Nordstrom Inc. has a 590,000 square foot distribution center in southwest Cedar Rapids where it fulfills online orders and ships them out across the country.
The Direct Contact and Fulfillment Center employs 1,500 people, a number that has doubled in size since 2008.
But despite its massive presence in the Corridor, if Eastern Iowans wanted to shop at a physical, bricks-and-mortar Nordstrom location rather than buy something online, they’d have to do so outside the state.
“We are in a unique situation since we operate our largest store out of Cedar Rapids,” said Colin Johnson, a spokesman for Nordstrom in Seattle. Johnson said it was hard to pinpoint one specific thing as to why the retailer was not in Iowa or the Cedar Rapids area.
"We don't know if a full-line store would pencil out,” he said.
“A lot comes down to market concentration,” Iowa State University retail specialist Ron Prescott said. “There’s 3 million people spread across the state, some in rural areas.”
Retailers seeking to break into the Iowa market may be more likely to choose the Des Moines metropolitan area over Eastern Iowa based on population, he added. More than 500,000 people make up the Des Moines metro area compared with the about 350,000 people who live in Linn and Johnson counties, according to an Iowa State University retail analysis that includes Census Bureau figures.
“There’s already a strong concentration of other businesses and a strong retail base” in Des Moines, Prescott said, adding that it can make it harder for other areas to compete.
Dan Butler, vice president of retail operations at the National Retail Federation, an industry trade group in Washington D.C., said population isn’t the only thing retailers are interested in when looking for a new market. They also take potential growth into account as they map out their store growth strategies up to seven years in advance.
Nordstrom, for example, has the cities and locations chosen for 29 new stores that will open by 2018, and Trader Joe’s plans to open another 13 stores over the next several years, according to each company’s website.
“They know the demographics of where they’ll do well, and they look at the potential for growth there already or will be happening there in the near future,” Butler said.
The cost of doing business
Different cities and municipalities also can court retailers at industry trade shows. And just as with other companies planning to expand, the cost of doing business as well as state and local incentives are factored into a retailers’ decision of where to open a location, he noted.
“All of that comes into play when a retailer decides where to expand,” he said.
Another big priority: Income. Iowa State’s Prescott said retailers look at the median wage of a given area to see if the market could support the store.
“Marginal salaries certainly don’t help,” he said.
But the high-tech jobs that come along when tech companies such as Facebook and Google invest in the state could spur some new retail options, he added.
A denser population coupled with the second highest average sales per capita in the state helps make West Des Moines a prime location for new retail. Per capita sales represent the average dollar amount an individual has spent on taxable goods for any given year.
This could explain why upscale grocers Whole Foods and Trader Joe’s have both found their home in Central Iowa rather than in the Corridor — even with the success of New Pioneer Food Co-op suggesting there’s a strong market and need.
Trader Joe’s opened its first Iowa location in 2010 and Whole Foods in 2012.
The right mix
“Iowa very warmly received us,” said Keith Stewart, a Whole Foods regional spokesman based in Chicago.
The company has said publicly that it believes it can sustain 1,000 stores in the United States and plans to expand. But Stewart said the natural foods giant has no immediate plans to make its way to the Corridor.
“It takes the right mix of desire … and the right real estate,” he said. “We have a constant ear to the ground for new locations.”
Whole Foods has a pretty specific formula it requires before it comes to town, requiring 200,000 people or more in a 20-minute drive time, a store of 25,000 to 50,000 square feet, a large number of college-educated residents, plenty of parking and a location in a high traffic area.
But when the upscale grocer does comes to an area, it signals to others that the location is a safe bet. And often, more development quickly follows – something that some homeowners, developers and brokers have dubbed the Whole Foods Effect.“We do know that we have a halo effect when we come to a trade area,” Stewart said. “We can benefit a community because other natural food stores will start to pop up.”