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  • From: "Tradingpost" <tradingpost@gilanet.com>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] Fwd: The Home Town Advantage Bulletin - February 2003
  • Date: Sat, 01 Feb 2003 07:33:40 -0700

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On 1/30/2003 at 6:15 AM Stacy Mitchell / New Rules Project
<home_town_advantage@topica.email-publisher.com> wrote:

>The Home Town Advantage Bulletin
>Issue #13 - February 2003
>
>
>CONTENTS
>
>-- About this Bulletin
>LOCALS: 4, CHAINS: 0
>-- Local Stores Create Triple the Economic Activity of Chains
>-- Big Box Stores Drain City Revenue, Study Finds
>-- Another Survey Finds Independent Pharmacies Cheaper than Chains
>-- Small Businesses Pay Their Employees. Wal-Mart Doesn't.
>LOCAL BATTLES
>-- Cape Cod Coalition Promotes Local Ownership
>-- Taos, New Mexico, Battles Big Boxes... Again
>-- Historic Georgia Community Fights Wal-Mart
>-- Midcoast Maine Residents Oppose Coastal Home Depot
>INTERNATIONAL NEWS
>-- McDonald's Defeated in Oaxaca, Mexico
>-- British Government Rejects Big Box Sprawl
>ALLIANCES AND COOPERATIVES
>-- Community-Owned Department Stores Replace Chains
>-- Charleston Merchants Join Forces to Promote Local Stores
>NEW RULES
>-- Supermarket Concentration Harms Farmers and Consumers
>ANTITRUST
>-- German High Court Convicts Wal-Mart of Predatory Pricing
>-- Wal-Mart's Purchase of Puerto Rico Chain Challenged
>
>
>ABOUT THIS BULLETIN
>
>In communities across the country, citizens are taking action to defend
>and strengthen their local economies. The Institute for Local
>Self-Reliance (ILSR) has been tracking these efforts and will use this
>bulletin to provide bimonthly updates on significant developments. We hope
>it will serve as a tool for making connections and sharing strategies
>within this growing movement. We encourage readers to share news and
>resources by sending email to smitchell@ilsr.org.
>
>ILSR is a nonprofit organization providing research, analysis, and
>innovative policy solutions for building healthy communities and strong
>local economies. This bulletin is part of ILSR's New Rules Project
>(http://www.newrules.org), which publishes a quarterly journal, The New
>Rules; several electronic bulletins on specific issues; and books,
>including The Home Town Advantage: How to Defend Your Main Street Against
>Chain Stores and Why It Matters. We also maintain a web-based
>clearinghouse of model public policies at http://www.newrules.org.
>
>Another good source of news on local efforts to keep megastores at bay is
>the NewsFlash! section of the Sprawl-Busters web site
>(http://www.sprawl-busters.com). Additional links and organizations are
>listed at the end of each story.
>
>If you're not already receiving this newsletter directly, subscribe by
>sending a blank email to:
>home_town_advantage-subscribe@topica.email-publisher.com To unsubscribe,
>send a blank email to:
>home_town_advantage-unsubscribe@topica.email-publisher.com.
>Back issues are available at http://www.newrules.org/hta/index.htm.
>
>
>I. LOCALS: 4, CHAINS: 0
>
>LOCAL STORES CREATE TRIPLE THE ECONOMIC ACTIVITY OF CHAINS
>
>When you spend $100 at the chain Borders Books & Music, your purchase
>creates only $13 worth of local economic activity. That same $100 spent at
>locally owned book or record store generates $45, or more than three times
>as much local economic activity.
>
>That's the conclusion of a new study conducted by Civic Economics and
>published by Livable City in Austin, Texas. The study, "Economic Impact
>Analysis: A Case Study," examines the local economic impact of two of
>Austin's venerable independent businesses---Waterloo Records, widely
>considered to be the best music store in the nation, and Book People, a
>beloved, 32-year-old bookstore. The study compares their contributions to
>the local economy with the economic return the community would receive
>from a typical Borders store.
>
>The study was prompted by plans to develop a retail complex that will
>include a 25,000-square-foot Borders outlet and a Whole Foods store at the
>same intersection where Waterloo and Book People are located. The
>development is slated to receive $2.1 million in public subsidies.
>
>"This analysis demonstrates a clear failure of public policy to steer
>desirable development at the site in question," the study concludes. "As
>presently configured, new development at the corner will yield a net loss
>to the local economy. Moreover, previous decisions have placed the city in
>the position of subsidizing such an outcome."
