<The impact of big-box retailers on local communities.
Summary.
Benefits:
Increased local sales leading to increased local tax revenues.
More jobs.
Lower prices for consumers.
Lower price ripple effect.
Greater convenience.
Increased productivity.
Greater sales for nearby restaurants.
Can re-generate run down areas.
Disadvantages:
Low skill jobs.
Poor employee benefits.
Lack of unionization.
A greater social burden.
Retail sales decrease in neighbouring counties that do not have big-box retailers.
Pollution from increased road trips and oil spill run-off from car parks.
Traffic congestion and accidents.
Greater demand for water and sewage facilities.
Increased policing costs.
Increased commerical vacancy rates.
Closure of a big-box retailer can increase local commercial vacancy
rates and negatively affect landlords.
The design of the premises is often ugly.
Variable pricing strategies.
Leads to closure of local retailers.
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Empirical evidence shows that big box retailers have provided numerous benefits.
Increased local sales.
A study by Kenneth Stone of Iowa State University found that counties
with big-box stores had greater sales than neighbouring counties. The
impact of Menards stores was studied. Counties with Menards stores
averaged about $21 million more in sales six years after the store
opened compared to adjacent counties.
Adjacent counties lost about $5 million in sales on average,
indicating that consumers crossed county lines to shop at Menards.
More jobs.
A study by Michael Hicks of Marshall University found that Virginia
counties with Wal-Mart stores experienced a permanent net gain of
about 55 retail jobs.
A University of Missouri study of 1,749 counties nationwide showed
that Wal-Mart counties experienced a permanent net gain of 50 retail
jobs.
Increased productivity.
Between 1990 and 1999, much of the productivity growth in general
merchandise stores was attributed to larger stores and greater use of
?point of sale? technology, such as scanners.
From 1995 to 1999, labor productivity grew 2.3 percent annually,
compared to only 1 percent annually between 1987 and 1995.
One quarter of the 1.3 percentage point increase in productivity came
from the retail sector, and one-sixth of this was mainly due to
Wal-Mart.
Lower prices.
A study by the University of Texas at Dallas found the presence of a
supercenter was associated with a 1.36 point decline in the Consumer
Price Index (CPI) for groceries.
Source: Thinking Outside The Big Box. Pamela Villareal. National
Center For Policy Analysis. February 21, 2005.
http://www.ncpa.org/pub/ba/ba501/
This study looked at the impact of Wal-Mart stores. It found that
there are definite costs and benefits associated with Wal-Mart. It
says that consumers are the clear winners.
Prices.
These can be from 8% to 27% lower than large supermarket chains for an
identical shopping cart of goods. Average savings on groceries alone
can be approximately 29% of an average household budget. This gives
savings of $1,335 for a household of four. Lower prices are especially
beneficial for low-income families as they spend a higher percentage
of their income on necessities such as food.
Lower-price ripple effect.
When Wal-Mart enters the local economy prices in neighbouring stores
tend to drop by typically 1.5% to 3%. Long term reductions reach 13%.
Wal-Mart?s prices also help to keep inflation down.
Workers
A study shows that average retail wages decline by about 7.5%
countywide after Wal-Mart arrives. Another study shows that Wal-Mart
workders earn an average of 31% less than the industry average and 23
% fewer Wal-Mart workers are covered by employer-sponsored health
insurance. However a Wal-Mart job may be a blessing to previously
unemployed workers.
Retail and wholesale employment
One study found a community loses between 180-270 jobs five years
after Wal-Mart opens. Another study found that there is an intial
increase of 100 retail jobs when Wal-Mart opens and that reduces to an
additional 50 retail jobs after 5 years. As Wal-Mart acts as its own
wholesaler this results in a decline of 29 wholesale jobs after
Wal-Mart moves in.
Impact on manufacturing
Wal-Mart?s market position means that it can demand lower prices from
manufacturers which benefits consumers.
Impact on tax revenues.
