Guarding the Gates

This is the ninth in our series based on Challenges of the
Future: The Rebirth of Small Independent Retail in America
, a 64 page white paper by Jack Stanyon, underwritten by the George H. Baum
Community Charitable Trust, the Illinois Retail Merchants Association, and the
National Retail Federation Foundation.  Today we take a look at the trend of community activism.

This is the first time that I basically disagree with Stanyon’s position.  What he calls "community activism" is best described as local businesses banding together to stop the spread of retail development in order to protect the "personality" of the local area.  In the past, you saw it most often when Wal*Mart announced plans to move into a new community.  Local merchants would try all sorts of strategies to keep them out. 

Today, we’re seeing the same thing happening in major cities.  A recent example is the attempt by the City of Chicago to keep Wal*Mart and other big boxes out of town.  Although the ordinance, specifying that large retailers would be required to pay a "living wage" and provide certain benefits was passed by the city government, Mayor Daley vetoed it.  There have been similar fights in other cities. 

Where Stanyon and I disagree is his statement that "protectionism from increased competition has often proved unproductive.  First, consumers will find their way to where they want to shop–big box, specialty store, or national chain.  Secondly, trying to stop new development often becomes a major distraction for the small retailers when they should be spending time thinking about their own business and improving their downtown or neighborhood shopping areas."

While Stanyon’s premise seems sound, local governments are often taken in by the promise of more jobs and a better economy that the big box stores offer.  To get these perceived benefits, they open their wallets and provide outrageous incentives to the chains.  This gives the big stores an advantage that they don’t need and that taxpayers shouldn’t have to provide.

A good specialty store should have little trouble competing with a big box store on a level playing field.  Their presence may require the independent dealer to change strategy and work a little harder, but the inherent benefits of an agile, flexible, locally-owned retailer should outweigh the advantages of size that the big guys enjoy.

But, given millions of dollars in tax breaks, the chain will win every time. 

While Stanyon has a point that too much concentration on possible incoming competition might distract from running the business and improving the local community,  the two aren’t mutually exclusive.  In fact, preventing new competition from getting a sweetheart deal from the local politicians may be necessary in order for the independent to have a business to run.

As most of you prove every day, it’s possible to survive and thrive in the face of competition from the big boxes.  In fact, it’s been shown many times that having a chain store nearby can actually help the local businesses.  Given the choice between having a Wal*Mart in your town and having one in the next county, it’s generally better for the independent to have them in town.  Otherwise, shoppers may do all their shopping in the neighboring community, bypassing you altogether.

The arrival of a big box store doesn’t necessarily create jobs.  In fact, it may replace existing jobs with jobs that pay less, giving the area a net loss in income (and tax revenue).  Local stores that don’t meet the challenge go out of business, leaving boarded up store fronts that reduce tax revenues and actually add costs for the local government.  As members of the community, it’s up to all of us to see that our
tax dollars are spent in the most efficient way possible.  Ignoring our responsibility to our fellow citizens to devote 100% of our time to our own business may turn out to be rearranging the deck chairs on the Titanic.

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