Military travel discount

San Diego: Military, Tourism Put Dollars in Retailers' Pockets

SAN DIEGO--San Diego County--ranked second in California's population behind Los Angeles--attracts residents, employers and retailers alike for its many natural attributes and prime Western locale.

Covering some 4,255 square miles and filled with slightly over 2 million people, San Diego County offers miles of beaches, natural and man-made bays, the nation's most popular zoo, and easy access to Mexico and nearby deserts.

These attractions helped to bring 30.4 million visitors to the area in 1986, which made tourism the third largest revenue producing industry in San Diego, according to the San Diego Union/Tribune's Annual Review of San Diego Business, 1987.

However, leading the city's economy is manufacturing in aerospace, electronics, ship building, apparel, food, oceanics and biomedical equipment. Much of the valued $11 billion in manufacturing products produced in San Diego are directly related to federal defense spending contracts, according to the San Diego Chamber of Commerce.

Reliance on Defense Spending

This economic reliance on defense spending is furthered even more by the presence in the city of the largest naval complex in the free world and a major Marine Corps base. According to the city's commerce department, the total economic impact on the area totaled some $8.27 billion in 1986, making the military the third leading economic source.

While San Diego has diversified its economic base somewhat in recent years, the military/defense industry still exerts a great influence on the area, and the city could be hurt in the future if defense spending is cut significantly.

The government has already announced that some San Diego-based ships will be retired early and others moved, while local analysts expect defense contracts to start dropping by 1 percent to 2 percent a year.

Presently, the military employment position is holding relatively steady, but the fastest growing major employment categories have been construction, finance/real estate and services, according to a recent report by First Interstate Bank.

Although construction employment has grown, permits for new residential and non-residential buildings were actually down during 1987, with much of the decrease in housing units taking place in the multi-family sector.

Economists expect construction starts to decrease during the next two years as the city looks at greater growth control measures. According to the U.S. Bureau of Census, San Diego's population grew 18 percent between 1980 and 1986, placing the area as the nation's 19th largest city in the nation.

Unemployment rates for the area have fallen below the national and California averages for several years, as shown by the 1986 level of 5 percent in San Diego compared to 7 percent nationwide and 6.7 percent in California.

While a defense/military and construction drop are forecast and the unemployment rate is expected to go up slightly, San Diego is not without future positive economic elements.

Because of the devaluation of the U.S. dollar compared to the Japanese yen, many of the West Coast's Pacific Rim cities--including San Diego-- have been provided with a boost in export activity, while incoming foreign investment is also providing an increase in economic growth.

Additionally, the possibility of hosting sailboat racing's America's Cup still exists, which could put the city in the national limelight and bolster tourism. San Diego has already received attention this year by hosting the Super Bowl.

Many of these tourism dollars fall directly into retailers' pockets, particularly with the existence of Horton Plaza in the city's rejuvenated downtown area. The downtown sector is expected to take on added importance when a convention center which is currently under construction opens.

Together, tourists and San Diego County residents spent some $11.6 billion in 1986, up 7.3 percent from 1985, while total retail outlets between the two years grew by 6.4 percent, according to the Union/Tribune report.

The major retail outlets for these dollars are located in 10 large regional malls, 13 mid-size regional shopping centers, and 11 theme and specialty centers. Discounters in San Diego are primarily found in mid-size malls and numerous neighborhood strip centers.

While many of the city's shopping centers are spread throughout the area, much of the new retail growth is currently taking place in the north county, coinciding with the majority of new housing developments.

Spending at retail is based on an average disposable family income for the area of $26,674 as of 1986--a figure some area retail specialists said is somewhat low for Southern California but attributable to the heavy military personnel concentration.

So the general San Diego consumer "is looking for value" in his retail purchases, explained Nancy Johnston, managing partner with Epsteen & Associates, a commercial real estate firm in San Diego.

In search of value, San Diegans frequently take to area discounters. Both Target and K mart have 11 locations each, while Fedco has two, Pay Less five, and Pic `N' Save six. Off-price apparel chains Marshalls, Ross and T.J. Maxx operate eight, four and three stores, respectively. Best Products is also present in addition to several smaller off-price chains and a few promotional electronics retailers.

Price Club Locations

Also in the market is Price Club with four locations. Although this number is less than half of what Target and K mart each offer, the membership warehouser is the leader in many general merchandise categories.

According to the Continuing Analysis of Shopping Habits study for San Diego by the Union/Tribune, Price Club was continually cited in the upper ranks by consumers who were asked where they made their most recent purchase for a given item.

For example, in many major appliance categories--such as microwave ovens, television sets and VCRs-- Price Club ranked No. 1, with market shares ranging from 12.8 percent to 14.4 percent.

Similar findings showed Price Club as the leader in small electrical kitchen appliances, auto tires, bicycles and cameras. The membership warehouser also ranked high as a supplier of hand and power tools, domestics, car batteries and toys. In fact, in toys, Price Club's 13.2 percent share was exceeded only by Toys "R" Us.

However, K mart and Target did command a respectable showing in many of the categories, as did the former Gemco stores. Since some of Target's 11 stores are former Gemcos, presumably its market share will increase.

Another San Diego leader, particularly in many apparel categories, was highly promotional soft goods retailer Mervyn's. It was ranked No. 1 in many children's clothing categories and also rated the No. 1 spot in domestics.

The dominance by Price Club, discounters and promotional chains has given the industry a secure footing in San Diego. However, like in many areas of the country, while future retail sales are expected to continue to increase, inflationary adjusted dollars will show little growth in retail sales for San Diego, analysts said. So, this climate is expected to produce an especially competitive environment in the city as retailers jockey for improved market share.

PHOTO : Consumers rated local Price Club as the leader for their most recent purchases of; small electrical kitchen appliances, auto tires, bicycles and cameras.

Table : San Diego: Discount Store Count