by Kenneth E. Stone
Extension economist
Iowa State University Extension to Communities
Iowa State University Extension has conducted many consumer surveys over the last several years. "What type of new business would you like to see in your town?" is one of the questions asked. Some of the typical responses are, "Our town needs a children's wear store," coming from a resident of a town of 3,000 population. From towns of 2,000 population we have heard, "Our town needs a men's wear store." From towns of 5,000 population we have heard, "We need a major department store."
The people making these responses are very sincere in their beliefs that their towns need the types of businesses indicated. However, there is a big difference between perceived needs and realistic viability of businesses.
Iowa State University Extension annually compiles a list of retail business thresholds to help Iowans understand how many people it takes to support various types of stores.
How the numbers were derived
The threshold levels were derived by dividing the estimated state population of 2,802,944 by the number of businesses. For example the threshold level for hobby, toy, and craft stores, was derived by dividing 2,802,944 by the number of hobby, toy, and craft stores (8,755) to arrive at 320. This means that there is one hobby, toy, or craft shop in Iowa for every 320 people.
What the numbers mean
The threshold levels give a general idea of the number of people it takes to support a business. This is an average for the entire state and does not take into consideration differences in income, age, tourism, etc. Cities such as Des Moines have a higher density of businesses than smaller towns because of the higher income levels, the large trade area of the city, and the large tourist and business trade that they attract.
How to use the numbers
The threshold levels should be used as a general guide in determining how many businesses a community can support. For example, it can be seen that many small towns can probably support businesses such as hobby, toy, craft stores; beauty shops, and restaurants.
Conversely, it would be very risky to start a new children's and infant's clothing store in a town of 3,000 population, when the threshold level is 31,144 people per firm. Likewise, it would probably not be wise to start a men's wear store in a town of 2,000 population, when on average there is one men's wear store for every 20,165 people; and the odds of a department store succeeding in a town of 5,000 population are poor, when there is an average of nearly 12,000 people per store.
There are, however, a few small towns that have businesses with a high threshold that are well established and well operated, but they have usually been there for a long time. If and when they go out of business, it would be very difficult for a new business person to operate the business successfully.
An abbreviated list of businesses and their thresholds (number of people per firm in Iowa) follows:
Hobby, toy, craft and game shops-320
Restaurants, taverns and bars-340
Beauty shops-476
Used merchandise (antique) stores-650
Automobile repair shops-924
Gasoline service stations-1,705
Lawn and garden centers-1,822
Grocery stores-2,530
Florists-3,077
Book stores-3,717
Jewelry stores-3,987
Hardware stores-4,641
Drug stores-4,648
Women's clothing stores-5,359
Shoe stores-9,290
Department stores-11,927
Men's and boy's clothing stores-20,165
Children's clothing stores-37,373
In using these numbers, it should be kept in mind that, as a general rule, a town's trade area population is about double the town population. For example, a town of 1,000 population would have a trade area population of approximately 2,000.
The complete booklet on threshold levels can be obtained by contacting your local extension office or by writing to Economics Extension, 460 Heady Hall, Iowa State University, Ames, IA 50011. If you prefer to order by telephone, the number is (515) 294-7318.
Contacts:
Terry L. Besser, ISU
Extension Sociology, (515) 294-6508
Del Marks, ISU Extension
Communication Systems, (515) 294-9807
