the Center City area that will house the company’s software engineers and other technologists, and also will include an incubator space for local tech start-ups.
Philly’s prospects as a technology center are buoyed by its long-standing status as a hub for higher education. The city is home to the University of Pennsylvania, which is the largest private employer in the area, as well as Temple University and Drexel University, which like Penn, are considered among the most prestigious research schools in the country. They are among the 80-plus colleges, universities and specialty schools in the region.
Financial services are the largest business sector in the economy, but health care, biotechnology, information technology and manufacturing are all important industries in the market, which is home to the headquarters of pharmaceutical giant GlaxoSmithKline, and several other pharmaceutical and biotechnology companies have operations in the region. Drug distributor AmerisourceBergen is based nearby in Valley Forge, Pa.
On the retail scene, Ahold’s Giant division has been in a battle with longtime market-share leader Acme, a local division of Albertsons. The market was roiled by the 2015 bankruptcy of A&P/Pathmark, which had operated SuperFresh and Pathmark stores in the area. Ahold divested several of its Bottom Dollar stores in the area when it merged with Delhaize, providing an opportunity for discounter Aldi to expand by taking over some of the locations.
Philadelphia is one of the strongest major metro areas for Camp Hill, Pa.-based Rite Aid, although CVS Pharmacy, based in Woonsocket, R.I., has been the largest chain in the market. It’s not yet clear how the acquisition of Rite Aid’s stores by Deerfield, Ill.-based Walgreens and Boise, Idaho-based Albertsons will shift the market share in the region.
Natural and organic specialty retailers are expanding in the Philadelphia market, as well. In addition to a new outlet last year from Rockville, Md.-based Mom’s Organic Market, Philadelphia also is expected to get its first Sprouts Farmers Market this year, a 32,000-sq.-ft. space in a development called Lincoln Square, slated for a late-2018 opening.
Austin, Texas-based Whole Foods Market opened a 62,000-sq.-ft. store in the Philadelphia market in 2016 that is considered a flagship for the Amazon-owned chain’s Mid-Atlantic region.
Target also has zeroed-in on the Philadelphia market, opening three of its small-format retail stores in the city in the last two years — all of which include a grocery selection and a CVS Pharmacy.
Philadelphia also had its share of retail controversy in the past year with the introduction of a soda tax, which raised $78.8 million in the first year and whose detractors include such retailers as ShopRite operator Brown’s Super Stores, which said the tax has driven shoppers to the suburbs.
Washington, D.C.: Cautious outlook amid spending cutbacks
The economy in the Washington, D.C., metro market has been on a significant upswing for the past several years, although some economists fear the good fortunes could be coming to an end amid an anti-government spending attitude in the Congress and the White House.
The federal government, which accounts for about 30% of the jobs, has been cutting back on the scale of government-funded programs, which is leading to a reduction in high-paying federal contractor jobs, according George Mason University professor Stephen Fuller.
“We are a company town, and our company stopped spending more money here,” Fuller said in a recent presentation at the university, according to Washingtonian magazine.
However, the Washington metro area’s population remains one of the most highly educated in the nation, and also one of the highest paid, with the highest proportion of doctoral degrees and a median household income of more than $75,000.
In support of the federal government, the region is home to law firms, lobbying firms, nonprofits, trade groups and professional associations. Retail groups, including the National Association of Chain Drug Stores, National Retail Federation and Food Marketing Institute, all have their headquarters in the area.
Many observers of the retail scene believe the local economy remains vibrant, despite government cutbacks.
“D.C.’s retail market is expected to remain strong as the metropolitan area’s economy is expected to grow by an average of 34,000 jobs per year for the next five years,” the Washington, D.C. Economic Partnership wrote in a recent report, citing data from HIS Markit and real estate firm CBRE. “In addition, it is estimated that D.C. will experience roughly double the nation’s percentage growth in food and beverage spending in the next five years.”
The Washington metro market is one the largest for CVS Pharmacy, which captures more than half the drug store market share, according to a 2015 research report from Barclays Capital. The chain gained a significant presence in the market through the 1990 acquisition of Alexandria, Va.-based Peoples Drug, which it converted to the CVS Pharmacy banner in 1994. Walgreens and Rite Aid each had a much smaller percentage of the Washington drug store market share before the recent sale of Rite Aid to Walgreens and Albertsons.
