Archives for July 2012

Holiday shopping choices make a big impact on your community

By Stacy Mitchell

Whether to patronize a chain or a locally owned business is not top of mind for many holiday shoppers, but it should be. It’s a choice that has profound implications for our economy.

If you shop at an independent toy store, such as Be Beep in Annapolis, Maryland, you will likely see products made by Beka, a small toy manufacturer in St. Paul, Minnesota.

A family-owned business, Beka has opted not to sell to chains like Target and Wal-Mart. Doing so, explains co-owner Jamie Kreisman, would require moving production to low-wage factories overseas, which would eliminate what he and his brothers most love about the business: their relationships with their employees and working hands-on with their products.

Beka is healthy, but its future depends entirely on the survival of independent toy stores. Over the last decade, Wal-Mart and Target have aggressively overtaken this sector and now capture 45 percent of U.S. toy sales.

If you buy groceries for your holiday meals at an independent grocer, like Catalano’s Market in Fresno, California, you will find lots of food produced by small-scale, local farmers, such as Paul Buxman.

A second-generation grower of peaches, Buxman nearly lost his farm selling to supermarket chains, which demand cutthroat prices and truckloads of perfect-looking, though often flavorless, fruit that only industrial farms can supply.

With bankruptcy looming, Buxman dropped the chains and forged relationships with independents like Catalano’s. He works hard to give them the best fruit and they honor this by paying a fair price and accepting the natural ebb and flow of supply.

Today, Buxman’s farm is back on track. Catalano’s is doing well too, but owner Michael Catalano worries about Fresno approving still more chain supermarkets and recently a Wal-Mart. Since 1998, the top five supermarket chains, led by Wal-Mart, have doubled their market share and now capture nearly half of all grocery spending.

Patronize an independent CD store, like Waterloo Records in Austin, and you not only support a business owned by a music aficionado, but help to ensure opportunities for new artists. Many beloved bands got their start when a few store owners fell in love with their first albums and began recommending them.

That does not happen at Wal-Mart, Best Buy, and other mass merchandisers, which now account for more than half of all album sales, but stock only chart-toppers and have no room for unknowns.

Chain retailers have expanded dramatically over the last two decades. Home Depot and Lowe’s, barely a blip on the radar screen in 1986, control half of the hardware and building supply market. Barnes & Noble and Borders account for half of bookstore sales. Every sector is now dominated by a couple of chains, and Wal-Mart dominates them all, capturing one of every ten retail dollars we spend.

We assume that the chains represent economic progress, but in fact they take far more out of our economy than they contribute.

As the chains have expanded, tens of thousands of independent retailers have lost their livelihoods and laid off hundreds of thousands of employees. A study by David Neumark at UC-Irvine found that every new Wal-Mart store actually eliminates many more retail jobs than it creates.

The expansion of the chains has triggered a cascade of losses in other economic sectors. Some three million U.S. manufacturing jobs have been eliminated since 1990, in part because the chains have pressured companies, including Black & Decker and Levi’s, to slash costs by moving overseas.

The chains also return very little of what their stores take in back to the communities where they operate. A study in Maine by the Institute for Local Self-Reliance found that only 14 cents of a dollar spent at big-box store remains in the state’s economy.

In contrast, the study found that independent retailers spend more than half their revenue locally. They bank at local banks, hire local accountants, advertise in local media, and require many other local services that chains do not. For mid-sized and smaller cities especially, this is a vital source of economic activity and jobs that pay a middle-class income.

In exchange for all the businesses and jobs they destroy, the chains offer us employment in their stores. Wages for most of these jobs are so low that many big-box employees rely on Medicaid, food stamps, and other taxpayer-funded programs to get by.

None of this looks much like progress. In fact, what the big-box model most closely resembles are the old colonial economies of the European superpowers, which were organized, not to improve the lives of the local inhabitants, but to extract their wealth.

This holiday season, we can declare our independence and begin building a more prosperous economy by forgoing the chains and seeking out locally owned businesses.

Stacy Mitchell is a senior researcher with the Institute for Local Self-Reliance and author of Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses (reviewed here ). 

This article was first written for the Beacon Broadside.

© 2007 Stacy Mitchell

I’ll say this for the featured speakers on the opening day of the recent Montana Economic Development Summit: they were consistent. Speaker after speaker noted Montana must “compete in the global economy” to thrive and how the internet was key to doing so. The clichés quickly grew old, but ideas only become clichés if they present some truth.

Technology and international trade undoubtedly serve an important role in Montana’s economy. Yet the cheerleading for corporate globalization only elevated my skepticism of the keynote speakers’ motives (all out-of-state, white, male millionaires or billionaires). After all, if something really improves people’s lives, you don’t need to tell them repeatedly how great it is.

More concerning was the invisibility of community-serving businesses—hardware stores, grocers, farmers and countless other businesses that serve the everyday needs of Montanans. These businesses may lack the sex-appeal of global exporters, but they are the bedrock of local economic vitality. Moreover, their importance only will grow as transportation costs rise and diminish the advantage wielded by global corporations dependent on cheap fuel and weak regulations abroad.