A study in Iowa found that total sales in the towns increased by 6%
two year after a Wal-Mart opened an held steady through year seven. By
year eight sales started to decline and by year 10, were 4% below
pre-Wal-Mart levels. This was caused by more big-box retailers opening
in nearby communities which resulted in fewer shoppers from
out-of-town.
Impact on social program costs.
A California study found that Wal-Mart employeed use and estimated 38
% more in public assistance programs than the average large-store
retail employee. Another study showed higher poverty rates in a county
with Wal-Mart stores. However these studies have not shown causal
links.
Source: Elena Irwin, Agricultural, Environmental, and Development
Economics. Ohio State University.
http://extension.osu.edu/~news/story.php?id=3515
This article analyses the sales tax benefits of big box retailers.
Surry County benefits from a Wal-Mart store which attracts customers
from neighbouring counties. According to the N.C. Department of
Commerce, the 2001 per capita income in Surry County was $22,912 -
$600 higher than that in neighboring Yadkin. But the $12,589 in retail
sales reported per person in Surry for the 2001-02 fiscal year is
almost $7,000 higher than that in Yadkin. And Surry County ranked 23rd
out of the state's 100 counties in retail sales per person, while
Yadkin ranked 83rd.
Of the 7 cents of sales tax collected for each $1 in retail purchases,
4 1/2 cents goes to the state and 21/2 cents is distributed to the
counties and local governments.
According to James Rambeau, a group manager for the N.C. Department of
Revenue's error resolution/distribution group, half of that 2 1/2
cents goes back to the county where the sale was made.
The other 1 1/4 cents is collected and redistributed based on the
population of the counties.
"In that situation, Yadkin County is essentially getting money from a
sale that's occurring in Wilmington," Rambeau said.
Source: Big-Box Benefits. Lisa Hoppenjans. Journalnow.com.
http://www.journalnow.com/servlet/Satellite?pagename=WSJ%2FMGArticle%2FWSJ_BasicArticle&c=MGArticle&cid=1031775071730
This site gives the benefits of big box retailers as:
Offering low prices and great convenience for an increasingly
time-deprived society.
Increased sales tax revenue.
Issues and concerns:
?Attack? teams are engaged for the first few months of opening. High
initial staffing levels give customers the idea of better service. Low
prices are also offered. Local stores close and the initial staffing
levels are reduced and the prices are raised.
Variable pricing is used to give the impression of big savings.
Customers are dependant on using cars to reach the big box stores this
reduces price comparison.
Increased traffic on local roads leads to greater pollution levels and
costs for road maintenance.
Workers are often not unionized.
http://www.columbia.edu/itc/architecture/bass/newrochelle/extra/big_box.html
This article points out that big box retailers have the ability to
re-generate run down areas. Examples highlighted include:
Passaic, N.J. Last year, it was reported that Wal-Mart was interested
in an old, dilapidated factory in Passaic that has been abandoned
since 1985 as well as a stretch of land along Rte. 21 and the Passaic
River. If you drive down Eight St. and the surrounding area one can
only imagine the positive impact a big-box retailer would have and how
the area would be revitalized and transformed into a thriving retail
center.
Rego Park, Queens. This one-square-mile section of Queens is not
rundown or abandoned as the Passaic site is, but one can still only
imagine how much a big-box retailer, along with the other proposed
residential and business development, would benefit this middle-class
community with an average household income of $51,000.
Red Hook, Brooklyn. IKEA is planning a megastore in a once abandoned
area of Brooklyn along the waterfront. One can only wonder how this
destination furniture retailer will help to revitalize the
neighborhood and lure other businesses as well.
Source: Big box, Big Apple, big benefits. Tony Lisanti. DSN Retailing
Today. February 28, 2005.
http://www.findarticles.com/p/articles/mi_m0FNP/is_4_44/ai_n13490462
This site has links to a number of studies.
Understanding the Fiscal Impacts of Land Use in Ohio by Randall Gross,
Development Economics, August 2004.
Main findings:
In may central Ohio communities, retail development generates a net
fiscal loss to local governments at an average rate of $0.44 per
square foot.
