COMMENTARY: Retail revolution | Why shopping locally — and avoiding the big boxes — will help Maine's economy

Senior researcher, Institute for Local Self-Reliance, Portland

This is the season when our thoughts turn to both giving presents and giving back to our communities. We do more retail spending during December than any other month and, as our donations and volunteering make clear, we're especially attuned to the common good. Both factors make this an excellent time to reflect on the importance of Maine's homegrown businesses, their contributions to our communities and their future.

Vital, yet often undervalued, locally owned retail businesses give our towns their unique character. They contribute a great deal to the well-being of our communities by providing leadership and financial support for civic and charitable organizations. And, perhaps most significantly, they're powerful economic engines for both their hometowns and the state as a whole.

Yet Maine's local businesses have faced a tough road over the last 15 years. Hundreds have gone under as big national chains have moved in and siphoned off a larger share of consumer spending.

More such development is on the way. Nearly three million square feet of new big-box stores already are planned for Augusta, Biddeford, Brunswick and Topsham.

And developers hope to build even more. If you think the big chains have already reached full build-out, consider that, while Wal-Mart captures roughly 10% of all retail sales in Maine, in some midwestern states the retailer accounts for fully one-quarter of spending. To attain that market share here, which Wal-Mart undoubtedly wants to do, it will need to build more than two dozen additional superstores across the state.

But while the chains may not have reached their limit, perhaps we've reached ours. Many big boxes already are here to stay. The question is whether Maine communities should take steps now to maintain a degree of balance ˆ— to ensure that there's still room for independent entrepreneurs in our economy, and that small businesses continue to have an opportunity to compete and thrive.

The stakes are high, not only for our landscape and the vitality of our town centers, but also for Maine's economy, particularly in the following areas:

Job creation
Local economies composed of many small businesses create more, and often better paying, jobs than those dominated by a few large retailers.

Although towns continue to welcome chain stores for the jobs they provide, many studies have found that by displacing sales at existing businesses, which then either downsize or close, new megastores ultimately destroy as many as or more jobs than they create.
The new jobs at Target or Wal-Mart, moreover, often pay less and offer fewer benefits than the jobs they eliminate. A recent University of California study found that the average Wal-Mart employee relies on about $2,000 annually in housing, health care and other public assistance to make ends meet.

Even more significant are the many non-retail businesses that depend on independent retailers for all or part of their livelihood. Last year, the Institute for Local Self-Reliance conducted a study that found that more than half of the revenue taken in by locally owned stores is re-spent within the state. Local retailers bank with local banks, advertise in local media, purchase goods and supplies from local firms, and hire local accountants, printers, Web designers and so on.

When national chains come in and displace spending at local stores, this engine of economic activity grinds to a halt. Only 14% of the dollars spent at national chains stays within the Maine economy.

Taxes
Small downtown and neighborhood businesses help to reduce sprawl by maintaining the viability and appeal of traditional town centers and mixed-use neighborhoods. These compact, walkable areas are very efficient users of public services. Downtown businesses generate a tax surplus ˆ— that is, they pay more in local taxes than they require in services.

In contrast, retail sprawl is costly from a public services standpoint. As malls and big-box stores have proliferated, Maine residents are logging three times as many road miles for shopping as they did a generation ago. This pattern entails much higher road construction and maintenance costs. Studies in Ohio and Massachusetts have found that big-box stores actually require more in public services than they generate in local tax revenue.

Long-term prosperity
Maine has few economic advantages. It's not the cheapest place to do business, nor is it a major market. Our biggest asset is our quality of life. Compared to other regions, we have livelier downtowns, more local character, more one-of-a-kind stores, more open space, cleaner lakes and rivers, and less traffic. These qualities, more than anything else, draw entrepreneurs and investment (not to mention tourists) to Maine.

But these assets are being depleted steadily by big-box sprawl. With each new chain store, Maine loses some of its local character and becomes more like the rest of the country.

Community
Locally owned businesses build strong communities. Studies by Thomas Lyson at Cornell University have found that counties with numerous small businesses have a larger middle class, more social capital and higher rates of civic engagement, compared to those dominated by a few large companies.

Competition
Chains provide low prices when they first come into an area, but vigorous competition among multiple businesses is critical to delivering sustained consumer benefits over the long term. Price surveys conducted in Maine and Nebraska have found that the cost of a basket of goods at different Wal-Mart stores across each state varied by as much as 16%. Prices were lowest in areas where Wal-Mart is fairly new and still faces competition, and highest in those communities where the retailer has largely eliminated rivals.

