What does your local grocery store say about your neighborhood?
It may seem pretty straightforward: Whole Foods stores tend to be located in pricier, more affluent areas, while discount stores like Dollar General are found in communities with less wealth. But a recent analysis shows that store openings have a lot to do with how grocery chains expect neighborhood demographics — and home prices — to develop.
The report comes from Aziz Sunderji, who worked in investment banking for many years before launching a newsletter called Home Economics. For the analysis, he matched more than 32,000 store openings over nearly 50 years alongside home price data, and added Census demographics.
Sunderji found that home prices in ZIP codes where a Trader Joe’s opened not only grew, but grew at a 6% faster rate than the national average over the following three years. But in ZIP codes where a Walmart opened, home prices lagged the national average by 4%.
Rich Get Richer, Poor Get Poorer?
“I think the people who are scouting locations for Trader Joe’s and Walmart are looking to locate in neighborhoods that are changing in a direction that’s going to be helpful for them,” Sunderji told USA TODAY.
Trader Joe’s, for example, may opt for “pretty well-educated, relatively higher-income people, (although) not necessarily in the most expensive neighborhoods,” he said.
Residents of neighborhoods where a Trader Joe’s store opens are likely to be college-educated: 52% hold a bachelor’s degree, tied with Whole Foods for the highest rate of any chain and well above the national average, Sunderji noted in his analysis. The median household income in those neighborhoods is $82,000 — also the highest of any chain — and median home values are $425,000 before the store arrives.
In contrast, Walmart’s clientele is “a little bit lower-income and probably in places where home prices are going up less quickly. They live in slightly more economically stagnant places,” he said.
The typical Walmart store opens in neighborhoods with a median household income of $49,000, where 23% of adults hold a college degree, and home values sit at $144,000, one-third of what homes cost in Trader Joe’s ZIP codes.
The divergence in fortunes between the “Walmart neighborhoods” and “Trader Joe’s neighborhoods” tells a bigger story, Sunderji thinks. “It’s almost like the grocery store story is like a bit of a window on a broader thing happening in America about affordability and inequality,” he said. Those retailers tap into an unfortunate reality about the American economy in recent years: Those on the upper end of the income and wealth divide are doing better, while the fortunes of those on the lower end aren’t faring as well.
As Sunderji wrote in his report, “The K-shaped economy runs through the grocery aisle.”
This article originally appeared on USA TODAY: Your local grocery store reveals a lot about you and your home price
Reporting by Andrea Riquier, USA TODAY / USA TODAY
USA TODAY Network via Reuters Connect