BUY LOCAL (OR, SEND YOUR ASSETS SOUTH)

March 2001

[NOTE: As you can see from the date, I wrote this piece over sixteen years ago. Not everything I wrote then is true today; it is MUCH WORSE now! Some of the "big boxes" and "dot.com" businesses have progressed from general cut-throat practices (i.e., the American Way) to being major predators on local business. Studies, investigations and evaluations have proliferated over the years, the results all emphasizing the same thing: these companies are not the friends of small enterprise.]

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I shopped at WalMart a couple times this past year. I told myself that I was justified in doing so, because there really was no other source for what I wanted within 100 miles or so. Still, I felt guilty. I felt like a traitor.

The monster chain stores - Walmart, Rite-Aid, Home Depot, Barnes & Noble - what have come to be known as the "big boxes" - have become the bad guys that almost everybody loves to hate. Books have been written about their evils, and a number of Internet websites are devoted to exposing the dangers of letting a "big box" into your community. Are they really as bad as that? For most small communities, I think the answer has to be a resounding YES.

It's a paradoxical situation, because the IDEA of a big chain store coming to a small community seems - in many ways - a good one. These national chains can bring in products or services not formerly available locally. They hire some local people. They seem to offer products at cheaper prices than are usually found in other stores. They have a look of "Prosperity" to them that seems like it should be good for a community. Despite all this, the growing body of evidence says that welcoming a "big box" into your community may be one of the worst things you can do if you want to build or sustain your economic base, and if you want to retain your community identity.

Not all the claims against the big chains have been researched to the point that they can be "proven" beyond a shadow of a doubt, and different communities have had different experiences with the same companies. Nevertheless, I think it is safe to say that most of the following things happen in small towns (and to some extent in larger communities) that are subject to a "big box" invasion.

(1) Local businesses suffer from the competition, often to the point of going under. For example, one study by an Iowa State University economist found that five years after the opening of a superstore, locally owned small businesses within a 20 mile radius had experienced a 19% decline in sales [quoted by 1000 Friends of Iowa].

(2) Downtown areas suffer because business is pulled away to the outskirts of town, where the chain stores usually establish themselves.

(3) Money that used to circulate within the local community - helping to keep the area's economic base healthy and diversified - now goes to national or international corporate headquarters elsewhere.

The suggestion that the large chains help local communities by donating great amounts of money to local causes seems largely unfounded. For example, it has been reported that WalMart donated $163 million in 1999, but that is "the equivalent of someone who makes $40,000 a year giving $40 to charity" . A 1991 Oregon State University study of 182 businesses suggested that small employers - the kind that the "big boxes" are most likely to put out of business - are much more likely to support local causes and charities than are larger ones. In that one example, companies with fewer than 100 employees gave an average per employee of almost $800; companies of over 500 employees had an average giving level of less than $350 per employee [Home Town Advantage Bulletin].

(4) The jobs created locally seldom live up to expectations. Many turn out to be part-time positions, with average (or below average) pay, and limited or no extra benefits.

(5) The predicted savings because of lower prices in the big stores is often more mythical than real. Several recent predatory pricing suits against WalMart [reported in the Home Town Advantage Bulletin] point to their practice of pricing certain conspicuous products very low [often too low for smaller local businesses to match] while keeping the majority of their goods at or above "normal" levels. They give the appearance of great savings when in fact most of what you buy may not be discounted, at all.

A more concrete example might help to show why the big chain stores are so hard on small businesses. Suppose a chain store sells a $5 box of plant fertilizer for 10% less than the small nursery next door. That's a fifty cent savings for you - which is obviously worth considering - but it's a $5 loss for the nursery. Suppose 100 more people choose to save, rather than buy in the smaller store. That's a 50 cent gain for each customer, but it's a $500 loss for the nursery. The story doesn't end there because, since the 100 customers are already in the bigger store, it doesn't make much sense for them to leave and go next door to buy the other garden products they need. They probably aren't discounted as much as the fertilizer, but they're convenient and they probably don't cost more than they do next door. Perhaps the 100 customers end up spending an average of $10 each. Maybe they save 75 cents over what they would have spent next door, while at the same time depriving the small business of $1000 in sales.

Because the gardening business really only makes money for a month or so each year, the loss of $1000 may be disastrous. And the effects go well beyond the nursery. The chain store carries all the new best-selling books, at a more or less standard 20% discount. Why waste your time driving downtown to your local bookstore, only to pay $8 for a book you can get here for $6.40? The chain store also carries light bulbs, and you also need a screwdriver. No savings on either of those items over what your local hardware sells them for, but since you're in the chain store, why not get them here? Chances are, if you still have a local drug store, the chain will end up taking some business away from them before you eventually get out the door. You left $40 in the big store, saved yourself maybe $2.50, and cost four local businesses $40. Chances are, most of those 99 other shoppers did about the same.

Some countries have actually banned the construction of "big boxes" over a certain size, and have restricted the variety of goods that any one store can sell. To many of us, that probably doesn't really seem like "the American way" to do things. Thankfully, there are less drastic ways to address the large chain store issue in many small communities. Some of the things that others have done might be worth considering in your small town.

·When a new "big box" is offered to you, consider all the angles and don't just automatically think that it will be "good" for your town. If you decide you don't want it, maybe your zoning laws or other regulations will discourage them. Perhaps there are ways to have the store on your terms, not theirs. For example, Bennington, Vermont, fought to have Wal-Mart set up their new store in existing vacant space downtown, rather than building new facilities on the edge of town. [It seems like this may be just as hard on existing local businesses, but it's an example of what might work for you.]

·Just because you have a chain store locally doesn't mean you have to shop there. Try to determine if your savings really are great enough and important enough to you to jeopardize local businesses. Remember that the people who own and operate the small businesses are your neighbors who support your community with their taxes and contributions; who have a stake in the well-being of the town; and who likely put the money that they make from their business into the local businesses of yourself and your other neighbors. 

·If the big store really does have something you can't otherwise get locally, buy it. But use your common sense and your self-control, and leave the store with your $5 purchase, not with a bag of $40 worth of losses for your neighbors.

·Do what other small communities are doing all over the country: banding together to find ways to support one another in business, and to find ways to be more competitive with the large corporations and the big dot.com businesses that are draining your community assets. For example, recent issues of The Home Town Advantage Bulletin discuss examples of self-help community action in such diverse places as Tucson, Arizona; Grand Junction, Colorado; Salt Lake City, Utah; Maui, Hawaii; and Santa Cruz, California.

Most people who like small towns like them because they are small, and because they don't look just like every other city. Preserving the unique character of your town, and stabilizing and diversifying your economic base, often go hand in hand.


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