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The last locally-owned men's clothier in our area closed recently,
as did one of two remaining hardware stores. Independent pharmacies
are less than half of what they were a few years back, and you'd look
long and hard to find an independent record store, appliance store or
grocer. And then there are booksellers: hardly a week goes by without
an independent bookstore somewhere in the country closing its
doors.
What's going on? Some economists would call this a natural
phenomenon. Big fish eat little fish. Warehouse stores and national
chains drive out local retailers. Tough for the guy who owns the
small store, but it doesn't really affect the economy. Overall retail
sales remain the same — maybe even up a little. So what's the
problem?
Economics is called the dismal science because it often measures
with misleading exactitude the answers to the wrong questions.
Ecologists argue that there's a misleading statistical boost in
national output when money is spent to pollute a river and another
positive blip when money is spent to clean it up. But if you don't
pollute at all? That's not measured anywhere. The same is true of the
women's unpaid labor in traditional societies. Writers like
Marilyn Waring in If Women Counted show how
misleading economic statistics can be if they don't somehow measure
the way people really live and work.
There's a growing suspicion that a similar form of mis-economics
is at work with local retailers, who are gradually slipping from our
midst, leaving a social and economic void that is palpable and real
— even if unmeasured. The fabric of a community can be
drastically altered in ways that macro-economics is slow to measure.
Jane Jacobs previewed this problem three decades ago in
The Death and Life of Great American Cities, showing how
mindless redevelopment projects often destroyed the vital interplay
between people in real neighborhoods. That loss — like the loss
of a retail base — can be crucial, even if it doesn't show up
immediately in the statistics.
The loss of a local retail base isn't a natural occurrence. This
loss is usually preceded by deliberate policies of large
manufacturers that favor national retailers. It's often matched by
local governments and landlords eager to embrace national retailers
who tempt them with illusive promises of growth and tax revenues.
The Real Cost to the Community
It's time to start asking the right questions. What's the real cost
to a community that loses its locally- owned retail base? What are
the forces undermining that retail base?
1. What's the Effect on Supporting Businesses?
A locally-owned business employs a wide array of local supporting
services. Local architects, designers, cabinet shops, sign makers and
contractors are hired to build it. Local attorneys, accountants,
insurance brokers, public relations firms, computer consultants, and
advertising agencies are employed to help run it. Operating funds are
deposited in local banks, and that money is plowed back into the
local community.
When a national chain moves into a community, it puts in place a
copy of stores it operates elsewhere, and it uses a minimum of local
supporting services. The money is funneled back to the home
office.
What then is the economic cost to other businesses in a community
when local retailers are replaced by national chains?
2. What's the Effect on Employment and Entrepreneurial
Skills?
Both local retailers and national chain outlets hire employees, but
there are important differences. The owner or manager of a local
store is an entrepreneur in every sense, developing skills in buying,
selling, planning and management that cannot be learned in any other
way. Local businesses also employ people with specialized skills,
like bookkeepers, who perform functions that in a national chain
might only be done in a single national office. This is not to
degrade the work done by chainstore employees, only to point out that
the jobs available in national outlets are likely to be
one-dimensional jobs, providing training in only a narrow aspect of a
business.
The loss of a community base of entrepreneurial skills is an issue
that needs to be explored, but there are others. How does the entry
level pay of employees compare with community-based retailers? How
often are experienced managerial employees transferred out of an area
as a matter of company policy? How well do national chain outlets
train employees to meet community needs and to understand the
products or services being served?
And then there's the biggest question of all: What happens when a
national chain, like Wal Mart, comes into a community, drives out
local retailers, and then ultimately decides to pull up stakes and
leave? When this happens to a community there are usually few if any
resources to fill the gap.
3. What's the Effect on Small Manufacturers?
Manufacturers look for national or worldwide markets for their goods,
but they have to begin somewhere. Usually the first stores to sell a
local manufacturer's products are local retailers with whom the
manufacturer has a personal relationship. Unlike national chains,
local retailers are free to make buying decisions on the spot and to
take chances with the goods of a new manufacturer that don't fit into
some national sales plan.
Small manufacturers also have a stake in the nationwide health of
local retailers. Manufacturers who sell through a multiplicity of
independent businesses nationwide can withstand the impact of a
single retailer who is slow to pay, goes bankrupt or tries to return
all the manufacturer's merchandise. But that's not true for small
manufacturers that do most of their business with a national chain:
they are in an exceedingly perilous position. Time and again in the
book business we've seen small publishers who have over-printed and
over-extended themselves for a couple of big buyers, who then demand
more and more concessions while they slow down on their payments.
As a handful of retailers become dominant, it's time to ask what
effect does this have on small manufacturers who are forced to do
business with retail giants that have much greater economic
power?
4. What's the Effect on Consumer Choice?
Local retailers are consumer advocates, sifting between competing
goods and services to find the ones that appeal best to their local
customers. A good clothier knows his or her customers and can advise
them about new merchandise they'll probably like; a good bookseller
does the same thing. Many people ask their local pharmacist for a
referral when they need a medical specialist. A skilled, friendly
hardware store owner has saved more than one homeowner from disaster.
As the economy becomes more global, the need for trained, committed,
local retail experts is even greater if consumers are to have any
hope of wading through the claims of conflicting products.