Setting a policy
These costs are "externalities" in the sense that they do not show up on price tags at Wal-Mart and Home Depot, but are borne by the community at large ˆ— which means that we should weigh these impacts not only in terms of where we shop, but also in terms of our public policy decisions.

Many communities across the country are adopting policies and strategies to curb excessive big-box development and strengthen locally owned retail. Our report describes dozens of these strategies, drawing on concrete examples from across the country.

They encompass a broad range of approaches, from planning and zoning policies to small business development strategies and public education initiatives. Ideally, communities should pursue several at once. Here's a sampling of the strategies included:

Funnel new retail downtown
Using zoning restrictions and incentives, Hudson, Ohio, a town of 23,000 people 30 miles south of Cleveland, has managed to steer new retail investment into its downtown. An extensive development completed this year adds two new streets to the downtown and more than doubles the leaseable space. The new buildings mimic Hudson's 19th century Main Street, with small storefronts on the first floor and offices and condos above. By agreement with the city, at least half of the storefronts will be leased to local businesses. In November, voters overwhelmingly endorsed existing zoning rules, which ban retail development on the outskirts of town.

Mandate appropriate sizes
When the town of Bennington, Vt., learned earlier this year that Wal-Mart wanted to replace its existing 50,000-square-foot store with a 150,000-square-foot supercenter, officials moved quickly to ban stores over 75,000 sq. ft. "The concern has been that if a single retailer becomes too large and too powerful it destroys all competition in the marketplace," said Bennington planning director Dan Monks. Store size caps have been enacted in dozens of cities nationwide.

Establish impact standards
Cities and towns commonly make decisions about retail development without objective information on the potential costs and benefits. Often, in fact, the only economic data available comes from the developer. Officials may know how many jobs a project will create, but they rarely know how many it will eliminate, or how much of a burden it will place on public services. To ensure adequate scrutiny of retail development, some towns now require large retail projects to undergo a comprehensive community impact review to gain approval.

Launch a revitalization program
One of the most effective programs for bringing an ailing downtown back to life is the Main Street model, a multifaceted approach developed by the National Main Street Center. Maine communities can get help implementing this approach from the Maine Downtown Center, which provides extensive training and technical assistance.

Encourage mixed uses
Bringing housing and second-floor offices downtown, as Gardiner and Bath are doing, creates more foot traffic and enlarges the customer base for local retailers.

Create space for entrepreneurs
In the Andersonville neighborhood of Chicago, many of the independent businesses that line the lively Clark Street commercial corridor got their start in an incubator building where small storefronts were leased to new entrepreneurs at minimal cost. Once established, the businesses moved on to full-sized, market-rate spaces elsewhere on the street. Community-owned incubators could be established in Maine towns and managed through community land trusts.

Set up a revolving loan fund
Some communities provide locally owned businesses with matching grants and low-interest loans to fund expansion, storefront renovations and other improvements.

Connect with buying cooperatives
Regional and national purchasing cooperatives have sprung up in numerous retail sectors over the last few years. New co-ops for bicycle dealers and lighting stores, for example, have helped independents to differentiate their stock from chains and to gain some of the benefits of scale.

Launch a "local first" campaign
In two dozen cities, independent businesses have joined forces to launch "buy local" marketing campaigns. Through in-store displays, advertisements and events, these campaigns work to remind people of the value of local businesses and to consider how their spending decisions shape the future of the community. (Maine Businesses for Social Responsibility will be coordinating these campaigns in communities across Maine in early 2005.)

Start a loyalty card program
Independent retailers on the Hawaiian island of Maui have started a joint loyalty card program called Ohana Savers. The cards have magnetic strips that enable customers to accumulate points on purchases and redeem the points at any of the participating local businesses. Having the cards in their wallets encourages consumers to think of their local providers first, before turning to a chain.

The current trends for Maine's local retailers are sobering. But trends are not destiny. Communities have choices. As the strategies described in this report suggest, we need not accept a one-size-fits-all model of development, nor relinquish our homegrown businesses to the dustbins of history. Rather, we can take steps now to ensure that Maine's retail sector continues to be dynamic, competitive and filled with opportunities for locally owned businesses.