Episode 2 Transcription Release

Episode Transcription: Ep2 Rapid Rise Retail: Unbelievable Growth

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Show me some money. A podcast about how many is made in Florida retail. I'm your host, Britta Eriksson.

Welcome back. This episode, we're going to talk about growth and how Florida has a lot of growth. It's been steadily growing over many years and we're now the third most populous state in the entire country. And because growth is happening at such an impressive rate in Florida, we ran out of room in the communities that are currently growing, and we have to find new communities to meet that demand of people who want to move here.

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So there's constantly new communities that are popping up that did not have growth and all of a sudden are starting to experience growth at a very high level. So it gets hard to predict when that growth is happening, where it's going to happen, how many homes are going to be coming online and realized in the market versus just conceived.

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And all those things affect who needs retail and how to meet that demand at the right time. And we're going to talk about how that all affects Florida retail.

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I really have been overwhelmed with the support that we've been receiving for this podcast. Thank you for everyone who's reached out and who's helped us spread the word. People keep asking me what they can do to help. And the number one thing that you can do from my podcast or anyone else's podcast is download the episode. So I know you listen, but if you click the download button, that helps us even more.

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Okay. Some ground rules, some standard disclaimers. I'm not giving you specific advice for your business, but I'm just trying to share some of my experiences from working in the industry for over 20 years and primarily just start a conversation, ask some questions, think about things in a different way, and open different mindsets.

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So we're starting the conversation with my specific experiences, and I want to expand that to talking to others in the industry to share their perspectives as well. So let's get started with our second episode and we're talking about all about growth. There's only a couple states that are at that 20 million mark around or above. We got California, we got Texas, we got Florida, which is third, and we have New York.

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Everything else is just significantly lower, sort of 13, 12 million. There's a couple in there. And then everything else is sort of 8 million. And under. So there are a lot of people who live in Florida. When we talk about these four states, Right, the big four, as I talk about them, that represents about a third of our population in the entire country live in these four states.

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Florida has a huge population. There are a lot of people who live here full time. We've already talked about there's even more people in our last episode who come here on vacation and who may only live here part time. But we have a really large full time population, and that's continuing to grow at very impressive rates. But that wasn't always the case.

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People did not want to live in Florida for a long time. We didn't have a large concentration of population. So let's talk a little bit about the timeline. When we look back 100 years ago, Florida only had less than 1 million people here. And to put that in context, we were the 32nd most populous state. So if you put all the states in order from 1 to 50, we were 32nd.

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Not very high on the list today were third. So we've moved up that list quite a bit. And more and more people have wanted to live here. And that growth has occurred really in this past 50 years. So from 1970 is when we really see that growth happen and there's reasons why and we'll get into that in a second.

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But let's talk a little bit about the horizon. So growth in Florida has been very consistent for the past 50 years and for the past 50 years from the 1970 census to the 2020 census, we are absorbing about 3 million people every decade into our state. To put that in perspective, 3 million people is roughly the size of the Tampa MSA.

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So the size of Hillsborough, Pinellas County, and I believe also Pasco and Hernando Counties. So a pretty massive area, right over 3 million people. So 3 million people are coming down and moving into the state every ten years. Let's say this in a different way. Let's say that the amount of people that moved to Florida every ten years is comparable to the entire population of Mississippi.

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It's like the entire state has moved to Florida, and that happens every ten years, consistently for the past 50 years, or Nevada or the size of Utah or Kansas. It's that many people. So more than a third of our states in our country has a lower population in total, the total amount of people who live there than what moves to Florida every ten years consistently for the past five decades.

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And because growth is happening at such an impressive rate in so much of our state, it is really important to stay on top of that, to understand how it affects retail. So now we've gone from being the 32nd most populous state in 1920s, to currently being the third most populous state. We have an estimated at 22.6 million full time residents, doesnt include our seasonal population, doesnt include that massive tourism that we talked about last episode.

