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Wednesday, May 09, 2007

"Big-Box Swindle" Author Speaks To DIMA Audience on Evils of Big-Box Retail

The Davis Independent Merchants Association (DIMA) held their first public event last night in the basement of the Davis Teen Center. Author Stacy Mitchell who wrote the book "The Big-Box Swindle" spoke before a good sized crowd about the problems that communities face with the arrival and proliferation of big-box retail.

Organizer Don Shor was very pleased with both the number and diversity of the audience.
"I was pleased with the turnout (I did a head count near the end, came up with about 70). Particularly interested and pleased with the diversity of professions in the audience. A couple of developers, the mayor, city staff, a real estate broker who specializes in highway commercial properties, along with some community activists, chair of DDBA, etc. An unusual and interesting mix, I thought."
Mitchell, who resides in Portland, Maine, works for an organization known as the Institute for Local Self-Reliance. She went around the country as she wrote the book, interviewing some 200 independent businesses from across the country. What she found is that big-box retail did particular damage to the local community in a number of ways.

First, most money spent at a Wal Mart or another big-box store, leaves the local economy. As Don Shor said in his introduction, local dollars spent on local business will stay locally. However, money spent on Big-Boxes largely leaves the community. A huge percentage goes to the corporate office that then spends their profits on out of area suppliers. Moreover, because the corporate office is based regionally if not nationally, there is lack of a connection to a particular community.

The intention of Mitchell was to write a book that put a face on the trend of consolidation towards bigger, larger, and fewer locally owned businesses being replaced by national chains. This overall trend has contributed to the continued loss of manufacturing jobs in the U.S. since 1990. A lot of this loss can be attributed by the pressure put on suppliers by big-box to reduce their rates and cut overhead in an attempt to save money. These manufacturing jobs have been the pillar of the American middle class. And as these retailers rely more and more on cheaper out-sourced production, avenues to the middle class have been closed off to many Americans.

In many ways, Mitchell describes this as a sort of colonialism. "This doesn't look a lot like progress," she said, "What it really looks like is colonialism." A new colonialism that sucks money and jobs out of a community--big boxes enter a community and plunder its resources, rather than adding value and enhancing the local economy.

As the push comes from a local level to develop cleaner and greener policies in an attempt to mitigate the effects of global warming, it is important to note the impact that big-box retail has on the environment. And we must question our leaders' priorities in this manner--as they at one point promote big-box retail development while at the same time speaking of their concerns about global warming.

One of the key impacts that Mitchell describes on the environment is the contribution that Wal-Mart and other big boxes have made to the carbon footprint. Not merely in terms of production and consumption, but in the form of transportation to and from the store. Mitchell describes a 40 percent increase in driving for the purposes of shopping. Americans drive more than 100 billion miles for shopping. There has been three times the increase in miles driven for shopping than for all other purposes combined. And this directly relates to the size and scale of the operation that has necessitated a move away from neighborhoods and other nearby locations and towards larger and more consolidated locations with the roads, infrastructure and parking to accommodate the number of people who would frequent a big-box store.

As neighborhood stores leave, people are forced to drive further and further distances to do their shopping. In addition, there is a link between the scale and the type of transportation that people use. People are more likely to walk or bike to smaller and more locally owned stores but they are most likely to drive to big-box stores.

Another key aspect in the rise of the big box retail giant is the perception by the public that locally owned businesses are more expensive, and that big-box retailers are cheaper across the board. According to Mitchell that is not necessarily true. She cited a Consumer Reports study from a year and a half ago where they looked at electronic consumer goods. What they found is that the best prices were not at the giant national chains like Best Buy or Home Depot or others, rather they were at smaller and more locally based stores.

Part of the way that big-box retail creates the impression of lower prices is by having a few goods that are quite cheap. Mitchell described goods that are essentially "loss leaders" that are used to create an impression of overall lower costs. For instance they may highlight a few items like DVDs and have them appear to be at very low prices, while most of their goods are around the same price you would get at a local business.