>
>The two local stores opened their books to Civic Economics so the firm
>could track how much of their incoming revenue is re-spent in the local
>area. According to the study, every $100 in sales at Waterloo and Book
>People returns $30 directly to the local economy. Using a standard
>multiplier (an estimate of how many times dollars re-circulate locally)
>and accounting for induced effects (greater household spending due to
>greater economic activity), the study concludes that the direct return of
>$30 results in a total local economic impact of $45.
>
>For the Borders comparison, Civic Economics relied on numerous
>sources---including interviews with former employees, the company's public
>records, and studies of similar stores conducted by Bank of America---to
>develop an estimate of what happens to dollars spent at a typical Borders.
>The study concluded that every $100 spent at Borders results in a direct
>return of $9 and a total local economic impact of $13.
>
>The gap in direct return ($9 vs. $30) can be attributed to three factors.
>First, Waterloo and Book People have larger payrolls. "When people wonder
>why there's such a big difference, I tell them to go up to the fourth
>floor of Book People and look at all the professionals writing ad copy,
>buying inventory, and doing accounting," says Dan Houston of Civic
>Economics. Borders houses all of these functions at its headquarters in
>Ann Arbor, Michigan.
>
>Another factor is that, compared to chains, locally owned businesses
>purchase more goods and services locally. Waterloo, for example, generates
>$600,000 annually in consignment sales of CDs by local bands which are
>recorded and produced locally. "The plastic case on the CD is about the
>only component that comes from out-of-state," notes Houston. Although
>Austin's Borders stores do have sections featuring local bands, they only
>sell CDs from major labels, which return little of the sale price back to
>the Austin economy.
>
>The last factor is that a much larger share of the profit at a locally
>owned store stays in the local economy compared to a chain.
>
>The study concludes that a typical Borders store generates $820,000 in
>local economic activity, compared to $2.8 million generated by Book
>People, which is roughly the same physical size as Borders at 22,000
>square feet. Waterloo, which is smaller but has higher sales per square
>foot, pumps $4.1 million into the Austin economy.
>
>Finally, the study looks at the likely competitive impact of the proposed
>Borders store. The study estimates that half of Borders' sales will be
>siphoned from Waterloo and Book People.
>
>The study then considers three scenarios---one in which Borders
>experiences better than industry average sales growth, one in which growth
>is average, and one in which the store's revenue declines over a period of
>five years. For each scenario, the study finds that local economic
>activity will decrease---despite the fact that a new Borders will boost
>the area's overall retail sales. In the average scenario, the study
>predicts the city will experience a net loss of $2.4 million in economic
>activity over five years.
>
>"Redeveloping this corner is important, but it must be done without
>hurting the economy and nearby local businesses," declared Bill Spelman,
>chair of Livable City. The group hopes the study will persuade Austin to
>withdraw public subsidies for the project.
>
>-- Civic Economics provides economic analysis and strategic planning, and
>is looking for opportunities to conduct similar studies in other
>communities. http://www.civiceconomics.com
>-- For a copy of the Austin study, go to Livable City at
>http://www.liveablecity.org.
>
>
>BIG BOX STORES DRAIN CITY REVENUE, STUDY FINDS
>
>Big box retail, shopping centers, and fast-food restaurants cost taxpayers
>more than they produce in revenue, according to a fiscal impact analysis
>in Barnstable, Massachusetts.
>
>The study, conducted by Tischler & Associates, compares the tax revenue
>generated by different kinds of residential and commercial development
>with the actual cost of providing public services for each land use.
>Barnstable is a community of 48,000 people on Cape Cod.
>
>The study found that big box retail generates a net annual deficit of $468
>per 1,000 square feet. Shopping centers likewise produce an annual drain
>of $314 per 1,000 square feet. By far the most costly type of development,
>according to the study, are fast-food restaurants, which have a net annual
>cost of $5,168 per 1,000 square feet.
>
>In contrast, specialty retail, a category that includes small-scale Main
>Street businesses, has a positive impact on pubic revenue (i.e., it
>generates more tax revenue than it costs to service). Specialty retail
>produces a net annual return of $326 per 1,000 square feet. Other
>commercial land uses that are revenue winners include business parks,
>offices, and hotels.