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We just surpassed New York and moved up from fourth to third. And that all really occurred in this concentrated time of the past 50 years. So why doesn't growth take off until the 1970s? Well, it does. It starts its acceleration mid-century. So like around 1950s. But why is it until then? I mean, heck, we have the oldest colonized city in the entire country.

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1565, I believe Saint Augustine was founded. So why does it take so long for people to really start moving down here and building large populations in Florida? Well, there's a few reasons for this. So you have to think back to when we did not have modern conveniences. And in the middle of a century is when it starts to get a little bit more comfortable to live in Florida.

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Prior to this, it's not the most hospitable area. So while its paradise. The bad sort of outweighs the good for a lot of people. And it's very hot. There are a lot of bugs and they carry diseases and it's sort of out of the way. It's not the easiest state to access. Were all the way down at the far south and we sort of just stick out in it.

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It takes a little bit to get here. We don't have modern roads, so all those things start to change in the mid-century. So one, we get effective chemical mosquito control and we can control the bugs. There was just a yellow fever outbreak. A lot of people had died and we just didn't have effective mosquito control. So now they do and that starts to improve.

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People don't have to worry about the diseases being carried by mosquitoes as much. Second, AC has been invented, but it's very expensive until mid-century. So at that point in time, AC becomes affordable and more and more people can afford to have AC and have a little bit of a break from that intense heat that we have here. So the window unit gets invented.

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More and more people have access to air conditioning, and now more and more people may be willing to live here. I mean, could you imagine living here without air conditioning? I could not. I probably would not. So until that mid 1950s timeframe, you know, the common person doesn't have access to air conditioning. So that all changes. And then one of the other big things that happens is the Interstate act is signed.

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And because we are so far, we are all the way down at the south, we have railroads, but it's still very hard to get here. And so what happens is the Interstate act signed, we get I-10, I-4, I-95 and I-75, and all of a sudden you have these modern roads that get people down here with ease. So that really starts to encourage development along these corridors.

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So that all starts coming about late fifties through the sixties. But as we talked about, tourism is very important to telling people how great we are in getting people to live down here full time. So tourism really starts to take off. In the seventies. So we now have the interstates, we now start getting timeshares and condominium development. We also get our modern airports primarily get developed in that seventies timeframe and eighties timeframe, and that's when you see growth just take off.

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At that point in time, Disney gets develop more and more people start coming down here and vacationing and that's when you see those numbers shoot up and that's when we start experiencing roughly that 3 million people every ten years being absorbed into our state. So all those things come into play and now we're on this path of 3 million every ten years, five times in a row.

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And Florida really captures that need and that demand that people want to move here and they incorporate into our Constitution in 1968, the state will not levy state income tax, inheritance tax or estate tax, which is a huge motivator for people to come and move here.

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So take a moment and just think about how recent the growth is that's around you. Think about the roadways and the new communities and areas that had no development. And now you drive down and there's development after development after development. Think about how short of a time span that that has been created in. So if you've lived here 30 years ago, you see a lot of changes in the market, but it doesn't need to be that long.

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It can even be ten years ago. And you can really feel these transitions in these markets, brand new communities that barely existed before are now fully populated. It's really interesting to see the massive growth and how it gets developed in Florida, how I like to look at growth and think about growth is sort of that width of the growth.

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And so in most communities you can sort of measure the progression of growth by looking at the shoreline where the most desirable portion of a community typically is located, because people want to be on the water, they want to be on the beach. And that's typically what first gets developed and then sort of how wide that gets. So for a long time, a lot of the development was concentrated in most communities in Florida from the shoreline to the interstate.

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And then as development has kept coming and growth has kept happening, you see these communities get wider and wider and wider, passing the interstate and going much farther beyond. So I first moved here, I moved to Collier County, and Collier County was limited to that west of the interstate primarily. There were some homes out east, but most development in the community was from Interstate 75 to the Gulf of Mexico, and that area was a concentrated area of about five miles.

