Austin's Yuppies find Target most appealing

Discount Store News, Dec 14, 1987

Austin's Yuppies Find Target Most Appealing

Flush with highly-paid, highly-educated workers from the University of Texas, state government and high-tech concerns such as IBM, Austin has developed a classic Yuppie population.

"You see a lot of BMWs on the streets," said Jerry Olson, co-founder of Johnston, Olson Associates, a demographics consulting firm.

Thanks to employment at the university, in state government and with research and development companies, Austin boasts a service economy relatively insulated from the Oil Patch woes that have hit other Texas cities, particularly Houston.

The state capital is emerging as an R & D, high-tech center for the Southwest, with a predominately whitecollar work force. More than 200 high-tech companies employ an excess of 30,000 persons.

Nonetheless, a glut of empty office buildings, a slump in population growth from 6.7 percent in 1985 to perhaps zero in 1987, the loss of 4,100 construction jobs this year and a continuing decline in retail sales that began last year shows that the state capital suffers somewhat along with the rest of the Texas economy.

Given that upscale work force, Target dominates the Austin discount store market, local economists say, even though K mart operates four stores here, compared to two for Target.

A Wal-Mart store, located 15 miles from Austin in a booming R & D area, and a Sam's Wholesale Club, owned by Wal-Mart, offer additional discounting competition.

A number of catalog showrooms round out the discount picture: two Service Merchandise units, two Edison's, a regional chain, and a Best Products unit.

Of Austin's population of 732,900, about 10 percent are black and 20 percent Hispanic.

"Austin is relatively sophisticated," Smith said. Weighted with scientists and engineers, its work force of 412,600 is better educated than the national average. Of those over age 25, 39 percent have earned college degrees, he said, compared to 25 percent nationally.

Examples of high-scale employment: IBM employs about 14,000 at three facilities in Austin and developed the second generation personal computer here; 3M is building a gigantic electronics facility that will employ 5,000; about 11,000 work at the University of Texas, and about 40,000 work in state government.

Average and median household incomes run 10 percent to 15 percent above the state average. Household income in Austin averages $38,500 a year, up from $37,000 in 1986, the Austin Chamber of Commerce estimates.

The median household income, with half higher and half lower, is $29,700, finds the Scarborough Market Report commissioned by the Austin Statesman-American newspaper.

Of the three chains, Target dominates because it has better looking and bigger stores, along with better selection, said James F. Smith, economist for the Bureau of Business Research at the University of Texas. "A Target is more appealing because it looks like a department store," he said.

"K mart's blue light specials don't attract as well here."

The 1987 Scarborough Market Report shows that 46 percent of Austin adults surveyed shopped at a Target during the previous 90 days. In comparison, 37 percent of adults shopped at a K mart. Wal-Mart shopping patterns weren't included.

Despite the upscale image of Target, its pricing fell in the middle in a market basket survey that DSN conducted. K mart was highest, while Wal-Mart was lowest.

For a market basket of 60 items ranging from power tools to razor blades, the bill at the Austin area Wal-Mart totaled $1,009.92. It was lowest on 35 items, or 58.3 percent, and highest on seven, or 11.7 percent.

At K mart, the bill came to $1,150.25. It was highest on 30 items, or 50 percent, and lowest on 19, or 31.7 percent.

Target fell in between, with a total bill for the 60 items of $1,076. Its prices were lowest on 15 items, or 25 percent, and highest on 29, or 48.3 percent.

"It is pretty fascinating that Target is outpricing K mart," Smith said.

In Austin, the discount store count is low, he said. On the upper scale, Austin lacks any store on a par with Sacks, Nieman Marcus or Blooming-dale's.

Although included in the Austin metro area, Wal-Mart stores in San Marcos and Taylor are 30 and 40 miles out, too far to draw shoppers from Austin, said Angelos Angelou, chief economist for the Austin Chamber of Commerce. Residents of those two towns do, however, commute to jobs in Austin, he said.

Of the three chains, only Wal-Mart has disclosed expansion plans, Angelou said. Wal-Mart is considering a new store site only seven to eight miles outside of Austin, he said, and plans to add another Sam's Wholesale Club.

The timing of any expansion remains uncertain, Angelou said, because Austin's bloom from 1980 to 1985 has lost its blush.

The Austin economy had been growing at the rate of about 14 percent a year, Smith said, but has slowed to about 3 percent.

Population growth has flattened from 6.7 percent in 1985 and probably will hit zero for 1987, predicted Olson, the demographer.

A major home builder went bankrupt earlier this year, Olson said, and the large number of unsold homes on the market shows that the population boom that was driving the Austin economy has ended.