The Rise of the Urban Entrepreneur

For example, Boston's fresh produce and food-processing cluster derives a critical competitive advantage from its inner-city location in Newmarket Square. Containing such businesses as flower wholesalers, seafood importers, meat processors, bakeries, and food distributors, the cluster is in close proximity to downtown; its location permits rapid deliveries and gives downtown buyers a convenient location for purchasing. The location has excellent access to highway, sea, and air transport, which gives businesses a particular advantage in the importing and distribution of seafood. The location is also within walking distance of a supply of able employees from inner-city neighborhoods. That combination of factors has led to a dense concentration of processors, caterers, truckers, wholesalers, distributors, and other suppliers, which together form a vibrant cluster.

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.

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