>
>"This study shatters the common misperception that any sort of growth
>creates revenue," says Christopher Cullinan of Tischler & Associates, a
>fiscal, economic, and planning consulting firm. "Communities often talk
>about development in terms of the new revenue it will bring, but they
>rarely give serious considerations to the on-going costs of servicing that
>development."
>
>The two main factors behind the higher costs for big box stores, shopping
>centers, and fast-food outlets, compared to specialty retail shops, are
>higher road maintenance costs (due to a much greater number of car trips
>per 1,000 square feet) and greater demand for public safety services.
>
>-- Tischler & Associates: http://www.tischlerassociates.com
>
>
>ANOTHER SURVEY FINDS INDPENDENT PHARMACIES CHEAPER THAN CHAINS
>
>In the last issue of this newsletter, we reported on two price surveys
>conducted by the state of Maine and New York City that found that
>independent pharmacies had lower prescription drug prices compared with
>chain drugstores, supermarkets, and mass merchandisers like Wal-Mart.
>
>In December, another prescription price survey conducted by the New York
>Statewide Senior Action Council in Albany, New York, concluded, "The
>lowest prices for generic drugs were found at an independent pharmacy. . .
>contrary to the belief that chain drug stores with high volume purchases
>would pass on the savings to customers."
>
>For example, prices for Lovastatin, a cholesterol medication, ranged from
>$84.50 at the independent Lincoln Pharmacy to $199.97 at Rite Aid. The
>online pharmacy Drugstore.com offered Lovastatin it for $99.99, Wal-Mart
>for $136.62, and Target for $146.39.
>
>-- Senior Action Prescription Drug Price Survey:
>http://www.nysenior.org/generic.htm
>
>
>SMALL BUSINESSES PAY THEIR EMPLOYEES. WAL-MART DOESN'T.
>
>In December, an Oregon jury found Wal-Mart guilty of forcing employees in
>eighteen stores to work extra hours without pay. A separate jury will
>determine damages in the class-action lawsuit.
>
>Employees testified that store managers used a variety of tactics to
>extract unpaid labor, including requiring employees to work after they had
>punched out for lunch, locking the doors at night to prevent off-the-clock
>employees from leaving until certain tasks were complete, and manipulating
>employee timecards.
>
>Carolyn Thiebes, a former store manager, testified that she routinely
>docked overtime hours from workers' paychecks at the direction of her
>supervisors and pushed employees to work more than 40 hours a week without
>pay to finish assigned tasks.
>
>Wal-Mart insists such practices are isolated and are not part of a
>company-wide strategy. But several former store managers have described
>intense pressure from Wal-Mart headquarters to keep labor costs low. They
>say the company made it impossible to meet the requirements without
>forcing employees to work unpaid hours.
>
>Indeed, lawsuits against Wal-Mart for unpaid work are now pending in at
>least 30 states. Wal-mart "has ridden the backs of its hourly employees to
>extreme profitability," reads one suit filed in Michigan. In many towns,
>Wal-Mart controls most of the retail employment, leaving workers little
>choice but to accept its terms.
>
>So far, Wal-Mart has settled out of court in two cases, reportedly paying
>$50 million in a class-action suit involving 69,000 employees in Colorado
>and $500,000 in a case brought by 120 workers in Gallup, New Mexico. The
>Oregon case is the first to go to trial.
>
>With more than one million employees nationwide, Wal-Mart's free labor
>could add up to tens of millions of dollars, harming retail workers and
>giving the company a significant illegal advantage over small businesses
>that pay employees their full due.
>
>-- Wal-Mart Watch: http://www.walmartwatch.org
>-- "For Wal-Mart employees, another side to the coin," by Kathy Watson
>http://www.hoodriversfuture.org/newsreleases.htm
>
>
>II. LOCAL BATTLES
>
>CAPE COD COALITION PROMOTES LOCAL OWNERSHIP
>
>"Now you know who really has your interests at heart," reads a recent
>advertisement in the Cape Cod Times that explains that a locally owned
>business returns a much larger share of its revenue to the local economy
>compared to an absentee-owned chain.
>
>The ad is part of a series of ads published in Cape Cod newspapers last
>fall by a new grassroots organization called the Smart Planning and Growth
>Coalition (SPGC). The group formed last year with the goal of promoting a
>more sustainable economy based on small, locally owned businesses and
>higher wage industries.
