Some observers argue that advances in transportation and communication have eliminated the competitive importance of location. However, the growth of concepts such as just-in-time delivery, superior customer service, and product-development relationships between customer and supplier continue to make location a critical business factor. Take, for example, Atlanta's Matrix Exhibits. With 30 employees and $2.2 million in sales, the company assembles, supplies, and delivers trade-show exhibits. Because Matrix is based in the inner city, only a six-minute drive from the Georgia World Congress Center, it can respond faster than its suburban competitors to exhibitors' frequent last-minute requests.
In Boston, proximity-sensitive businesses -- food processing and distribution, printing and publishing, commercial laundry, and other support services -- have remained in the inner city, notwithstanding attendant difficulties. (See table, page 9.) Likewise, in Los Angeles many of those and other businesses -- toy and electronics importing and distribution, for instance -- are location sensitive. Such businesses have emerged and remained in the inner city despite government policies that erode the area's locational value. That persistence suggests that the potential to expand the base of location-sensitive businesses in inner cities is significant.
Local market demand. The second potential competitive advantage of the inner city lies in the unmet demands of its own population. Even though average incomes are relatively low in inner cities, high population density creates substantial purchasing power and a large market. Total family income in Boston's inner city, for instance, is an estimated $3.4 billion, not an insignificant market. Although average household incomes are 21% lower than in the rest of Boston, spending power per acre is comparable. In some cases it is higher than in the surrounding suburbs.
Inner-city markets are not only large but young and rapidly growing, in part because of immigration and relatively high birthrates. Their largely minority consumers, as some established companies have already realized, represent a major growth market. Chicago's historic retailer, Goldblatt's Department Stores, for example, found new life after bankruptcy, with a strategy built on inner-city stores. In 1981 the company closed all but six of its stores. Focusing on cash-and-carry items, Goldblatt's has re- emerged as a competitive retailer, now with 14, mostly inner-city, stores.
The principal inner-city business opportunity springs, however, not from the size of the market but from its character. People in largely lower-income ethnic and minority communities have distinctive needs and tastes, which demand tailored products and services. But most companies design products and services for white middle-class consumers and businesses. Hence, their product configurations, retail concepts, entertainment, and personal and business services don't fit inner-city customers' needs. Microsegmentation lags in the inner city, but it represents a substantial opportunity.
Companies and entrepreneurs based in the inner city are uniquely positioned to understand and address the needs of consumers and businesses in their own and other similar markets. Many of the largest and most enduringly successful minority-owned (although not necessarily inner-city-based) companies have drawn their advantages from targeting those buyers in fields such as food products (Parks Sausage, Brooks Sausages); beauty care (Soft Sheen, Pro-Line, Dudley, Luster Products, Johnson Products); and media (Essence Communications, Earl G. Graves Inc., Johnson Publishing, Black Entertainment Television). Other examples include Cacique, a Latino-owned cheese manufacturer that has become a leader in the Mexican cheese market in the United States. Miami-based, Latino-owned CareFlorida Inc. has rapidly grown its health-maintenance organization by tailoring its marketing to Latino customers. Universal Casket, in Cassopolis, Mich., has grown to $3 million in annual sales by marketing to African American-owned funeral homes.
A focus on satisfying ethnic needs does not necessarily limit the growth and potential of minority businesses. Instead, a focused strategy can provide a competitive advantage over large established manufacturing-company players like Procter & Gamble, Safeway, and Levi Strauss, and a base from which to expand into other market segments. Inner-city-based firms can sell not only in their own communities but to similar communities nationally and even internationally, creating the opportunity for large multiunit companies. The rapid progress of Americas' Food Basket, a Cuban-owned supermarket based in Boston's inner city, suggests the potential for growth in retailing concepts that cater to local ethnic demand. In just its second year of operation, the company is profitable on annual sales of $8 million. Americas' Food Basket has developed a product mix that satisfies local demand better than mainstream supermarkets do. And unlike nearby mom-and-pop stores, Americas' Food Basket has developed a partnership with a leading national wholesaler, which helps it make its selection, prices, and services better than those of its smaller competitors. In San Antonio, Handy Andy Supermarkets focuses on the Latino market. The company has 23 stores in Texas and projected sales of more than $400 million for 1994.
The creation of retailing concepts tailored to inner-city consumers in such areas as food, clothing, toys, books, and restaurants in turn breeds opportunities to manufacture products for that market. For example, specialized supermarkets boost the demand for established ethnic-food producers and distributors like Goya Foods, a supplier of Latino foods, with annual sales greater than $450 million. Inner-city companies can also specialize as distributors for products targeted at inner-city consumers or provide professional services such as advertising and market research to outside companies seeking to serve inner-city markets.