Finally Mitchell described three ways that we can fight back. She noted a trend of a lot of communities saying no to Big-Box. Even in Davis, where Target eventually won the election, they had to fight hard to gain a foothold. The first change she described was a policy issue; and looking for ways to change the way in which small business is undermined by local policy. And, she said to look at size limitation and changes to zoning policies. A lot of communities automatically zone all new development commercial, which allows retail stores to come in on the outskirts, leapfrog and undermine existing business, rather than developing business in areas that will support existing business. She advocated keeping business in the center of cities and towns and then developing mixed use zoning laws to support these city centers.

Second, we need small business development programs that will help build and maintain a local business base.

Along similar lines, we need greater public awareness about big boxes and the importance of local business. The public needs to know the consequences of their choices to shop at big-boxes rather than putting their money into local business. There have increasingly been "buy local" campaigns aimed at encouraging people to spend their money at local businesses rather than big-box retail. Mitchell described the summer tourist months in Portland, ME where the visitors go to the more recognizable and familiar national chains rather than local business. A member of the audience described the student population as initially going to the more familiar chains rather than local business. The public needs to be educated on the advantages of local business not just from an economic standpoint, but from a consumer standpoint.

After the meeting, I asked organizer Don Shor about some of his thoughts on what we should take away from the meeting.
"I would be interested to look in more detail into her comments about big box not always having the lower prices. I've frankly avoided that argument because it is hard to verify, but perhaps she has seen research. I'm very familiar with their use of loss leaders, not to mention predatory pricing."

"There are some practical policy issues she reviewed (rather quickly) which can be encouraged at the local level: maintain the existing downtown+neighborhood shopping focus, retain the store size limitation, avoid peripheral retail sprawl. Those are zoning and development issues, so they can be done. I liked her comment that it was 'surprising' to come to a community which had store size limits already, and had made such a key change in them, while other communities across the country are just now embracing them."
What role can DIMA play in helping to support local business in Davis? Mitchell mentioned a "buy local" mentality? In what ways can Davis promote this type of mentality?
"The things we've talked about, in addition to educational events like this, involve the 'branding' idea she mentioned: creating a visible way for people to find and recognize the locally owned business. Coop advertising, promotions city-wide and of course. continuing to support local groups that need donations, volunteers, etc.: building relationships.

The city itself, including the commissions, can stop focusing on sales tax leakage and start focusing on providing strong neighborhood shopping centers, and continue to support the events that DDBA and others put on (city staff does a great job on that; I don't think there's anything to complain about on that front). If the commissioners and councilmembers who supported Target had spent half as much time trying to find healthy tenants for the struggling east and far west Davis shopping centers, the people who live there would have strong, healthy neighborhoods. They wouldn't have to drive across (or out of) town to shop. They could do it right in the existing centers they already have.

Abolishing BEDC would be another possibility. At the very least, changing its guidelines to exclude 'leakage' (it's in there) and include 'encourage existing locally owned businesses'."
Don Shor mentioned that Yolo County Supervisor Matt Rexroad sent in a number of questions, most of which were addressed by Stacy Mitchell indirectly during the course of her presentation. One that really struck me though was his first question:
"Where does individual consumer choice come in to play in her view? If we assume she is 100% right then why not allow the consumers to vote with their feet once they are informed?"
I think there are good reasons as to why the local community should not allow consumers to vote with their feet, but I think given that big-box retail now exists--it exists outside of Davis within a reasonable driving distance and soon it will exist in Davis. The key is to educate the public and make them informed, because ultimately if one can change consumer behavior and give people reasons to shop locally both in terms of economic vitality, environmental awareness, and also from the standpoint of the consumer--good prices, quality service, and good selection, then local communities can beat back big-box retail in the market place. Now the problem is that big-box retail has a lot of advantages of scale and can often use unfair tactics to undercut competition. But that is at least where I think we need to start in addition to maintaining our current zoning and peripheral development practices.

Overall Don Shor said Mitchell's presentation was,
"Very thorough, good detail. It provided a good overview, with some sound policy implications."
I agree and would encourage people interested in this issue to take a look at the Institute for Local Self-Reliance website which has links to a number of good articles and good information about big-box retail and what local communities can do about it.

---Doug Paul Davis reporting