Market study: Nashville - discount retailing in Nashville

Discount Store News, May 9, 1988

MARKET STUDY: NASHVILLE Discounters Carry the Tune in Stable Nashville

NASHVILLE, Tenn.--Country music may get the press, but the name of the tune in Nashville is retailing, particularly in the discount arena. While the market is, as a whole, slightly understored, the discount market is a hotbed--and getting hotter.

With a little under a million metro residents, Nashville is at best a mid-sized market. However, it has a strong and stable economy which is growing slowly but steadily, providing a predictable and profitable customer base for area retailers.

"Some people have said that Nashville is a boom town," said Don Belcher, Nashville Area Chamber of Commerce research director. "That's not really true. We have a strong, varied economy, but it's not growing above the national average."

The city has added an average of about a million square feet of retail space per year over the last three years, but Belcher noted that, given the population growth of the same period, per capita square footage increases are under the national rate. "We may not be understored, but we're certainly not overstored," Belcher said. Few markets in the United States can make that claim.

Nevertheless, for discounters, Nashville has become an intensely competitive market. The main players are K mart, Wal-Mart, Target, Hills, Stein Mart, Service Merchandise, Sam's Wholesale Club and Zayre; each has at least two stores in the market. Most of the stores are situated on one of two sites, Gallatin Road and Nolensville Road, where discounters are virtually stacked up.

"This is a very concentrated, very competitive market," said Terry Assad, regional manager of Hills Department Stores, which has five units in the area. "We have a large number of top quality retailers here competing for a relatively small market."

A spokesman for Sam's Wholesale Club, which has two locations in Nashville, concurred. "It's a growing area and business is good, but this is a very competitive market," he said. The two clubs employ two full-time outside salespeople to recruit new small business members as one method of competing in the market.

Evidently, Nashville has welcomed the warehouse club concept. The first Sam's opened several years ago, with the latest, at Harding Place, opening last year. According to the spokesman, Nashville is a bit understored. "I've seen smaller towns with a lot more stores," he said, adding that the market is particularly light in department and specialty stores. "When Dillard's came to town last fall, it filled a void," he said.

A key to Nashville's strength as a market is the diversity of its economy. "We have tourists year round," the Sam's representative said, "but it's not primarily a country music town. There's a large printing industry, river trade, several colleges, and a wide variety of small businesses. The population is evenly mixed--there's no real `bad' part of town and most people are fairly affluent."

The Chamber of Commerce's Belcher added that the diversified economy protects Nashville in recessionary times. "We're not dependent on any one industry," he said. "In a recession, we go a little flat, but our economy doesn't go down, like in Houston and Dallas when the oil industry went bust."

Belcher expects the moderate growth of the last decade to continue. "We have five or six major malls announced, although only two or three of them will be built, and even they may be a long time coming."

But, further discount and department store activity may also be a long time coming. "It's very hard for them to get three good locations, which most need to make advertising cost-effective," Belcher said. "It's like trying to do a jigsaw puzzle; there's not enough room in existing locations and not enough new construction underway."

Despite a temperate climate and the deep Southern accents of its inhabitants, Nashville is much more a Midwestern than a Southern city.

"We're a lot more like Columbus, Ohio, or Indianapolis than we are like Memphis or Atlanta," Belcher noted. That tradition can be traced back to the Civil War, when Nashville, caught between agricultural, Confederate western Tennessee and industrial, Union eastern Tennessee, essentially stayed neutral.

Historically, Nashville was a rowdy river town, and the Cumberland River still plays a large part in the city's economy. A gradual inner-city rehabilitation has nearly eliminated slums and has established a thriving nightlife in the former warehouses flanking the river downtown.

To visitors, Nashville is Opryland, the home of the world-famous Grand Ole Opry. The complex includes the Opry's new home, a showpark, theaters and the General Jackson riverboat, as well as the Opryland Hotel.

Although the city's seven million annual tourists are primarily drawn by the country music industry, that industry only employs about 5,000 people. However, it has a very high profile in the metro area, and visitors to Opryland Hotel may well leave town with the impression that everyone in Nashville wears 10-gallon hats and lizardskin cowboy boots.