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08. Fighting the ChainsSelf -Reliance By Stacy Mitchell, Institute for Local This article originally appeared as a three part series in the New Atlantic Independent Booksellers Association's newsletter, 2000 The chaining of America is proceeding at a staggering pace: 11,000 local pharmacies have failed since 1990. Local hardware stores are losing ground, while two chains now control more than one -quarter of the market. Independent bookstores have seen their market share decline from 58 percent in 1972 to just 17 percent today. Blockbuster rents one out of every three videos. Starbucks has 2,200 outlets nationwide. One firm, Wal-Mart, controls fully 7 percent of all consumer spending. That's the bad news. The good news is that, dismal as the trends are, they are not inevitable. Across the country, citizens are beginning to fight back. They're packing city council and planning board meetings, demanding that chains be denied zoning and building permits, and rewriting local land use rules to protect homegrown businesses and the unique character of their communities. It's a movement that has drawn support from a broad base: consumer advocates, historic preservationists, neighborhood activists, environmentalists, independent business owners, and a growing group of planners and policymakers. The success of this movement hinges on challenging conventional wisdom: Myth One: Chain stores benefit consumers through lower prices and greater selection. Most chains have a stated policy to offer deep discounts when they enter a new market. Translation: undercut the local competition until there is no local competition. Backed by corporate headquarters, a chain store can afford to operate at a loss for as long as it takes to secure a dominant position in the market. Then prices begin to rise. In Virginia, for example, researchers found that prices at several Wal-Mart stores varied by as much as 25 percent depending on the level of local competition. Booksellers know perhaps better than anyone what retail consolidation means for consumer selection. Barnes & Noble certainly carries many titles under one roof, but these are the same titles offered at each of its 1,000 stores. In aggregate, independent booksellers stock --and promote ---far more titles than either of the big chains. They take risks on unknowns and small publishers. I need only drop a few names to demonstrate what this means: Barbara Kingsolver, Charles Frazier, Frank McCourt, and Amy Tan. The same is true of every retail sector. Home Depot and Wal-Martdon't do business with small and mid -sized manufacturers. They only buy from big manufacturers and stock a virtually identical mix of goods in each of their outlets. The end result is fewer choices for consumers, not only in what they buy, but from whom they buy it. Myth Two: Chain stores generate economic growth. Local officials often get dollar signs in their eyes at the prospect of a new chain store coming to town. This is not economic development, however. It is economic displacement. Unlike new manufacturing facilities, which do generate added wealth, new retail stores simply displace sales at existing, often locally owned, businesses. These businesses in turn will experience reduced sales tax revenue, job losses, and potential failure. Several studies confirm that the end result of new chain store development is at best marginal overall improvement in taxes and jobs, and, at worst, a decline. On top of this, communities will lose the tremendous economic benefits of local ownership. Unlike absentee owners, local owners keep profits circulating in the local economy and support other local businesses, like the community bank or neighborhood print shop. Local merchants are more than providers of goods and services; they chair neighborhood organizations, host community events, and contribute more time and money to local causes than absentee -owned firms. Myth Three: This is simply the natural evolution of the economy. If local businesses are failing, it must be that they are inefficient, high-priced, and provide poor service. Certainly some small businesses fail for these reasons, but the tremendous shift from local to absentee -owned retail that has occurred in the last fifteen years is more the result of public policies that tilt the playing field by giving large corporations unfair advantages. There are numerous examples. Failure to enforce antitrust laws has allowed corporate retailers to engage in predatory tactics and to exact price discounts unavailable to independent merchants, even on orders of the same volume. Exempting mail order and Internet retailers from collecting sales tax has given remote businesses a 6-8 percent price advantage over local stores. Land use policies often encourage sprawling retail development on the edge of town, undermining existing business districts. State and local officials have doled out millions of dollars in tax incentives and subsidies to chains. Rarely are public funds given to locally owned stores. It's time to change the rules. Public policy at the very least should ensure fair competition. Given the civic, cultural, and economic benefits of local ownership, a number of communities are going a step further and enacting rules that actively defend and nurture homegrown businesses. Planning for Healthy Main Streets Strong land use planning provides a critical line of defense for communities concerned about the proliferation of chain stores and sprawling big box development. Zoning rules can bolster downtown vitality, retain small-scale, pedestrian -friendly shopping districts, nurture local ownership, and ensure that future development meets the needs and goals of the community. Unfortunately, too many cities and towns learn this the hard way. Residents wake up one morning to discover that Wal-Mart or Borders is on the way. The developer has already submitted a formal application. The site is zoned for large-scale retail and the zoning code allows no opportunity for citizens or municipal officials to review or reject the proposal. Rather than being left to the mercy of developers, a growing number of communities are taking a proactive approach. They are adopting land use rules that limit the growth of chains and protect the community's character and local economy. [see rules at New Rules Project's Retail Sector] Limiting Size Dozens of towns have enacted ordinances that restrict the physical size of new retail stores. Size caps can apply to the entire town or just a particular area. After a bruising five year battle with Wal-Mart, the village of Lake Placid, New York outlawed new stores that exceed 40,000 square feet. In the Northbeach neighborhood of San Francisco, residents concerned about the proliferation of upscale chain ? stores recently convinced the city to prohibit new stores over 4,000 square feet from locating in the neighborhood. [see rules at New Rules Project's Retail Sector] Assessing Community Impact A number of communities now require that new retail development undergo a special review. In order to pass, the development must meet criteria established by the community. Criteria may include impact on the environment, public revenue