>
>Cape Cod is one of the few regions of the nation governed by a regional
>planning body, the Cape Cod Commission, created by voters in 1990. All
>developments over a certain size (10,000 square feet in the case of
>retail) must gain approval from both the town and the CCC, which reviews
>proposals according to a set of environmental and economic criteria.
>
>The CCC is also responsible for crafting an overall vision for development
>on the Cape. The current Regional Policy Plan (RPP), adopted in 2002, says
>that the region should focus on creating locally owned businesses,
>channeling new investment and growth into existing town centers, and
>limiting megastores and retail sprawl.
>
>The goals are great, says SPGC, but not enough is being done to implement
>the vision. Many towns have not incorporated these goals into their own
>local comprehensive plans. The CCC itself can only respond to development
>in a piecemeal fashion, and its standards for reviewing the economic
>impact of chain retail projects are much too weak. Out of twelve-pages of
>minimum standards that projects must meet, only three lines are devoted to
>economic impact.
>
>Over the last few years, the Cape has been inundated with proposals from
>big box retailers and smaller chain stores. Wal-Mart opened its first
>store on the Cape in an abandoned Bradlees outlet in the town of Falmouth.
>Home Depot is likewise proposing to open in an old Bradlees in Hyannis.
>Stop & Shop is building a 70,000 square foot store in Orleans.
>
>Thanks to the CCC and regional planning guidelines, these stores are
>significantly smaller than their counterparts elsewhere and are located in
>existing retail buildings.
>
>But those factors only slightly mitigate their cumulative impacts on the
>Cape's economy, according to SPGC Executive Director Felicia Penn. She
>says the stores undermine locally owned businesses, drain dollars from the
>region's economy, and strain town budgets. She points to a recent study in
>Cape's largest town, Barnstable, that found that big box stores require
>more in pubic services than they return in tax revenue (see article above).
>
>Cape Cod is already "over-stored," according to SPGC. Retail space per
>capita is many times the national average. Low-wage service jobs account
>for nearly one-third of the Cape's employment, and 29 percent of all
>families do not make enough to cover basic living expenses. Chain stores
>are not only adding to problem of low-wage jobs, but may be impeding
>higher wage businesses by consuming the region's limited land and eroding
>its historic character and appeal.
>
>All of these themes were highlighted in SPGC's print ads, which can be
>viewed on its web site.
>
>The group plans to focus mainly on research and education during the next
>year. It has been giving presentations to town councils and community
>organizations, will soon begin running material on public access
>television, and has a emerged as a regular voice in the local media on
>economic development issues.
>
>SPGC is also committed to fighting harmful development proposals.
>Currently the group is working with other organizations to block a
>proposed BJ's warehouse store in Hyannis. It would be the first
>free-standing big box on the Cape---"the camel's nose in the tent,"
>according to Penn.
>
>-- Smart Growth and Planning Coalition: http://www.gotcommunity.org
>-- Association to Preserve Cape Cod: http://www.apcc.org
>-- Cape Cod Commission: http://www.newrules.org/retail/capecod.html
>
>
>TAOS BATTLES BIG BOXES... AGAIN
>
>Hundreds of citizens packed a Town Council meeting in Taos, New Mexico, in
>late January to voice their opposition to a proposed Wal-Mart supercenter.
>
>With the meeting room filled to capacity, many were forced to sit out the
>proceedings in other rooms, hallways, and even outside the building. More
>than 70 people testified against the development over a three-and-a-half
>hour period. Opponents wore green ribbons to identify themselves and
>presented a petition with 6,800 signatures. Small business owners held up
>green signs with the names of their stores and the number of people they
>employ.
>
>Wal-Mart already has a 70,000-square-foot store in this historic mountain
>town. The company wants to build a 180,000-square-foot supercenter that
>would combine general merchandise with a full supermarket and numerous
>specialty items from cut flowers to eye glasses.
>
>An earlier attempt by Wal-Mart to build a supercenter was defeated three
>years ago. Afterwards, the Taos Town Council adopted a zoning law that
>prohibits stores over 80,000 square feet, about twice as large as a
>football field but less than half the size of a supercenter.
>
>But this fall, seemingly out of the blue, two residents presented the town
>manager with a petition containing 7,000 signatures in support of a
>Wal-Mart supercenter (the validity of at least one-quarter of the
>signatures has been called into question). Proponents took out large ads
>in The Taos News and have convinced the Town Council to reconsider the
>80,000-square-foot limit.