But local retailers don't just sift through a diversity of
products, in a real sense they create that diversity. When
3,000 or so independent booksellers buy books to sell in their
stores, the cumulative effect is a broad demand for a wide variety of
books. This divergent demand of many retailers makes it possible for
publishers to print new or controversial books and books from new,
young authors with the expectation that there will be a market for
such books somewhere within a wide variety of retail stores. This is
true of independent retailers in any business. Each one buys
merchandise based on his or her particular tastes and interests, on
the tastes and interests of his or her customers, and on the
expectations of what will sell in that particular community.
How can this broad demand for new or unusual products be
replicated when only a few buyers from national chain stores are
doing most or all of the buying? How does a new author or the creator
of any other new product break into the system when a national buyer
is looking only for proven products that will sell in all of its
chain stores nationwide? New, innovative products involve a certain
level of risk. The only retailers who are likely to take that risk
are smaller, local retailers who know how such a product will fit
into the social and cultural patterns of their community. When there
is a monopoly or oligopoly at the retail level, isn't it inevitable
that the variety of goods will be reduced to the lowest common
denominator of public taste?
5. What's the Effecti on Community Involvement?
Local retailers are the eyes and ears of main street, the first to
report uncollected garbage or a troublesome pothole. Most have a
significant portion of their life savings invested in their
businesses, and because of that they are vitally interested in the
community. Community-based retailers are usually the backbone of
local charitable endeavors, frequently serving on local boards,
supporting a variety of causes that range from Little Leagues to
battered women's shelters. With only themselves to answer to, local
retailers can support causes with their time and money that may not
be on a list of official or popular charities.
How well do national chains fill this gap? Some enter a community
with a big initial splash, but how does their long-term commitment
compare with that of retailers who live in the community?
6. What's the Effect on the Vitality of Community Life?
In a healthy retail environment stores function as a group, forming a
magnet for window shopping, browsing and strolling. Go to any Italian
town in the early evening, and you'll see virtually the entire
populace taking an evening passeggiata — not around the
monuments and churches, but through the retail shopping streets. In
America as well, retail stores are at the core of a community. But
for retailers to perform this role there must be balance, diversity,
scale — even serendipity — in the way that such stores
interact with each other and the surrounding area. Towns with a
healthy retail core have less need for special police forces or crowd
control measures, because they have the self-policing mechanism of
shoppers, lovers, strollers, visitors and shopkeepers interacting
with each other and maintaining an unofficial kind of order.
What happens when this civic balance is disrupted? Shopping malls
in remote locations with a repetitious and predictable selection of
shops have proven to be poor substitutes. Large discount stores
outside of the downtown area draw in shoppers and then immediately
disgorge them when their specific shopping tasks are completed.
How do you measure a community's loss when it no longer has a
retail core that attracts people for random or casual visits? What's
the additional cost of police, social workers and others resources
needed to do something that a healthy retail environment produces for
free? How do you measure the loss of random encounters on a city
street, the joy of seeing your neighbors taking a walk, and the loss
of civic pride?
The Forces Behind It
The loss of business on Main Street hasn't come about naturally. It's
had plenty of help.
Local officials have yielded to the seductions of national
warehouse chains, looking only at the promises of jobs and tax
revenues without evaluating the greater loss that occurs when the
local retail base is undermined. Local governments often give tax and
regulatory breaks worth millions of dollars to national chains. Some
landlords have contributed to the problem, by renting key locations
only to national retailers at lower "anchor tenant" rates.
Franchisors often impose onerous restrictions on their franchisees,
preventing them from functioning as the entrepreneurial businesses
that most of them want to be.
But the most destructive force has been large manufacturers and
distributors who have blatantly favored large retail chains in many
types of businesses with cash and other benefits, thus enabling them
to wear down local retailers with expensive promotions and price
wars.
The illegal favoritism of large manufacturers towards national
retail chains has been the subject of recent anti-trust litigation in
the book, record, and pharmacy businesses. This favoritism takes
different forms, but most of it is illegal under the Robinson-Patman
Act and other anti-trust laws. The themes are different, but the
results are the same. In the clothing business, big manufactures like
Levi Strauss cut off smaller retailers and refuse to allow them to
sell the manufacturer's products. In the record business larger
retailers have benefited unfairly from big promotional allowances. In
the pharmaceutical business drug manufacturers have arbitrarily
classified retailers into different categories, giving institutional
retailers a far lower price than they give to neighborhood retail
pharmacists. In the book business major publishers have, according to
a Federal Trade Commission and other investigations, given illegal
advantages in price and promotional allowances to Barnes & Noble,
Crown Books and Borders.
How can this situation be changed? Better law enforcement of
existing anti-trust laws is an important first step. Big
manufacturers often tilt in favor of big retailers both because of
institutional inertia and because of a shortsighted view of their own
economic interest. The anti-trust laws are there to protect the
community from the consequences of such misguided behavior.
But a conceptual change is also necessary. Somehow the real, daily
needs of local communities and local economies must be quantified and
conceptualized into terms that will command respect among economists
and hard-headed business people. Only then will the work of local
retailers be valued for what it is: the glue that holds a community
together.
-- WRP
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