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So it's only about five miles wide. And then it really was Livingston Road, so like four miles. So over the years, you can see that development continuing to expand further east and further away from the water. So as we get there, we now are looking at communities, large scale development happening 20, 25 miles away from the shoreline. Take a moment and think about the community that you may live in or operate in and think about when that community jumped the interstate.

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Think of the large scale communities that were up here at the beginning of the 2000s. We're talking Oakleaf, Nocatee Lake Nona, Hamlin, Champion s Gate, Angeline, Bobcat Ranch , Ava Maria, Trinity and Starkey Ranch and the list goes All these neighborhoods of thousands and thousands of homes did not exist in the very recent past. All that retail that's been built to support them, probably many of the areas you may be looking in was not there.

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They were roads with no development, farmland, very little population in these communities. Think about the new communities that are under development right now near you and the thousands of homes that will be coming to the areas and how the new retail demands will be created in those areas. High growth markets undeniably have a lot of opportunity, but they also have a lot of risks in understanding those markets.

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There's a lot of problems with it. The data gets a little off. It doesn't necessarily keep up with the growth that's happening in the market. It also maybe shows us a potential that isn't realized for a very long time, and we may plan for that end potential when in reality we're not quite there yet. And that may cost us money in the meantime.

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In addition to that, these markets can be very vulnerable to things outside of our control, economic conditions that disrupt that timeline, that disrupt when customers are living in these homes and actually shopping in your stores. So it's not just about analyzing our entry into a market and understanding the right time to enter, which can be very difficult. It's also about keeping a pulse on that information and adjusting our business and our inventory and how we are meeting the needs of the customers who are currently there at that moment in time.

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All of those pieces are changing so rapidly and it's really important that you don't spoil your inventory and lose out on sales because you maybe don't know the customers are there or you think more customers are there than they are. You can't just open your doors and expect the same market day after day, year after year. It is constantly evolving.

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Additional people are constantly moving in and so is competition. I think something that's very easy to forget about in a high growth market is a lot of other retailers also want to be there and so it can be competitive to get into the best location. And you may also forget about that. There may be no one serving that market today, but what that future looks like, how many other people are going to be dividing up that pie and sharing the existing sales from that community and you can't control what they do.

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You have to sort of analyze how to best position yourself both from a location standpoint and a timing standpoint. There may not be as many barriers to locate to a market where other barriers may be more clearly defined in an existing market where there's only certain locations to go, maybe not a lot of land to be developed. There's only so much opportunity and so much additional competition that can enter. This market

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the competition would be constantly changing. New developments may be happening at all different corners that you may not expect. You may think that you're the only coffee shop that's entering the community. And then three national chains open next to you. So in a growing new community, there's a lot of things changing besides new people coming there. There's also new competition.

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So, you know, you can only keep a pulse on it and you can't prevent that and you can't stop that. And that's just sort of a natural risk in a high growth market. But it's important to keep tabs on it, to understand who's coming into the market, where when people are coming into the market. There is so much information that is online that can really help you monitor how your markets are changing and growing.

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So you know how you can adjust your business and you can plan ahead to differentiate yourself from new competition who comes in the market. So in most communities and a lot of cities and municipalities, especially in Florida, because we have very good online platforms that the municipalities provide us. A lot of times we can look at the growth that's happening.

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We can see who's applying for a permit, who's applying for a new development, how growth is changing in those communities. So I always encourage retailers to keep tabs on that information. It's accessible in most communities and it really can make a difference so that you can plan ahead instead of react once your sales decline after a new competitor enters the market, you really want to be on the front end and ahead of the curve versus being reactive to that situation.

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We can all lament Florida is a little different. It doesn't behave by the norms that the rest of the country may be behaving by. Heck, we literally have more people dying here on an annual basis than are being born. So we have a negative birth rate and we still have excessive growth, just crazy amounts of growth. Some of the highest growth in the entire country is happening here.

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But yet we have more people dying than being born in our state. That's a little different. We have a lot of people who have homes here and they don't live in them full time that they maybe only live here part time or have a vacation home. That mass of how that happens throughout our state is a little different.

