Northwest Indiana Discussion

Gary supermarket packs ’em in
Oct. 16, 2005

By Andy Grimm / Post-Tribune staff writer



GARY — In the decades since the last full-size grocery store store was built here, supermarkets have grown increasingly super-sized but have taken root almost exclusively in suburban areas.

City officials estimated the 50,000-square-foot County Market that opened in September at 25th Avenue and Grant Street is the largest grocery store built in the city in 30 years.

The County Market has everything a modern consumer has come to expect — and, three weeks removed from its grand opening, it has what every retailer wants: a packed parking lot.

Given the lack of competition for suburban-style super-groceries inside city limits and the apparent success of County Market, why did Gary go more than 30 years without seeing a new store built?

“People make some assumptions about Gary,” said Pat Lee, whose Lee Construction was one of the major investors. “Those assumptions turn out to be wrong.”

The assumption is that Gary’s demographics make the city a hard sell for any retail chain.

A large but relatively poor population, a reputation for crime and high cost of building are daunting for any corporate investor, but grocery stores, which have the tightest profit margins of any retail business, are even more conservative, said industry analyst Matthew P. Casey.

Since the 1950s, grocers led the exodus of businesses that moved to suburban strips, said Joe Lackey, president of the Indiana Grocery and Convenience Store Association.

“I can remember an unpleasant half hour with Mayor (Richard) Hatcher when the last A & P closed in the city,” Lackey said. “All of a sudden, the city had no chain grocery stores, and he wanted to know what I was going to do about it.”

Gary’s population is three times the size of neighboring Merrillville, which has five grocery stores the same size or slightly smaller than Gary’s two largest groceries, County Market and PayLow on Ridge Road.

Merrillville’s median household income is nearly double Gary’s $27,000 per year.

Casey’s New Jersey-based consulting firm, Casey & Associates, helps major chains pick locations for new stores, and those income figures make all the difference. In the hyper-competitive grocery business, about 1 percent of all sales are profit, and industry executives are reluctant to risk going into an area where high-volume sales aren’t assured.

Suburban locations have several advantages over urban markets, Casey said.

It’s easier to find the acres of vacant land needed for a modern grocery in the suburbs. Residents there buy more and more expensive items.

Suburban stores have lower rates of “shrinkage” — the industry term for merchandise lost, damaged or stolen — and don’t require the added expense of security.

Suburban retail strips tend to have more traffic than the old business districts in cities. Finally, grocers can locate in the suburbs and still draw from an urban customer base.

“You’ll have inner city people go out to the suburban stores,” Casey said. “But you won’t have suburbanites come into the inner city.”

The local chain that now runs seven WiseWay and PayLow stores throughout Northwest Indiana began as a single storefront on 4th Avenue in Gary, said Don Weiss, whose father, Mickey, opened his first shop in 1939.

The chain now has a 70,000-square-foot store on Ridge Road on the south end of the city, a building that has been expanded twice since the 1980s.

Weiss would not say how the store’s sales compare with the others in the chain, but it was recently remodeled from a WiseWay into the company’s discount brand-heavy PayLow store model.

“From what we can tell, (the store) is Gary’s largest and most successful retail venture,” Weiss said. “We have put a large investment into that store.”

In the absence of large grocers, smaller convenience-style stores that typically charge higher prices to make up for the added costs have opened their doors.

The National Institute of Health found that residents who live far from large groceries or markets with a large selection of fresh produce tend to be less healthy, and a University of Connecticut study found that consumers pay as much as 70 percent more for the same goods at convenience stores as at large groceries.

Lackey said he is not surprised by the early success of County Market, but acknowledged that various city subsidies and the determination of local investors made the store possible.

Gary native Jim Hatchett owns and manages the store, and the grocery building and strip mall around it were developed by a group headed by Lee.

The city paid to clear what had been a city park to make way for construction, and city money also went toward upgrading 25th Avenue for increased traffic. Loans from several local banks were backed with $1 million in city casino tax revenue, and the developers and businesses there will benefit from generous tax breaks.

“These guys did their research, and they decided to go ahead at a difficult time in our industry,” Lackey said. “It shows there is a market in Gary.”

Casey said it’s a tough sell to most corporate groceries, but said there are examples of stores that are thriving in urban markets.

“I have guys tell me all the time they can’t find any good locations in the suburbs. I tell them there are still great locations in the inner city,” he said. “People there have to eat, too.”