>
>The two men leading the campaign for Wal-Mart, Santiago Chavez and Ramon
>Trujillo, will not say who is funding the ads and paying their salaries.
>An out-of-state developer has optioned land on the edge of town presumably
>to build a shopping center anchored by Wal-Mart.
>
>Proponents of the development have attempted to divide the community along
>ethnic lines, painting opponents as white newcomers who care little about
>unemployment among Hispanics.
>
>The characterization has angered many Hispanic small business owners. More
>than 290 businesses employing 1,700 people have come out against the
>development. In December, the Hispano Chamber of Commerce passed a
>resolution opposing Wal-Mart.
>
>Resident Arsenio Cordova contends that, at the very least, the Town
>Council needs to conduct a thorough economic impact study. He contacted
>several New Mexico communities—including Las Vegas, Trinidad, and
>Espanola---which all reported losing grocery stores and other locally
>owned businesses soon after supercenters opened.
>
>Anther concern, according to Hilario Serrano, manager of Randall Lumber
>and Hardware, has to do with Wal-Mart's wages. He says local businesses
>pay significantly more, especially the town's three unionized grocery
>stores.
>
>-- Examples of Size Caps: http://www.newrules.org/retail/size.html
>
>
>HISTORIC GEORGIA COMMUNITY FIGHTS WAL-MART
>
>Two churches and a long-time resident of the historic Sandfly community
>near Savannah, Georgia, have sued city and county officials to block a
>proposed Wal-Mart supercenter. The lawsuit claims the officials violated
>planning and zoning laws in approving the development.
>
>Settled by slaves in the 1700s, Sandfly is one of the nation's oldest
>African-American communities. Until recently, most homes is this
>tight-knit village were built by residents themselves with everyone in the
>community pitching in to help. "Sandfly is a way of life," said James
>Miller. "It's basically family and I don't mean individual family, I mean
>community."
>
>Wal-Mart wants to build a 204,000-square-foot supercenter on a 52-acre
>site that was once a drive-in movie theater and more recently a ball field
>for a nearby church.
>
>Residents organized as Save Our Sandfly ("SOS") have used lawn signs,
>letters to the media, and turn-out at public meetings to fight the
>development. SOS has enlisted the support of several state and national
>organizations, including the Georgia Conservancy, the NAACP, and the
>National Trust for Historic Preservation. Two years ago, a similar effort
>led Target to drop plans for a store at the same location.
>
>Sandfly falls under the jurisdiction of the Savannah Metropolitan Planning
>Commission. Despite opposition from the county commissioner representing
>Sandfly, in October the MPC voted to approve the Wal-Mart. Opponents say
>the decision-making process clearly violated zoning laws. The issue is now
>before a state court.
>
>
>MIDCOAST MAINE RESIDENTS OPPOSE COASTAL HOME DEPOT
>
>Residents of the midcoast region of Maine are petitioning the state
>Department of Environmental Protection (DEP) and the US Coast Guard to
>deny permits to a planned Home Depot store in the town of Rockland.
>
>The 100,000-square-foot store is slated for a 24-acre site along the coast
>near Route 1. The project was approved by the Rockland Planning Commission
>in October. It still needs permits from the DEP, which is accepting public
>comment through February and is expected to issue a decision in March.
>
>Concerned citizens say the project violates state law by creating visual
>pollution and noise, destroying wetlands, harming existing uses, and
>damaging the scenic beauty of Penobscot Bay.
>
>In a letter to the DEP, Ron Huber of Penobscot Bay Watch points out that
>the Home Depot "would be the largest and highest major light-emitting
>facility on the West Penobscot Bay coast." Constructed at elevations of 50
>to 150 feet above sea level, the store's nighttime visual footprint "would
>extend at minimum across a ninety degree swath of west Penobscot Bay and
>its islands and coasts." The store's air conditioning, lumber yard, and
>car traffic would produce a "continuous low frequency hum, annoyingly
>audible well throughout the harbor and beyond."
>
>The harm to the scenic character of the bay could severely impact the
>region's thriving tourism and commercial wind jamming industry. Add to
>this the impact on existing hardware businesses and downtowns, and the
>project is likely to destroy more jobs and tax revenue than it creates.
>
>Penobscot Bay Watch has also petitioned the US Coast Guard to block the
>development. The store's lights would be at about the same elevation as
>two lighthouses, and thus pose an illegal navigation and safety hazard.