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The amount of growth and how much of it is occurring in areas that had very limited growth before more rural communities and all of a sudden large scale mass of communities are developed, thousands of homes, complete new towns come online. That's a little different. So when we look at growth methodology that is, you know, very strong throughout the rest of the country and we look at it and we're basing it on building permits or basing it on where someone's reporting income to the IRS and all these other factors.

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We miss out on some things that are important to us in Florida retail. And what I found is that population growth is not synonymous with available customers. So this is my experience, and I may completely differ from your experience, but when I started in retail, I started in Florida and I was tasked with understanding these high growth markets and really expanding different stores and looking at different methodologies and looking at different data to determine accurate sales projections.

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And when you first started looking at that information, we started noticing this offset from population to customers. And when we tried to project sales and we apply it to the estimated population, those numbers weren't really jiving. They weren't translating to accurate projections. So we started to have to look at the markets a little bit different, really understand how many customers were available when they were there, how long they were there during the year, and come up with really viable sales projections based on that.

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And I really was able to bring this margin of error down to a very low level. We got to a point where we were sub 2% on sales projections, which is amazing in any market, especially one that's very dynamic in high growth. And we noticed when we were in the middle of the decade, we had a lot of variation in those numbers.

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The different data sources that we were using to project how many customers were in a market was not the same as what these population estimates were showing us. They were pretty far off. But then once we got back to the next census, in the next full accounting of how many people are there, then those numbers sort of caught up and were very close to one another.

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We really have a hard time using growth projections to be synonymous with customers and having that equate to accurate sales projections. And this could lead to really underestimating the market potential. But that's not the only risk with high growth markets we see people underestimate. But we also see them overestimate the markets. We see people rely on this built out version of that market well before it's ever realized, well before it's ever real.

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Retailers can get very enamored by the promise of growth, this phantom growth that exists, vacant plots of land with no people there yet, but this idea that there's going to be this whole new market created out of nothing, that thousands of homes are coming to an area that once had very limited residential, it's hard to not get excited about that concept, especially when you see these large scale communities all on a map that comes to you in a marketing package.

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And you see these numbers of two thousand, and four thousand, and five thousand, and ten thousand homes, you want to be a part of that. You want to get in on the ground floor and be in that market. But this way of thinking has its own problems. This mindset creates a vision that just doesn't exist. It truly is phantom growth at this point. It's very important to not get swept away with what the future may hold, and you want to be a part of that.

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You want to calculate toward that number, but you have to apply timing to these homes. When at what point are you going to have a minimum viable market? We think about minimum viable products all the time. We talk about it in our companies and we see, you know, what is the minimum viable product that I can bring to market that early adopters will purchase and I will make money.

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And that's the same mindset that we think about in high growth markets. With the real estate, we're looking for a minimum viable market. What are the early adopters who are going to come and live in that community? Who is going to come and buy a home there before? There's nothing really in the neighborhood yet? When do we start having enough of those people there to make enough sales to be profitable?

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It gets really easy to be enamored by just how many households are planned for an area, and it's very easy to overlook that there is a timeframe and a horizon of how those households have to be built and absorbed and have people actually living in them who are actually customers for your business. You have to understand at what point you have a minimum viable market base.

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When are the minimum amount people going to be in that neighborhood to support your store? Yes. Or maybe 50,000 homes coming at some point in time. But those are just vacant plots of land right now. It's really hard to make any money from a vacant plot of land. You need customers in a home who then they're shopping habits, would support a store there.

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Another thing that people don't think about is the time of day. A lot of new communities in high growth markets. People don't necessarily stay there during the day. The employment comes later and until that time people are working in other communities typically and they're not staying in the local community and spending money during the daytime. They're going during the workweek to wherever they're working, whether it be in a downtown metro area or just another suburban area that has more established businesses.

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And then they are going there and commuting. They're spending their money there and not spending as much money in their home community. And that really changes that minimum viable market. And you have to take this extra time to sort of calculate, well, if people aren't here during the daytime, Monday through Friday, how am I going to make it?

