There are many factors a business considers when relocating to a community. These factors include location to suppliers, market/trade area, lease rates/land costs, availability of land/buildings, proximity to semi-skilled and skilled labor, quality of life, time to obtain permits, and proximity to more affordable housing.
Not surprisingly, another key factor is if the business’ CEO and senior management lives or wants to live in town because they will also want to locate their company in town. In some cases, a business is influenced to move to town because Morgan Hill’s semi-rural setting best fits their company image. Businesses make location decisions based on their expectation to maximize profits and return on their investment.
For retailers one of their key decision-making factors is the trade area. Basically, will a lot of customers shop at the store and how will it impact other nearby company stores. In general they look at how many people live in the trade area and their demographic and psychographic data. Demographic data consist of such information as household income, age, education and population. Many companies such as restaurants use this information to help them to preliminarily assess a market. For example, they look for daytime population within a certain radius of a potential location. To illustrate this point, a few years ago we spoke to Fresh Choice about building a restaurant in town since their corporate headquarters are in Morgan Hill. They indicated that Fresh Choice looks mall location (80 percent of their stores are in mall locations), 50,000 in daytime population within a three-mile radius and 100,000 people in overall population within three miles. They opened a store in Gilroy because it comes close to meeting these criteria. In essence, the outlet stores act as a mall and generate an average daily population of 12,000 people. Fresh Choice receives about half its revenues from lunch. So it would appear that daytime population is fairly important for Fresh Choice.
In comparison, Morgan Hill’s daytime population is about 18,000 and the overall population is about 41,000 within a three-mile radius, respectively. However this doesn’t mean Fresh Choice or other restaurants wouldn’t consider a Morgan Hill location in the future. It just means they may wait for the market to “mature” before they pursue a location.
Other data retailers look at is psychographic data. Psychographic data are factors about lifestyle that influence how and what people spend their money on. For example, two households may have the same demographic such as a four-person household earning $120,000 per year, but be very different in how they spend their money. Psychographic data is broken into general segmentations with households classified with such descriptive names as “Organic Volvo” which I assume to broadly mean households who drive Volvos also buy more organic foods.
Trader Joe’s
Two key factors Trader Joe’s considered in a Morgan Hill location was would the site adversely impact their San Jose stores and would it draw customers from both south and north of Morgan Hill. Intuitively, we believe Morgan Hill’s demographics played a role as well, but in Len Lewis’ “The Trader Joe’s Adventure” (yes, there’s a book), Lewis concludes there is no typical Trader Joe’s customer anymore. However, Lewis best describes the trade area for Trader Joe’s by quoting Kevin Costner in the Field of Dreams: “If you build it [and build it right], they will come.”
Who’s coming to town?
You may have heard that the developer of the new retail center at Cochrane Road and U.S. 101 is currently negotiating a lease with Gottschalks department store for about a 75,000-square-feet building. While not a done deal, it looks promising. Ono Hawaiian BBQ and Chipotle Mexican Grill are also very interested in the center. Is it just me or does it seem that Hawaiian BBQ is one of the latest trends in food?
Happy holidays and remember to shop local.
Garrett Toy is the director of Business Assistance and Housing Services (BAHS) for the City of Morgan Hill. BAHS is responsible for the city’s economic development, redevelopment and affordable housing activities. He has been working in this field for 18 years: 8.5 years for Morgan Hill. E-mail him at garrett.toy @morganhill, ca gov.