>
>-- If you live in or visit the region, the DEP needs to hear from you on
>why this project should not go through. For the DEP's address and guidance
>on what to write, see PBW's letter at
>http://www.penbay.org/hdepotdep122k2.html.
>
>
>III. INTERNATIONAL NEWS
>
>MCDONALD'S DEFEATED IN OAXACA, MEXICO
>
>Officials of Oaxaca, Mexico, have turned down an application by McDonald's
>to open an outlet in a 500-year-old plaza at the center of town. "There
>are values that we have to preserve, such as our traditions and culture,"
>city leader Gabino Cue Monteagudo said. A local ordinance allows local
>officials to reject development projects that endanger the city's cultural
>heritage.
>
>As we reported in the last issue of this newsletter, residents organized a
>spirited campaign against the global fast-food chain that including
>gathering more than 10,000 signatures and handing out free tamales in the
>plaza.
>
>-- November 2002 issue of The HomeTown Advantage Bulletin:
>http://www.newrules.org/hta/hta1102.htm
>
>
>BRITISH GOVERNMENT REJECTS BIG BOX SPRAWL
>
>In a move that could derail big box development projects throughout
>England, Deputy Prime Minister John Prescott has rejected a bid by the
>furniture chain Ikea to build a 300,000-square-foot store (seven times the
>size of a football field) outside the city of Stockport.
>
>In a letter explaining his decision, Deputy Prime Minister Prescott said
>the proposed store violated several provisions of both national and local
>planning policy. Major factors included the store's impact on the vitality
>and viability of Stockport's downtown and other nearby town centers, and
>the fact that it would foster increased automobile usage.
>
>Mr. Prescott declared that local authorities had not conducted a
>"sufficiently rigorous assessment of the likely economic impact of the
>proposed store." He said that Ikea's claim that the store will bring more
>traffic to Stockport's town center was probably overstated and unlikely to
>offset the store's negative economic impacts on the downtown and other
>smaller towns nearby.
>
>Mr. Prescott suggested that Ikea substantially reduce the size of its
>stores and locate them in or adjacent to town centers. He said the
>company's approach to retailing---building massive out-of-town stores
>primarily accessible by car---ran "counter to the Government's objectives
>to ensure sustainability and promote social inclusion."
>
>While planning and development is strictly a state and local matter in the
>United States, in England, local policies must follow broad national
>guidelines.
>
>Ikea has already built eleven of its massive outlets in Britain. The
>government's recent rejection may reflect a renewed and more stringent
>interpretation of "Planning Policy Guidance Note 6: Town Centres and
>Retail Development" (PPG6), a national policy that aims to protect the
>economic vitality of town centers.
>
>PPG6 requires that town centers be given preference for all new
>development, followed by edge-of-town sites (defined as within walking
>distance of the downtown). Out-of-town development is allowed only if the
>developer demonstrates a need that cannot be satisfied with a more
>centrally located project.
>
>Before approving out-of-town retail projects, local planners must consider
>the development's impact on the downtown's economic vitality, potential to
>attract new investment, mix of goods and services, visual character, and
>"role in the economic and social life of the community."
>
>Ikea plans to appeal the decision through the courts. Sprawl opponents,
>including the Council for the Protection of Rural England, hope the
>decision will be upheld and herald a stronger national commitment to
>maintaining vibrant local economies.
>
>-- Deputy Prime Minister's Decision Rejecting Ikea:
>http://www.planning.odpm.gov.uk/callins/oct2_2002/index.htm
>-- Planning Policy Guidance Note 6: Town Centres and Retail Development:
>http://www.planning.odpm.gov.uk/ppg/
>
>
>IV. ALLIANCES AND COOPERATIVES
>
>COMMUNITY-OWNED DEPARTMENT STORES REPLACE CHAINS
>
>"It's been a remarkable success," says Ken Witzeling, who helped start a
>community-owned department store in the small town of Powell, Wyoming.
>Known officially as Powell Mercantile and more informally as The Merc, the
>store is the third community-owned department store to open in this region
>of the country since 1999.
>
>It is unlikely to be the last. Witzeling has received numerous inquiries
>from small towns throughout Wyoming, Montana, Utah, and Idaho.
>
>The idea originated in Plentywood, a town of 2,000 people in northeastern
>Montana. A few years ago, the Houston-based Stage Stores chain (formerly
>Anthony's) pulled out of Plentywood and dozens of other small towns in the
>northern Rockies, leaving residents with little choice but to drive long
>distances for basic clothing and housewares.
