CUED

Market Feasibility Analysis for a Cooperative Supermarket in
Robbins, Illinois

Detailed data on the supply and demand for supermarket and related goods have been analyzed in this study. These include a survey of residents of Robbins, Illinois; a survey of shoppers at the two supermarkets that are likely to be the major competitors of the proposed store; a detailed analysis of the competing stores including on-site inspections, evaluation of both facilities and merchandise, comparative pricing and accessibility to Robbins; interviews with store managers and others experienced in supermarket marketing and management; and an analysis of industry trends, consumer buying patterns and U.S. Census data.

On the basis of this analysis, we conclude that a supermarket of at least the size proposed by RICS (24,000 square feet) is feasible. We have delineated a primary trade area including Robbins and the black population of surrounding communities which has a population of 10,911. In addition we determined a secondary trade area of 31,153 people. We further calculate that the total demand for supermarket goods in the primary trade area is $8,510,580. And there is another $32,809,920 of demand in the secondary trade area. Based on the data from our surveys, national trends and an analysis of competing facilities, we determine that a supermarket in Robbins could capture $5,409,799 of the total demand for supermarket goods in both primary and secondary trade areas. With a strong liquor and drug department, lottery, and other goods, the total market for the Robbins store will be $6,000,000. For a store of 24,000 square feet, the yield per square foot would be $250. This is well above the national average for stores of this type.

While square foot yield is one measure of feasibility, it is more important to examine financial feasibility based on the specifics of each project. We established through our analysis of competing stores that a competitive gross margin would be 23%. We further determined operating costs for a store of 24,000 square feet and a potential sales volume of $6,000,000. If the store operates on a gross margin of 23%, we estimate that the store will operate at a profit after approximately six months of operation, while meeting debt service payments.

While a supermarket in Robbins is clearly feasible, sound management and organization are crucial to realizing this potential. We discuss in this report the advantages and disadvantages of alternative forms of cooperative organization. We also recommend a vigorous marketing campaign to sell the store in general and its specific cooperative structure.

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UIC-Center for Urban Economic Development