Overview of Research

Most of us assume that if we live in an advanced, developed country (such as the U.S.), and if we have the money to buy the things we need: (a) there will always be stores nearby where we can make our purchases, (b) these stores will offer us a reasonable assortment of brands within which to make our product selection, (c) these brands that are being offered are of good quality, and, (d) we will be offered reasonable prices at which to purchase one or more of these brands.

Now, while these assumptions are true for most of us, some or all of these assumptions are not true for all us. It is especially not true for many in our society who: (a) may live in geographically-distinct clusters of ethnic-minority populations, (b) may live in areas where the average level of education may be below the rest of society, and (c) may live in areas where the average household income may not be at par with the rest of society.

These three symptoms do not of course mean that many (if not most) individuals who live in these areas cannot pay for the goods and services they need. Quite the contrary. Very often, they can. However, also, very often they cannot get the same retailers, who operate in other neighborhoods, to run similar stores in their neighborhoods.

We shall refer to this apparent contradiction, as a market ‘anomaly’ or failure. In other words, if a consumer who lives in one of these areas has the money, but cannot get someone to sell him what he wants, then one must assume that the normal economics of the free market which are at work everywhere else in this country, cannot be presumed to be at work in that consumer’s neighborhood? We refer to this type of situation as ‘Retail Redlining’.

Now, one might ask, what causes Retail Redlining to take place? Well, it appears that there are at least two different sets of forces that might be at work. The first we might refer to loosely as ‘supply-side’ forces. The second we might refer to loosely as ‘demand-side’ forces.

Supply-side forces might be set in motion by a whole host of agents, including Retailers, commercial real-estate Developers, Mall-operators, local governments and zoning bodies, among others. Though they will all deny that they practice ‘Retail Redlining’, when asked to defend their retail-location decisions and practices, they typically will also list a host of reasons for why they do not open stores in certain areas, including, but not limited to: higher crime rates, higher business insurance rates and poorer infrastructure.

Demand-side forces are more ‘passive’ in nature. They unwittingly set the stage for Retail Redliners to act and prevail. These demand-side forces include, but are not limited to: a less-educated population (who may not have access to better sources of information to guide their purchase decisions) and a less well-off population which often leads to them being less mobile (because they typically lack the resources to have their own modes of transportation), which then leads to them being unable to avoid the damaging economic impact of Retail Redliners in their neighborhoods, by shopping elsewhere.

We identify eight different types of Retail Redlining, from looking at alleged cases of this practice, as reported in the popular press. They range from the ‘micro types’ where individuals from the minority population are treated differently compared to those from the majority population (e.g., Type A), to the ‘macro types’ where an entire minority-dominant area is treated differently from the majority-dominant population area (e.g., Type H).

Finally, we show, using a step-by-step procedure, how one might test for and verify whether Retail Redlining is being practiced in an area. As is often the case with a controversial practice like this, there are two strongly-defended sides to this argument: those who say that Retail Redlining is being practiced (typically consumer/activist groups) and those who deny it (typically retailers). By suggesting our procedure, we hope to take the emotion out of this debate and substitute instead a procedure based on logic and statistics, to test whether and to what extent this practice exists.

Significance of Research

First, as with any phenomenon that one is interested in studying, we first have to describe it clearly enough, so that others who are interested in it can easily identify it themselves. We think we have clearly defined this practice and cited several examples of it.

Second, as mentioned earlier, we think we have clearly distinguished between different variations of this practice, so that each of them can in turn be identified and studied in detail, before remedies can be suggested for each of them.

Third, again, as mentioned earlier, we think we have suggested a clear step-by-step procedure whereby Market Researchers, Retailers, Law firms, Legislators, Market Regulators (e.g., FTC) and Courts of law, among other interested parties, can test for and verify whether Retail Redlining is being practiced in an area.

Implications for Consumers

The most obvious implication of our paper is for consumers, who live in areas with high concentrations of ethnic-minorities and who allege that they are the victims of Retail Redlining. These consumers might finally be able to verify their allegations and if proven right, they might be able push for change through either legislative &/or judicial action.

Reference

Denver D’Rozario and Jerome Williams (2005), “Retail Redlining: Definition, Theory, Typology, and Measurement”, Journal of Macromarketing, Special Issue on Vulnerable Consumers, Volume 25, Number 2, December, pp. 175-186.