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What do local grocery stores say about your neighborhood?
It may seem like a no-brainer. Whole Foods stores tend to be located in more expensive and affluent areas, while discount stores like Dollar General are located in less affluent areas. However, a recent analysis found that store openings are highly related to how grocery chains anticipate neighborhood demographics and housing price trends.
The report is written by Aziz Sunderj, who worked for many years at an investment bank before starting a newsletter called Home Economics. For his analysis, he collated more than 32,000 store openings and home price data over nearly 50 years and added census demographics.
Sundarj found that home prices not only rose in ZIP codes where Trader Joe’s opened, but rose 6% faster than the national average over the next three years. But in ZIP codes where Walmart opened, home prices were 4% below the national average.
Will the rich get richer and the poor get poorer?
“I think people who are looking for a location for a Trader Joe’s or a Walmart are looking for an area that is changing in a way that is beneficial to them,” Sundarj told USA TODAY.
For example, Trader Joe’s may select “well-educated, relatively high-income people, (but) not necessarily in the most expensive areas,” he said.
Residents in areas where Trader Joe’s stores open are more likely to be college-educated, with 52% holding a bachelor’s degree, tied with Whole Foods for the highest percentage of any chain and well above the national average, Sundarj said in his analysis. The median household income in these areas was $82,000, also the highest of any chain, and the median home price before the stores opened was $425,000.
In contrast, Wal-Mart’s customers are “slightly lower income and probably live in areas where home price growth is slower. They live in areas that are somewhat economically stagnant,” he said.
A typical Walmart store is located in an area where the median household income is $49,000, 23% of adults have a college degree, and home prices are $144,000, one-third of the home prices in Trader Joe’s ZIP codes.
Sundarj believes the disparate fortunes between the Wal-Mart and Trader Joe’s districts tell a larger story. “The grocery store story is kind of a window into the broader story of what’s going on in America about affordability and inequality,” he says. These retailers are taking advantage of an unfortunate reality about the American economy in recent years. In other words, companies at the top of the income and wealth divide are doing better, while those at the bottom are faring less well.
“The K-shaped economy is running down the aisles of grocery stores,” Sundarj wrote in the report.
