Locally-Owned Businesses

The Local Edge: The Impact of Retailing on the Community
Article by William Petrocelli

Tolstoy claimed that all happy families are alike and that unhappy families are unhappy in their own way. That may be true of families, but if Tolstoy had looked at the downtowns of local communities, he might have concluded just the opposite.

A thriving downtown is full of surprises. It may be one-of-a-kind stores, spontaneous meetings between neighbors, unique local products, or seasonal entertainment. Whatever the local mix includes, it sings out clearly that this town is what it is and cannot be confused with any other.

A failed downtown is unrelievedly dreary. Boarded up stores, empty lots, a lack of basic services - everything to indicate that the life of the town has gone elsewhere. You can see hundreds of them, all alike, across the country. No one sets out to suck the life out of a town, but that’s often been the result of many local policies.

The advent of a typical 225,000 sq. ft megalith like Wal Mart (by way of comparison, our Corte Madera store is about 12,000 sq ft.) usually spells the end of the nearby downtown as a vital economic force. Shopping malls with the promise of "national tenants" can also have a negative impact on nearby businesses, siphoning off business from the downtown until nothing is left but an endless series of strip malls and cookie cutter stores on the outside of town.

Until recently, the harm caused by wall to wall chain stores has been hard to calculate. It might bother you, but you can’t attach a dollar sign to your uneasiness. But now there is economic data to reinforce the idea that a steady diet of chain stores is bad for your local health.

A recent advertisement from the Northern California Independent Booksellers Association:

California Independent Bookstores and Your Community:
A Partnership That Really Clicks
California Independents

Number of in-store author appearances last year:
Over 4,000

Amount of donations to local community organizations last year:
Over $100,000

Number of local people employed:
Over 3,000

Sales taxes collected and paid to support schools, social services, and public agencies last year:
Over $10 million


Number of in-store author appearances last year:

Amount of donations to local community organizations last year:

Number of local people employed:

Sales taxes collected and paid to support schools, social services, and public agencies last year:

A message from California independent booksellers

Austin and Chicago

In 2002 a study was commissioned in Austin, Texas, to compare the comparative economic benefit to the community of Bookpeople, an Austin independent bookstore, and Waterloo Records, a local music store, with a proposed Borders store that threatened to drive both out of business. The study looked at the local economic impact - i.e. the degree to which money from each business flows back into the local economy. The study concluded that for every $100 of money spent at Borders $13 flowed back into the community in wages, expenditures, taxes, etc. With the independents, however, the comparable figure was $45. In other words, the two independent stores yielded more than three times the local economic impact.

In 2004, a larger study was conducted in the Andersonville district of Chicago, one of the city’s livelier neighborhoods. In that study, ten local businesses were analyzed, including four restaurants, three service businesses, and three retailers (one of which is a book store), and they were compared against ten chain store competitors. The economists looked at both the direct effects of local spending by the businesses, such as wages, local procurement, charitable contributions, etc., as well as indirect effects of the continuing expenditure of the money in the community using the standard IMPLAN method of calculation.

The results were similar to what was found in Austin. In Chicago they found that the locally owned businesses produced about a 70% percent advantage for the overall local economy:

  • Locally-owned businesses generate a 70% Local Premium in enhanced economic impact.
  • For every $100 in consumer spending with a local firm, $73 remains in the Chicago economy.
  • For every $100 in consumer spending with a chain firm, $43 remains in the Chicago economy.
  • For every square foot occupied by a local firm, local economic impact is $179.
  • For every square foot occupied by a chain firm, local economic impact is $105.

The complete study can be found at www.andersonvillestudy.com

From the Chicago study:
"Across the board, locally-owned businesses substantially exceed their chain competitors . . . For example, local firms spent an average of 28 percent of revenue on labor compared to 23 percent for chains. Additionally, eight of the ten local firms are owned by Chicago residents, so profits largely remain in the city. Local firms procure local goods and services at more than twice the rate of chains. Finally, locally-owned firms in the study contribute more to local charities and fundraisers than do their national counterparts and, although this provides the smallest local advantage of the four categories, this difference is important to the community."

The New Rules
While the deck has been stacked against local businesses, there is some indication that public opinion and local governments are starting to change. The New Rules Project (www.newrules.org) lists a number of legal strategies that localities have begun using to keep their local business base intact.

Communities like Corvallis, OR, have modified their general plan to include a requirement for a certain number of - locally owned, managed, or controlled small businesses.- Palm Beach, FL, has adopted a "town-serving zone," limiting businesses in the zone to those primarily serving local residents. Greenfield, MA, requires retailers over 20,000 sq. ft. to go through a special permit process. Santa Cruz, CA, has a similar rule. Communities like Ashland, OR; Bozeman, MT; Hailey, ID; Homer, AK; and Taos, NM has banned large retailers over a certain size limit entirely.

Arcata, CA, limits the number of "formula"?restaurants, which are defined as ones that share "the same design, menu, trademark, and other characteristics with twelve or more other establishments." Calistoga, CA; Sanibel, FL; York, ME; Port Jefferson, NY; and Carmel, CA bans formula restaurants entirely.

Independent Business Alliances

In many communities local businesses and their supporters are starting to organize. By joining together they are able to increase their influence and present their case more effectively.

In Austin, TX, the bookstore and music store who were part of the study in that city banded together and helped form the Austin Independent Business Alliance. The AIBA helped defeat the $2.1 million subsidy that the city was ready to give to their chainstore competitor. Their motto is "Keep Austin Weird."(Well, that must work for them.)

In Santa Fe, NM, the local IBA has worked with city and state agencies on procurement from local sources. In Boulder, CO, where the independent business alliance movement got its start, the local IBA now boasts more than 140 members who publish a directory of local businesses, do joint promotions, sponsor a community shopping card, and have a host of effective programs.

The umbrella organization for this movement is the American Independent Business Alliance (AMIBA) with a website at www.amiba.net AMIBA offers a legislative program, training sessions and resources, and help for local groups that are trying to organize. The key is to get locally owned business leaders involved, but the AMIBA model also includes a role for concerned citizens.

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