>
>"We thought about contacting a national chain," says Ann McKenzie, the
>former manger of Stage and the current manager of the community-owned
>Little Muddy Dry Goods store. "But we realized, if we get another one,
>they'll probably pick up and leave in a few years too."
>
>McKenzie proposed a community-owned store. Residents stepped up and
>purchased 18 shares in the venture for $10,000 a piece. (Many single
>shares are owned by groups of five or six people.)
>
>Little Muddy Dry Goods opened a few months later. The 10,000-square-foot
>store has two full-time and four part-time employees, and sells clothing,
>shoes, linens, and housewares. Although not particularly profitable, the
>store does break even, while filling an important community need.
>
>Plentywood's success inspired residents of Malta, Montana, to open their
>own department store, called Family Matters, shortly thereafter. Malta
>organizers took a slightly different approach, selling shares for $500,
>which allowed more people to get involved. According to Malta Chamber of
>Commerce Director Anne Booth, Family Matters has been profitable. But its
>real value has been as an anchor for the downtown and a draw for other
>local businesses.
>
>Organizers in Powell, a community of 5,500 people in northwestern Wyoming,
>likewise chose to sell shares in The Merc for $500 each. More than 800
>shares have been sold to approximately 500 investors. Shareholders are
>limited to no more than twenty shares in order to prevent any one
>shareholder from gaining too much control.
>
>The 10,000-square-foot store, which sells mostly mid-range clothing and
>shoes, opened in July and has turned a profit ever since. Key factors
>behind its early success, according to Witzeling, include the store's lack
>of debt, a board of directors made up of local merchants, and a manager
>who is a veteran buyer in the industry.
>
>Unlike Plentywood and Malta, where residents must drive at least 100 miles
>to find significant shopping options, Powell is just 22 miles from a
>Wal-Mart store in Cody, Wyoming. Some residents initially argued that The
>Merc was a sure failure with such a powerful competitor nearby. But, as it
>turns out, plenty of residents prefer shopping at the local store.
>
>Part of the reason is undoubtedly the sense of ownership, say Witzeling.
>Before opening The Merc, he and other Powell residents visited Little
>Muddy Dry Goods in Plentywood. "We went up and down the street and talked
>to different people," says Witzeling. "They all referred to it as 'our
>store.' Not 'the store,' or 'that store.' It was 'our store.'"
>
>Another community-owned department store is now opening in Glendive,
>Montana, and a fifth has started selling shares in Worland, Wyoming.
>
>
>CHARLESTON MERCHANTS JOIN FORCES TO PROMOTE LOCAL STORES
>
>A dozen independent businesses in Charleston, West Virginia, have banded
>together to promote one another and the idea of supporting locally owned
>businesses.
>
>In November, the group began running print, television, and radio
>advertisements. The print ads read, "Supporting your locally owned stores
>keeps your dollars in our community. Not only do we provide the best
>service and selection, but we service what we sell and most importantly,
>take care of our customers."
>
>The ads include joint coupons that can be redeemed at any of the
>businesses. Barry Ogrin, owner of the Charleston Department Store,
>collected more than 400 coupons within the first few days.
>
>Other businesses in the group, called the Kanawha Independent Merchants
>after the Kanawha Valley, include Kelley's Men's Shop, Pile Hardware,
>SportMart, Save Supply, Foto 1, Drug Emporium, Calvin Broyles Jewelers,
>Sodaro's Electronics, Andrews Floor & Wall Covering, and Goldfarb Electric
>Supply.
>
>One of the group's co-founders, Don Tate of Fas-Check, said the
>association could evolve beyond joint advertising to take on an active
>role in local affairs. The association has already begun to voice
>complaints about the subsidies that the city routinely gives chain
>retailers. "We've watched giants like Wal-Mart get the tax breaks, which
>independent merchants don't get. We wonder where's the fairness of the
>whole situation," Tate said.
>
>The group is hoping to block a plan by the city to lease land it purchased
>for $5.5 million to Dillard's, an upscale department store chain, for $1 a
>year. The company has also requested $7.5 million in subsidies from a city
>program designed to help low- and moderate-income families.