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What kind of population, what kind of sales can I derive during the times that people are actually in the market? And so that's something to think about too, and that's something that I feel that a lot of people overlook. You can feel like you're out of control. There is so much that's out of your control in a high growth market.

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It's a little bit of a dice roll. You try to pick the best location at the right time and still, if you do everything right, the market could turn, the homes could not get built. Other people can come in, take some of your business because there's so much sort of when you start. You just may make a wrong prediction.

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And so what I recommend in high growth markets, because there's a lot of advantages to being in them, I really recommend trying to monitor, trying to stay on top of those changes and be more proactive versus reactive and do what you can, plan your business the way you can if you're going to have some downturn or you're not going to have as many people as you thought in a certain time, adjust your inventory and just how much frozen yogurt you have.

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So it doesn't spoil in your fridge. So you have to sort of monitor those different components and then you have to understand what the catalysts in the market are and what starts to change that. And it's all about getting to a minimum viable market so that you're operating a business that's profitable and that you're also planning as much as you can for if you are going to lose money for a couple of years until that market picks up, what you can't sustain what's tolerable.

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So you have to hit the timing right And you have to understand, well, maybe I'm going to take a hit and I want to get into the community first and so I'm going to get that best corner and I'm going to go in there five years early or I'm going to go there even ten years early as we see some of the top retailers do.

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But we're going to get those corners. We're going to get the best locations or we're going to get into the Publix center and the whole center. There's only like 20,000 square feet of shops. And if I don't get my nail salon in there now, I'm never going to get the space. I'm never going to get a shot. But it's understanding that the growth may not be coming when you think it is and is to take a step further, to really get immersed in your community and understand who's in the homes when they're coming there, when they're going to spend money in your store or your location, and how to plan for that, how to make

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better retail decisions in your communities. But understand there is a gamble with that. And so try to predict what that minimum viable market is at what time it comes. I feel that most people I talked to are not looking at that in between, are not trying to apply a time frame to it. I'm just encouraging you to look at additional resources and if you're open in a high growth market, just really to use the resources that are available to you, seek out people at your city, at your county that you operate in.

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Your economic development councils talk with them, try to get a handle on what is happening in your market because it's going to continue to change. And if you aren't aware of what's happening, you're not going to be able to really maximize your profit from those changes. Try to not rely on what's projected in the sometime future or try to understand that timeline of absorption of what's actually being built, what's actually happening in the community.

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Growth is not instant and growth cannot be fully relied on as economic changes happen in our macro economies. It may stop development in the area. So areas that maybe have proposed homes of 50,000 or 20,000 or whatever the number may be, that may take a longer time to get built. South Hillsborough County was a great example of that.

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A lot of that development was occurring at the beginning of the 2000s, really pushed forward up through the financial crisis and then a lot of those proposed homes and proposed communities just stopped and then they did get built. But it took many more years for those homes to actually have people living in them and being meaningful to the retailers and the restaurants and the other services in those communities where those people were actually there to spend money in them.

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So what are the numbers telling us right now? What are our current trends? We look at the numbers. We are seeing a lot of growth, more growth than we have for the past 50 years. So that 3 million number that we talk about every ten years. We're trending higher than that. So right now we're talking about full time residents.

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We also have a lot of part time, but we're talking about the growth of the full time population. So what are our trends telling us about that? Well, one thing to think about just holistically, we have a heck of a lot of people retiring right now. The baby boomers are in the retirement age and we've got another decade of baby boomers retiring.

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Florida is a very desirable from a retirement standpoint. And a lot of people choose to move to Florida for retirement. So because we have such a large segment of the population retiring at the same time, that is going to fuel our population growth. I feel for about the next ten years. So if we look at the census numbers and we look at the numbers that they are projecting for each year and growth, which we've already talked about, can be understated because of some of the unique factors in the Florida market.