Ahold’s Giant Food division is the leading grocer in the market with about 100 area stores and a 20.2% market share, according to the Washington Business Journal — about double that of second-place grocer Safeway, whose 79 stores reflect a roughly 10.7% market share.
CVS Pharmacy was ranked third on the list with 255 locations and 8.7% of the grocery market. It was followed by Kroger’s Harris Teeter banner, which has 42 locations and 7.3% share, and Supervalu’s Shoppers Food & Pharmacy, which has 31 stores and just under a 6% share.
Whole Foods has several stores in the market and a few more in the pipeline. Wegmans Food Markets, which has long been active in the Maryland and Virginia suburbs, said last year that it was planning its first store in the District of Columbia itself. Reportedly one of the retailer’s smallest locations, it is expected to be twice as large as the nearby 40,000-sq.-ft. Whole Foods.
While the suburbs and higher-income areas of the region have seen a boom in supermarket development, the market also has struggled with a high level of food deserts — or areas underserved by grocery retail.
One retailer seeking to tackle that challenge is Good Food Markets, which opened one small store in an underserved area in 2015 and has since been in discussions to expand to other underserved communities in the area.
Atlanta’s retail scene brings the heat
Dubbed Hotlanta for its infamously scorching summer temperatures, this moniker also easily could be applied to Atlanta’s red-hot economy. As is the case in many metro markets, the IT sector has been leading Atlanta’s growth pace. Finance, insurance and real estate, as well as the transportation, utilities and professional and business services sectors, are also making large contributions to Atlanta’s growth. For these reasons and more, Atlanta is often considered the economic engine of the state and of the Southeast. City officials said it is important to them that Atlanta be viewed as a business-friendly city.
Atlanta has proven itself as an attractive place for business relocation. A big part of that is the national and global connectivity provided by Hartsfield-Jackson International Airport. For these and other reasons, such global companies as Porsche and Mercedes-Benz have their U.S. headquarters in Atlanta. Other companies that call this region home include NCR, GE and Honeywell, all of which have located their digital innovation centers here.
Its population growth, as well as its current and future job growth projections, handily outpace U.S. national averages, which is a signal to some that growth will continue to track upward for the next few years at a minimum. One trade magazine recently called out the Atlanta metro area as the No. 1 state to do business in, noting how Atlanta’s attractive low cost of doing business, combined with a job market that rivals Silicon Valley, Boston and New York City, helped push it to the top.
Competition for shoppers’ dollars is tight in this market, which means retailers need to bring their A-game to hold onto market share. Publix may lead in many markets in the South, but when it comes to Atlanta, Trader Joe’s is more often noted as the place customers love to shop. Trader Joe’s wins rave reviews from customers in this region for its friendly staff, healthy food choices and competitive prices. The wine, produce and floral departments are often cited for their great assortments and affordable prices, but customers said its Trader Joe’s eclectic frozen items, center store offerings and sampling program that keeps them coming back.
Also unique to this retail chain — if there’s a product customers want to try, all they have to do is ask an employee to open it. Company officials said this has been effective in boosting loyalty and increasing impulse purchases.
Rotating assortments and novel products are a great way to add excitement, but it can be hard for shoppers to keep up. To remedy this, the company has designed its store flyers, not to be a sales vehicle but an informative tool designed to teach shoppers about the products in the store. The flyers offer background information on some of its highlighted products, whether they are new or existing, but the real reason people love them is because they are written with a sense of humor and include interesting backstories on the products, they are so effective, that many shoppers walk around the store with the checklist from the back of the flyer, which encourages them to pick up everything on it.
Another area favorite is Kroger. One of its largest stores in Atlanta, the Kroger Marketplace on Glenwood Avenue South East, includes a drive-through pharmacy, gas station, urgent care clinic, Starbucks and an expanded housewares section called the Kitchen Place. It even has a bar in the store, featuring several local beers on tap and an Enomatic wine system with more than a dozen different wines sold by the glass. The bartenders at the “Krobar” are happy to offer samples of
anything customers would like to taste.
This location also boasts an expanded takeout area intended to go head-to-head with the likes of Publix and Chipotle. A sandwich bar and burrito station can also be found, along with the standard fried chicken fare.