Conventional wisdom holds that when “category killer” retailers, such as Home Depot , enter a market area, they decimate many independent retailers in nearby downtown and neighborhood commercial centers. Local hardware stores, lumber yards and paint shops are supposedly doomed, while shops featuring lighting, window treatments, flooring, home decorations, etc., are seen to be in increased danger. The urban Metropolitan Avenue shopping district in the Forest Hills neighborhood of New York City and the suburban Springfield Avenue commercial corridor in Maplewood, NJ, demonstrate that sometimes these small merchants can not only survive, but possibly even thrive, after a Home Depot opens nearby.
Forest Hills, NY
A Home Depot opened five years ago about 500 feet from a 0.70 mile section of Metropolitan Avenue, a two-lane, often congested street, that for decades was a backwater shopping district in this neighborhood. This district is 1.7 miles from the very powerful Queens Center Mall, and about 0.8 miles from the Austin Street shopping area that is tenanted by the likes of The Gap, Eddie Bauer, Benetton, Banana Republic, Sephora, Barnes & Noble, etc.
Five years ago Metropolitan Avenue was anchored by popular independent operations such as Eddie’s Sweet Shop, Continental Hardware, Alberto’s Restaurant, Weston Bros. Appliances and a movie theater. All had been around for over 30 years.
When Home Depot opened many retailers, including the owner of Continental Hardware, thought that a lot of local shops would be crushed. Today, this strip has experienced a surge of growth with better quality shops and restaurants opening that attract more affluent shoppers from nearby neighborhoods, including the famed Forest Hills Gardens enclave. Commercial rents and foot traffic have increased significantly. It now also has a flourishing 24 store “home and hearth” niche that includes: a 4,000 sf hardware store that stocks 60,000 items and has been around for over 80 years; a paint and wallpaper store featuring Benjamin Moore products; six antique shops; two appliance stores, with one specializing in air conditioners and fireplaces and the other in vacuums and sewing machines; two plumbing and plumbing supply stores; two furniture shops; one kitchen cabinet store; one shop specializing in window treatments and two reupholstery and drape shops.
Consumer expenditures provide room for both a Home Depot and a lot of nearby independent retailers: 157,459 households live within a seven-minute drive and they spend over $321 million annually on home furnishings and equipment.
The shops in this commercial area have long experienced heavy competition from Manhattan as well as nearby malls and shopping centers.
Double click photo to access photo album on this niche.
Springfield Avenue is a 2.5 mile-long suburban commercial corridor. It long has been a secondary shopping area within the community to Maplewood Village in terms of reputation, appearance , store quality, commercial rents and customer traffic. The core of the shopping district is about 3 miles away from the Short Hills Mall, which is famed for its array of high end retailers.
Over eight years ago a Home Depot opened about one mile west of the heart of the area. An Expo also opened near the Home Depot, but it soon closed. Today, Springfield Avenue is definitely improving. The Township has made significant street improvements. Recently, Dunkin Donuts and Pappa John’s Pizza opened as have some attractive restaurants, a toy store, an art gallery, a home decorating shop and a dance school. There also is a 25-store home and hearth niche that includes architects, plumbers, art dealers, upholsterers, paint and home décor shops. The strongest stores in this niche are Riccardi Bros. Decorating, Riccardi Paints (which have been around for 75 years) and Sherwin Williams Paints.
According to Walter Riccardi, his paint store’s revenues took a 5% hit the first year Home Depot opened, but they have since more than recovered. The Expo had a similar impact pattern on his decorating store. While his store’s prices are close, Riccardi states that his key to success is that “We serve our customers to death.” Households living within a 7-minute drive of the heart of the Springfield Avenue corridor spend $260,801,200 annually on household furniture and equipment.
There are several apparent reasons why these home and hearth niches have succeeded:
- These niches represent nearby specialized shopping centers for consumers interested in making their homes more attractive or comfortable. They provide a lot of choice and convenience. Attractive restaurants, coffee houses and ice-cream parlors enhance this shopping experience.
- Many of the niche shops that pre-date the Home Depots continue to be strong because of their quality products and especially their high levels of service. They never competed on price — and do not today. Many target time-pressed, affluent shoppers who definitely are not do-it-yourselfers and who place a high priority on such things as design, paint selection systems and installation being parts of the purchase package. Such services are definite keys to success.
- They also had years of experience dealing with strong competitors before the Home Depot arrived. Similar shops in less urban settings may not have similar competitive experiences and are consequently less able to cope with the strong competitive pressures presented by a Home Depot.
- Many niche shops — e,g., the antiques, art, furniture and decorating shops — do not compete head-on with Home Depot. Their goods and services complement Home Depot’s offerings. They help maintain customer traffic for the stores that do compete more directly with Home Depot
- The opening of the Home Depot legitimated Metropolitan Avenue as a retail location, attracting better operators and more investment . It also increased consumer awareness of the strip.
- Consumer expenditures within both market areas for home and hearth goods and services provide ample room for a Home Depot and a lot of independent retailers.