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If we look at that based on these current trends, we would be projected to be about 3.4 million more people by the time we get to the next census. So at 2030 we'd be up to almost 25 million people, up from the 21.5 that was counted in 2020. And that is a higher growth than we've been experiencing. We are projected to be at a higher rate than we have been for the past 50 years.

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We've already talked about for the past fifty years we've been at extraordinary numbers and right now we're training to be even higher than that. And so it's going to be very interesting to see how everything plays out and how the 2030 census comes to be. So a lot can happen, though, in the next six years. There could be economic disruption and different events that cause that number to change and that trend to change.

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But if we keep with the current trend that we've been experiencing, we'll be arriving right at about that 25 million mark. That could also be a little light from different factors in Florida. So I'm very curious about what these numbers are going to be and how they're going to shape up, especially with everything that recently happened with COVID and how a lot more people move down here.

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Honestly, COVID has been a little bit crazy, and the movement and transition that happened during COVID, I think introduces even more volatility and maybe differentials than we currently experience with these numbers. And COVID was happening right at the same time the census was being taken. So we're accounting for all the population of where everyone is in the entire country.

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And during that time, everyone is moving around and a lot of people are moving to Florida. They may be quite weren't where they are now at the time that the census was taken. So again, in 2020, we're taking the census covid's happening. People are choosing a lot of different reasons to move to Florida. One, a younger generation can work from home and live here, right?

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They have more flexibility than they ever have. They will have to wait until they retire and they maybe are moving down here to work from home from Florida. We saw that happening. Second a lot of people had already had a second residence down here. They were seasonal residents. They would come down here and live part time and they're like, you know what?

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We want to be in Florida full time right now. We want to transition from a seasonal resident to a full time resident, and we're just going to move down there permanently. And during COVID, a lot of people chose to also retire early. They didn't want to, you know, be exposed in their workplace to COVID. And they said, hey, you know what?

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We're going to take that early retirement and we're going to leave our job. So we also saw a push of people who retired early and moved down here. So all these things were happening. Florida was just desirable to a lot of people during COVID for their their personal needs on top of those things. And so we had a lot of movement and you can feel it right, Like you can feel the amount of people that are here.

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So there's again, more vacation people, more seasonal residents. But then all these pushes for full time resident increases as well. And so I'm really interested to see the 2030 census because I expect that those numbers are going to be even higher. I think we're going to have a little bit more of a catch up effect that we talked about between those customer numbers and the growth projections.

00;31;14;01 - 00;31;38;03

And I think we're going to be above 25 million. And it's we have to see if that continues, if the economics and the environment allows for that growth to sustain through 2030. Growth is part of our landscape. Growth is constant in Florida. New communities are popping up every day. Existing communities are growing as fast as they can because people want to be here.

00;31;38;10 - 00;31;58;17

So take a moment and think about how you can reach those growing populations. And maybe there existing in your community. Maybe they're on the outskirts of your community. Maybe you're thinking about opening a store in those high growth new areas. How are you going to reach these new residents? How are you going to analyze when they're coming in to the market?

00;31;58;17 - 00;32;25;20

So you can plan your inventory, you can plan your marketing to them. How are you planning your second store? Maybe you're currently reaching some of that community that's a little bit farther away in an existing location, and maybe you're going to open a second store in the center of where that new growth is. Try to understand the timeline of growth, trying to understand the absorption of when that growth is actually realized and not just stated as 2000 homes or 20,000 homes coming to an area.

00;32;25;20 - 00;32;50;10

Really bad sales come from vacant plots of land. And until there's warm bodies in there and until that community is economically stable with new homes and new residents in the community, it makes it really hard to make your sales. So it's all about understanding growth in a multidimensional way so that you can make the best of Florida retail sales.

00;32;50;12 - 00;33;10;07

Remember to download the episode, share our show on social media, and also leave us a comment. Tell us what you like about the show. This is your host, Britta Eriksson and we look forward to seeing you next month here at Show Me Some Money. Show Me Some Money, a podcast about how money is made in Florida. Retail.

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