The analyses were not based on ?large or big box? develoment but
rather on all retail within those communities, including CBD, shopping
centers, strip retail, neighbourhood convenience, big box and all
other retail which varied in location and type.
http://www.newrules.org/retail/econimpact.html
Wal-Mart?s Impact on Local Police Costs.
This site gives references to a number of cases where policing costs
have risen including:
Vista, California - A constant stream of arrests at Wal-Mart
contributed to a 24 percent rise in the crime rae. Source: San Diego
Union-Tribune, June 5, 2003.
Port Richey, Florida ? One in four arrests are made at Wal-Mart, which
is straining the local police department. Since the store opened,
non-emergency response times have risen significantly, while traffic
citations have plummeted. An additional police officer has been hired
but the police chief says a further two are needed which would cost
the city more than the $75,000 that the store generates in tax
revenue. Source: Sun-Sentinel, Feb 21, 2005
Fishers, Indiana ? The town reported over 400 calls a year from a
Wal-Mart supercenter. Source: The Indianapolis Star, March 17, 2004.
East Lampeter, Pennsylvania ? District Judge Ronald Savage has had to
add more days to his monthly court calendar just to deal with crimes
at Walmart, which generates almost one-third of his non-traffic
criminal violations, criminal misdemeanors and felony complants ? a
number the judge described as astronomical. Source: Intelligencer
Journal, August 18, 2003.
http://www.newrules.org/retail/policefactsheet.pdf
Summary of the findings of this report which compares the advantages
and disadvantages of big-box retailers:
The jobs created require minimal skills.
Wages in big box stores are relatively low.
Jobs in this sector are anticipated to grow from 10 percent to 20
percent through 2008. In Maryland there were 483,000 retail jobs in
1995, this is projected to rise to 569,200 in 2010 (Source: Maryland
Department of Planning, Data Services, U.S. Bureau of Economic
Analysis.)
Increased sales in the eating and drinking category ? particularly in
restaurants near big box stores. Restaurant sales in towns with a
Wal-Mart increased 3.2 % in the first year after opening then
increased to 4.8 after 3 years then returned to 3.2% after 5 years.
In Iowa restaurant sales in cities with a Wal-Mart rose 0.5% after
year one and rose 2.9% after the first five years.
Speciality store sales in cities with a Wal-Mart rose 0.9% after the
first year and 5.5% after 5 years.
Between 1983 and 1993, smaller towns and rural areas without a
Wal-Mart store experienced a loss of $2.1 billion in total retail
sales.
In Toronto, big-box employment in the categories: supermarkets,
electronics, hardware, toys/sporting goods, and books, and office
products increased by 60.9%. However, employment in the non-big-box
categories decreased 2.1%.
There was a 15% chance that retailers operating on street front
locations in Toronto in the electronics hardware, toys/sporting goods,
and books, and office product categories would close within the year.
From 1994 to 1997, sales in storefront retail strips declined from
53.7% in 1994 to 49.5% in 1997.
Environmental impact.
Big-box retailers generate more truck trips due to higher sales
volumes and merchandise turnover.
The size of most big-box facilities often increase demand for public
water and sewer services. This imposes a fiscal impact on the local
economy.
Big-box retailers are often designed to be inaccessible to
pedestrians. They can lead to increased traffic congestion and
accidents.
Big-boxes can cause problems like excess noise, poor traffic access
management, increased demand for road repair, traffice control and
improved lighting.
Big box development can cause increased pollution. Oil run-off from
the parking surface.
Increased traffic and noise pollution can result in lower prices for
nearby properties.
The number of locally-owned retail businesses declines resulting in
increased unemployment and vacant buildings.
The esthetic appearance of the big-box premises can be detrimental to
the community.
Empty big-box sites contibute to an overall increase in commercial vacancy.
Local landlords lose revenue when a big-box retailer closes or moves.
Source: Maryland Planning Department.
http://www.mdp.state.md.us/mgs/bigbox/bigbox_v3.pdf>
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