Honestly, I thought I was having déjà vu reading Dunning's column this morning. "Shopping habits, not Target, are what drives stores away." It was remarkably similar to last Sunday's column, "Davis' downtown won't change with a Target on its back."
Dunning makes the classic laissez faire argument:
Now one problem I have with Dunning's argument is that like last week, he cites businesses that do not have overlap between Target's merchandise and their service and products.
He argues that he will continue to frequent various businesses that reside in the downtown. Now I understand that *he* probably will. The question though that is unanswered is will Target begin to eat away at the sales of stores that do have common merchandise. And if Target does drive those businesses away will places that Dunning does cite, like the downtown restaurants be harmed?
There are two types of customers. One type who comes to a given business for a specific reason. Bob gets hungry and wants Nepalese food and so he goes to Kathmandu. That type of business probably is not going to suffer.
But observe this type of business... I go down to Bogey's books to get some used books and I get hungry. There is Chipotle's right next door and the Pita place a couple of doors down. So I buy my books and then get my meal. That's incidental or walk-up business. I'm in the vicinity for other reasons but happen to get hungry and incidentally frequent an adjacent eating establishment.
But what happens when Bogey's closes? Now I am not in the vicinity, I get hungry and I go to my kitchen instead of a restaurant, since I have now order my used books at Amazon rather than Bogey's.
How much of business is intentional versus incidental? Has there been a study on this? If not, then Bob Dunning has no way of knowing whether these businesses will or will not be hurt. But in general, I think it is safe to speculate that more people at Target means less people downtown which means less opportunity for walk-up business. And this means while Bob may still go to his favorite restaurant, Doug may stay at home and eat his food from the fridge.
Target will as Bob perhaps sardonically suggests, offer worse customer service (probably poor based on my experiences in large stores), they will not know their customers' name, they probably will help the customer find the items they wish to purchase, but they probably won't be able to help them make a decision about these items or possess any kind of knowledge.
However, there is one advantage that Target has over small businesses--and it is in the end decisive--the ability to sell a large quantity of products for low prices.
There has been considerable research done on the effects and tactics of big box retailers such as Target. And there is a pattern.
First, they come in with very low prices. Not only can they buy in bulk which reduces the per-unit-cost of each product. But more importantly, they can afford to turn a lower per-unit-profit on each item in the interim. They do this to undercut local competitors who cannot take a temporary hit and cannot compete with the lower prices.
Okay, this is a good thing you say. Bob is high-fiving Jay Ziegler as he reads this. Like anything, there is a catch. Research suggests that big boxes offer very low prices initially, but then as they gain market share, those prices then begin to go up. This can't be, Bob exclaims. Moreover, some of those lower prices are just on certain, highly identifiable items, known as "signposts" that most consumers know the price of. However, those items may account for only five percent of the items in the store.
There have been arguments disputing the degree to which Target will actually take away business from people who shop at downtown stores who do sell similar merchandise. It is noteworthy that most of those stores signed the letter to the Davis Enterprise opposing Measure K. These are not the normal "CAVE"-dwellers as Dunning likes to call many progressives. It may be paranoia and it may be uncertainty. Or perhaps, the retailers themselves may actually suspect that they will lose money as the result of Target entering fully into the Davis market.
We just don't know, it's not like this has ever happened in other communities and we can judge it on the basis of history. Oh wait. It has and we can. And oh yeah, downtown and local businesses lose.
Again we must ask key questions that our leader has not: how much loss of revenue can a small business sustain? If they lose only 10% of their revenue would that wipe them out? What if they lose more?
A reasonable assessment of the situation suggests that even a small loss in profits may make downtown businesses not profitable enough for the owners to remain in business.
The combination of loss of sales based on direct competition and the lose of sales based on loss of walk-in business could put a number of our downtown businesses at serious risk.
Once Target enters the city of Davis, it will become powerful--very powerful as it takes up larger and larger percentages of the tax revenue that the city relies on.
The recent events of Fairfield indicate that once a business comes into town, they hold a huge upperhand. In Fairfield, as we reported yesterday, the City Council passed an ordinance in August to limit the size of retail stores. Wal-Mart made the announcement that they were closing their business at one location threatening the city with around a $400,000 per year loss of tax revenue. Wal-Mart then asked the city to approve a much larger Wal-Mart at a new location. The council facing the loss of a substantial tax base, ended up approving it.
The suggestion all along from the Davis City Council is that we as a communtiy are in control. What the city of Fairfield example shows is that we are not in control. The mega-corporation once established wields the influence of (nearly) half a million dollar in tax revenue. So Target can build their store at the Second Street Crossing and then decide that they need a larger location. A future city council has to hear the request and what happens if Target says, we're leaving and closing the location and we'll either move to another location where we can build a superstore or you can lose your tax base. What does the new city council do then? What do you think?
Tell us Souza and Saylor, who is in control? Because I know one thing with great certainty, it is not us and once Target is built, it will not be you.
---Doug Paul Davis reporting
Dunning makes the classic laissez faire argument:
"The true power in these struggles rests not with the mega-retailer but with those consumers on whom the mega-retailer depends for its very survival."People will indeed vote with their feet. Unfortunately, Target has the capacity to force people to walk a lot further.