Unfortunately, Target and Wal-Mart—the only two retailers with tables in the Summit’s exhibition hall—represent the opposite of sustainable economic development. Global chains’ displacement of local businesses ensures more dollars will leave the local economy and fosters dependence on corporations with no real commitment to our communities. The history of Butte, MT, where the summit was held, provides a prime example of how such dependence ultimately can ravage a local economy and environment.

But while these mega-corporations and their entourage of think tanks and public relations firms persuade us of their benefits, the benefits of doing business locally often go unappreciated or ignored.

We have much to gain personally from the knowledge, personal service, and quality offered by independent businesses, but the economic benefits are less obvious. Independent local businesses typically hire local designers, sign makers and attorneys to get started. Whether employing people in-house or hiring other local firms, they create opportunities for insurance brokers, computer consultants, advertising agencies and others.

In contrast, global chains typically open a clone of their other units. Locally, they employ many clerks and cashiers, but provide few higher paid jobs and use minimal local goods and services. Meanwhile, profits exit town to corporate headquarters. Thus, local independent merchants recirculate three or more times as much of each dollar in the local economy as chain stores—a multiplier effect that drives economic growth far more than attracting outside entities.

Independent businesses often look for ways to stand out in their communities, embracing unique and memorable tools that reflect their commitment to quality and personal service. One such tool is the use of metal business cards, which offer a level of sophistication and durability that traditional paper cards lack.

Unlike generic cards, Metal Kards add a distinctive touch that resonates with clients and colleagues alike, symbolizing the business’s dedication to excellence and individuality. These cards often become conversation pieces, helping local businesses establish a lasting presence in the minds of potential customers while enhancing their brand’s image.

In today’s digital age, standing out in a crowded market isn’t just about physical presence—online visibility is just as crucial. SEO (Search Engine Optimization) is essential for independent businesses aiming to increase visibility and reach a broader audience. Effective SEO strategies not only help improve a website’s ranking on search engines but also ensure that a business’s online presence reflects its unique qualities and values.

Just like a well-crafted metal card, a strong SEO strategy leaves a lasting impression, helping local businesses build credibility and trust with potential customers who are actively searching for services. One powerful aspect of SEO that can significantly enhance a business’s online presence is link building.

By obtaining quality backlinks from reputable sources, businesses can improve their domain authority and overall search engine ranking. SERPninja is an excellent resource for businesses looking to grow their backlink profile. With its proven strategies for acquiring high-quality, relevant links, this company helps businesses build a strong online foundation.

By focusing on these organic methods of growth, local businesses can create a digital presence that mirrors the trust and connection they foster with their community, establishing themselves as a prominent force in both the local and online markets.

Small manufacturers and service industries also have a stake in the health of these entrepreneurs, who are more willing give their new products and services a chance. Independent businesses, in many realms, are interdependent; their fortunes rise and fall together.

Further, local businesses also return a greater percentage of sales to civic events and community causes, though you don’t often see them photographed with table-sized checks to call attention themselves.

Despite “globalization” hype, understanding the multiplier effect and the benefits of a local ownership is crucial to intelligent, sustainable development in our communities.

Retail chains boast how their stores create hundreds of jobs, but “create” is simply a euphemism for “relocate.” We don’t suddenly need more toasters or toilet paper when a big box store opens. As a result, nearly 85% of sales at new big box discount stores come directly from existing local businesses. Combine this impact with the efficiency of consolidating most well-paying jobs at headquarters, and most chains become net disemployers.

Chain proliferation hasn’t just resulted from market competition; it’s had plenty of help from what Stacy Mitchell, author of the outstanding book Big Box Swindle , calls “the invisible hand of Uncle Sam.” For local officials luring a new national chain is politically seductive and much easier than actual job creation. As a result many chains receive millions of dollars in local and state subsidies—creating a decidedly uneven playing field for independent competitors (whether or not such subsidies are offered locally).

The real giants like Wal-Mart are masters of extracting public subsidies, but they’re not alone. For example, Cabela’s is seeking to move into Montana, starting with Billings, but prefers not to compete in a “free market.” The corporation is seeking municipal subsidies that few (if any) Montana outfitters enjoy.

Tax evasion schemes also unfairly handicap entrepreneurs who pay their fair share of taxes—and raise them for the rest of us. Incredibly, when State Senator Jim Elliot investigated corporate income taxes in Montana, he discovered 40 percent of the largest 500 corporations doing businesses in Montana paid less than $500 in state income taxes in 2002. Such perverse practices must change to create a level (or better) playing field for homegrown businesses; chains already have enough laws rigged in their favor nationally.

For long-term progress, a conceptual change also is necessary. As citizens, we should consciously plan our future with rules that will encourage the values we want reflected in our communities. And as consumers, each time we spend money, we should weigh the full value of our choices, not just for ourselves short-term, but for the future we want in our own hometowns.

By Jeff Milchen, co-founder of the American Independent Business Alliance, which helps communities around the country form coalitions that help independent business compete effectively and prevent chains from displacing local entrepreneurs.