streams, historic preservation, traffic, the local economy, and community character. In Greenfield, Massachusetts, for example, new retail stores that exceed 20,000 square feet must demonstrate that they will not adversely affect the downtown business district or the character of the community. Although too late to halt construction of a Borders bookstore, the city of Santa Cruz, California last fall adopted an ordinance that requires new stores over 16,000 square feet to obtain a special permit. Designed to enhance the diversity of the business mix, the law requires a new store to demonstrate that it 1) adds a new type of business, 2) contributes to an appropriate balance of local, regional, and national stores, 3) contributes to a mix of small, medium, and large stores, and 4) contributes to a balance of traditional and non-traditional businesses. Noting that locally owned stores will more effectively diversify the business mix, the law presumes local stores automatically meet the criteria, while national chains must make their case to the community. [see rules at New Rules Project's Retail Sector] Barring Uniformity Several communities have outlawed certain types of formula businesses. These include retail stores, restaurants, hotels and other establishments that are required by contract to adopt standardized services, methods of operation, decor, uniforms, architecture or other features virtually identical to businesses located in other communities. These laws do not prevent a chain store from coming in, but they do require that the incoming chain not look or operate like any other branch in the country. This has proven a significant deterrent to chains, which generally refuse to veer from their cookie -cutter approach. Calistoga, California, for example, prohibits formula restaurants and hotels, and requires other formula businesses apply for a special use permit. Boulder, Colorado is currently considering legislation that would bar all types of formula business from locating in most areas of the city. These are a few examples of the many ways cities and towns can use land use policy to support Main Street merchants and buck the chain store trend. Active citizen participation in planning decisions can ensure that the needs of developers take a back seat to the needs of the community. [see rules at New Rules Project's Retail Sector] Building Local Business Alliances Trade associations have played a pivotal role in defending the interests of independent businesses at the national level. Last year, through a coordinated effort led by the ABA and regional associations, booksellers successfully fought the acquisition of Ingram Book Group by Barnes & Noble. This year, attention has turned to abolishing the sales tax exemption for intemet retailers. Many of the most critical battles that independent retailers face, however, are not national in scope, but local. There is a pressing need to build community -wide alliances that can educate citizens about the value of local businesses, effectively fight chain store developments, and urge city officials to enact land use policies that protect the local economy and the character of the community. (Examples of these policies were described in the last March -April issue of this newsletter). Perhaps the way to begin is to convene a conversation. About a year and a half ago, the Institute for Local Self -Reliance held a conference in the Twin Cities. We called it the Place Matters conference and invited directors a wide range of community -based enterprises: the local bookseller, pharmacist, hardware dealer, credit union, community banker, historic preservationist, representatives of public libraries, independent media outlets, food coops, family farmers, and neighborhood nonprofit groups. Nearly all of those we called, and most of these were cold calls, enthusiastically agreed to attend. We learned three things that day: First, community -based businesses and institutions all face common challenges brought on by concentrated economic power, changing technologies, and public policies that favor their big competitors. Second, community -based enterprises are interdependent. Local retailers do business with community banks, which in tum are a major source of loans for family farmers and other small businesses. Family farmers support local merchants in rural towns. Independent media outlets depend on local businesses for advertising revenue. This interdependence means that the vitality of any of these sectors depends on the health of the others. Finally, we teamed that, although each of these sectors is struggling, together they represent a substantial and powerful segment of the economy. A coalition of community -based enterprises in any city would be a powerful force. If Borders Books tries to open a new store, and the local bookseller protests, it is dismissed as mere self-interest. Imagine if the opposition also included the local banker, the hardware dealer, the pharmacist, the cafe owner, the grocer, and members of a variety of community organizations. In 1998, a handful of local business owners decided to launch the Boulder Independent Business Alliance (BIBA), which now includes more than 200 businesses and employs two staff people. The first of its kind, the alliance works to shift consumer spending to local merchants by highlighting the economic and community benefits of supporting locally owned stores. BIBA builds awareness and promotes independent businesses through a variety of shared marketing efforts. Store window decals urge consumers to buy local and identify member -businesses as locally owned. Bumper stickers say "put your money where your house is." Members display and distribute a colorful directory of locally owned businesses. BIBA members have also found ways to directly support each other's businesses through group purchasing and member -to -member discounts. Last year, RIBA drafted the Community Vitality Act and presented it to the city council. This four-part local ordinance would 1) require the city to give preference to local businesses for all city purchases and contracts, 2) require the city to lease city - owned property only to local businesses, 3) limit additional "formula" businesses, and 4) require some new retail stores to undergo a public review before being granted a permit to build. BIBA expects some and perhaps all of the components of the ordinance to be enacted by the city. Regardless of the measure's ultimate fate, David Bolduc of the Boulder Bookstore says it has been well worth the effort. The proposal led to a public forum, substantial media coverage, and much debate, all of which have created a broader understanding of the importance of maintaining locally owned businesses. BIBA is helping seed independent business alliances in other cities. For more information, contact the director, Jeff Milchen, at 303-402-1575 or visit www.boulder- iba.org. The proceedings of ILSR's Place Matters were compiled in a report titled "Closer to Home: A Conversation about Local Ownership and Community," The report and other resources can be download from the New Rules Project web page at http://www.newruies.org/misc/resources.htm New Rules Project Home Page http://www.newruies.org