Now one problem I have with Dunning's argument is that like last week, he cites businesses that do not have overlap between Target's merchandise and their service and products.
He argues that he will continue to frequent various businesses that reside in the downtown. Now I understand that *he* probably will. The question though that is unanswered is will Target begin to eat away at the sales of stores that do have common merchandise. And if Target does drive those businesses away will places that Dunning does cite, like the downtown restaurants be harmed?
There are two types of customers. One type who comes to a given business for a specific reason. Bob gets hungry and wants Nepalese food and so he goes to Kathmandu. That type of business probably is not going to suffer.
But observe this type of business... I go down to Bogey's books to get some used books and I get hungry. There is Chipotle's right next door and the Pita place a couple of doors down. So I buy my books and then get my meal. That's incidental or walk-up business. I'm in the vicinity for other reasons but happen to get hungry and incidentally frequent an adjacent eating establishment.
But what happens when Bogey's closes? Now I am not in the vicinity, I get hungry and I go to my kitchen instead of a restaurant, since I have now order my used books at Amazon rather than Bogey's.
How much of business is intentional versus incidental? Has there been a study on this? If not, then Bob Dunning has no way of knowing whether these businesses will or will not be hurt. But in general, I think it is safe to speculate that more people at Target means less people downtown which means less opportunity for walk-up business. And this means while Bob may still go to his favorite restaurant, Doug may stay at home and eat his food from the fridge.
Dunning writes: "To survive, Target will have to offer something the downtown merchants don't, yet time and again I hear from my friends downtown that their stores are superior in every way to Target. Again, downtown wins, Target loses."I'm sure this is a bit of a hyperbole by Dunning, but once again, he fails to grasp the central points. And dare I say, he fails to really do adequate research about what big box stores do in order to command their market share.
Target will as Bob perhaps sardonically suggests, offer worse customer service (probably poor based on my experiences in large stores), they will not know their customers' name, they probably will help the customer find the items they wish to purchase, but they probably won't be able to help them make a decision about these items or possess any kind of knowledge.
However, there is one advantage that Target has over small businesses--and it is in the end decisive--the ability to sell a large quantity of products for low prices.
There has been considerable research done on the effects and tactics of big box retailers such as Target. And there is a pattern.
First, they come in with very low prices. Not only can they buy in bulk which reduces the per-unit-cost of each product. But more importantly, they can afford to turn a lower per-unit-profit on each item in the interim. They do this to undercut local competitors who cannot take a temporary hit and cannot compete with the lower prices.
Okay, this is a good thing you say. Bob is high-fiving Jay Ziegler as he reads this. Like anything, there is a catch. Research suggests that big boxes offer very low prices initially, but then as they gain market share, those prices then begin to go up. This can't be, Bob exclaims. Moreover, some of those lower prices are just on certain, highly identifiable items, known as "signposts" that most consumers know the price of. However, those items may account for only five percent of the items in the store.
There have been arguments disputing the degree to which Target will actually take away business from people who shop at downtown stores who do sell similar merchandise. It is noteworthy that most of those stores signed the letter to the Davis Enterprise opposing Measure K. These are not the normal "CAVE"-dwellers as Dunning likes to call many progressives. It may be paranoia and it may be uncertainty. Or perhaps, the retailers themselves may actually suspect that they will lose money as the result of Target entering fully into the Davis market.
We just don't know, it's not like this has ever happened in other communities and we can judge it on the basis of history. Oh wait. It has and we can. And oh yeah, downtown and local businesses lose.
Again we must ask key questions that our leader has not: how much loss of revenue can a small business sustain? If they lose only 10% of their revenue would that wipe them out? What if they lose more?
A reasonable assessment of the situation suggests that even a small loss in profits may make downtown businesses not profitable enough for the owners to remain in business.
The combination of loss of sales based on direct competition and the lose of sales based on loss of walk-in business could put a number of our downtown businesses at serious risk.
Once Target enters the city of Davis, it will become powerful--very powerful as it takes up larger and larger percentages of the tax revenue that the city relies on.
The recent events of Fairfield indicate that once a business comes into town, they hold a huge upperhand. In Fairfield, as we reported yesterday, the City Council passed an ordinance in August to limit the size of retail stores. Wal-Mart made the announcement that they were closing their business at one location threatening the city with around a $400,000 per year loss of tax revenue. Wal-Mart then asked the city to approve a much larger Wal-Mart at a new location. The council facing the loss of a substantial tax base, ended up approving it.
The suggestion all along from the Davis City Council is that we as a communtiy are in control. What the city of Fairfield example shows is that we are not in control. The mega-corporation once established wields the influence of (nearly) half a million dollar in tax revenue. So Target can build their store at the Second Street Crossing and then decide that they need a larger location. A future city council has to hear the request and what happens if Target says, we're leaving and closing the location and we'll either move to another location where we can build a superstore or you can lose your tax base. What does the new city council do then? What do you think?
Tell us Souza and Saylor, who is in control? Because I know one thing with great certainty, it is not us and once Target is built, it will not be you.
---Doug Paul Davis reporting
