September 4, 2009 at 10:07 am

Daniel Howes

Meijer sees a chance to prosper in Detroit

What does it say about Detroit that a western Michigan retailer is poised to invest in the city so many are giving up for dead?

Maybe that Detroit ain't quite dead yet.

Meijer Inc., the Walker-based retailer with 190 stores in five states, is midway through an intensive assessment to determine whether it will green-light plans to build a 190,000 square-foot superstore at Eight Mile and Woodward. To hear President Mark Murray tell it -- or at least to read between the lines -- a Meijer for Detroit is all but a go.

"I'm hopeful and optimistic," he says. "We know we're in a downturn in Michigan, but we have been in business for 75 years and fully expect to be in business for several generations. We're bullish on the (Detroit) site and we certainly see good signs in the city."

Really? Detroit Public Schools are in freefall. Mayor Dave Bing is grappling with unions and a City Council mostly in denial. The unemployment rate is running near Depression-era levels. And the boom that made Detroit the region's housing-start leader for much of the past decade (6,176 permits since 2000) has stopped.

"Nothing is ever fully linear. I can remember back in the 1980s when there were no housing starts," says Murray, former state treasurer and budget director under Gov. John Engler. "We wouldn't be taking a look at this investment if we didn't think it was a good site. We put 'em in to make money."

How much is unclear, because Meijer is privately held. But the superstore chain, with outlets in Michigan, Ohio, Indiana, Illinois and Kentucky, closed last year with revenues of $13 billion. This year and next, it plans to open four more stores, with the Detroit location expected to open sometime in 2011.

Retailers don't deliver growth like that by being stupid, slow to move or captive to half-truths, cynicism and conventional wisdom. They aim to be a half-step ahead of the competition, to do their homework, to be well-positioned when conditions improve, to serve markets that have been there all along.

"We have numbers that show $1.7 billion is spent by Detroiters outside Detroit for retail," says George Jackson, president of the quasi-public Detroit Economic Growth Corp. "That's a powerful number. Building something in the city ... gives a store like Meijer a competitive advantage.

"It's not like Detroit doesn't have buying power," he continues, referring to the success of a Home Depot outlet at Seven Mile and Meyers. "There is a market here. Meijer will benefit greatly from this move."

You'd expect such enthusiasm from Jackson because it's his job to sell the city. Murray? Less so, because his job is to deploy Meijer's capital wisely and not blow it on do-good urban renewal projects that sully the brand and erode the bottom line.

Yet they're in the same place on Detroit: An underserved market, troubled as it is by failing schools, failing government and high unemployment, is waiting to be served closer to home -- and not just here.

Even as Meijer continues to hone its plans for Detroit, the retailer is moving ahead with plans to open a new store in the near-western Chicago suburb of Niles. It's smaller. Some product lines are "edited," as Murray says. And it represents an emerging retail trend that recognizes legitimate urban demand.

Among Meijer's operating assumption (apparently shared by rival Wal-Mart Stores Inc.'s "urban strategy") is that higher fuel prices and generational migration to more densely populated areas will revitalize urban areas abandoned by developers a generation ago. Revenue and, perhaps, loyalty will accrue to those who arrive first.

Murray sees a different Detroit than a decade ago. New housing units. New casinos and newly built hotels. Two new stadiums. Corporate moves that are hanging on. New leadership at the schools and at City Hall finally -- my word -- doing the right and the tough things.

And there's getting a piece of that cool $1.7 billion. ...

dchowes@detnews.com">dchowes@detnews.com (313) 222-2106 Daniel Howes' column runs Tuesdays, Thursdays and Fridays. Catch him Fridays with Paul W. Smith on 760-WJR.