>
>
>V. NEW RULES
>
>SUPERMARKET CONCENTRATION HARMS FARMERS AND CONSUMERS
>
>Supermarket chains in the northeast are using their market power to reap
>record profits on milk at the expense of both dairy farmers and consumers,
>according to a new report.
>
>The findings are fueling legislative efforts in several New England states
>to rein in the power of grocery chains. One proposal in Maine would tax
>big box retailers to support dairy farms.
>
>The study, "Milk Prices in New England and Neighboring Areas of New York:
>A Prologue to Action?" by Ronald W. Cotterill, Adam N. Rabinowitz, and Li
>Tian of the University of Connecticut, examined milk prices at 191 stores
>in four states and found that, while farm prices have dropped to 25-year
>lows, retail prices remain at record highs.
>
>Since late 2001, when Congress abolished a price support structure known
>as the Northeast Interstate Dairy Compact, raw milk prices in New England
>have dropped from $1.65 a gallon to $1.10. This is well below what it
>costs farmers to produce milk, which is about $1.50 a gallon.
>
>Meanwhile, consumer prices have inched down only slightly, from $3.09 a
>gallon to $3.01. The problem, according to the researchers, is that a
>handful of retail chains and milk processors now dominate the market,
>leaving farmers with few options for selling their milk and consumers with
>exorbitant prices. "Consumers in New England are being overcharged at the
>rate of $144 million per year," the report concludes.
>
>The study found that, despite efficiencies of size, prices were highest at
>large supermarket chains and lower at smaller retailers. Wal-Mart's milk
>prices were only slightly lower than the high prices charged by
>established grocery chains.
>
>The study found that prices in New York are much lower---around $2.20 a
>gallon---due to a 1991 law that bars retailers from charging more than
>twice what farmers receive for their milk. Massachusetts, Connecticut, and
>New Hampshire are now considering similar legislation.
>
>Another approach, proposed by Ronald Cotterill, one of the study's
>authors, is a "fair share" law. When the consumer price of milk exceeds
>1.8 times what farmers receive, then half the additional revenue would be
>collected from supermarkets and funneled back to dairy farmers.
>
>Vermont meanwhile has launched an extensive investigation of milk prices
>and is expected to release a report soon recommending legislative action.
>
>Several measures are under consideration in Maine. One would revive a
>statewide program similar to the regional Compact. Another would levy a
>handling tax on milk that would be funneled into a subsidy program for
>farmers.
>
>Another measure would tax big box stores to support dairy farms. The bill
>would levy a 0.001 percent tax on revenue at stores larger than 10,000
>square feet located outside of traditional town centers. (The tax on a
>typical Wal-Mart supercenter would be roughly $80,000.) The funds would be
>used for support payments to dairy farms and to reduce property taxes on
>agricultural land to protect it from development.
>
>-- "Milk Prices in New England and Neighboring Areas of New York: A
>Prologue to Action?"
>http://www.sp.uconn.edu/~cotteril/MilkPrices.html
>
>
>VI. ANTITRUST
>
>GERMAN HIGH COURT CONVICTS WAL-MART OF PREDATORY PRICING
>
>Germany's highest court has ruled that Wal-Mart's below-cost pricing
>strategy undermines competition and violates the country's antitrust laws.
>
>Two years ago, the federal Cartel Office accused Wal-Mart and two other
>large supermarket chains of selling goods below cost and ordered the
>companies to raise their prices. The items in question included about a
>dozen staple products like milk, butter, and vegetable oil.
>
>German law prohibits below cost pricing, because of its impact on small
>businesses. In this case, authorities feared a price war among the
>country's three largest food retailers would decimate independent shops,
>ultimately leaving consumers with fewer options and higher prices.
>
>Wal-Mart appealed the regulator's decision through a state court, which
>ruled in the company's favor. The Cartel Office then appealed to the
>Supreme Court, which ruled that below cost pricing harms independent
>competitors and reduces competition over the long-term.
>
>Wal-Mart opened its first German store in 1997, but has struggled ever
>since. Last year the company dropped plans to open 50 new superstores.
>
>
>WAL-MART'S PURCHASE OF PUERTO RICO CHAIN CHALLENGED
>
>Puerto Rico's Department of Justice has asked the U.S. Court of Appeals
>for the First Circuit to block Wal-Mart's acquisition of the island's
>largest grocery store chain, Supermercados Amigo Inc. The outcome of the
>case could affect the ability of states to review and challenge mergers.
>
>Wal-Mart already operates 19 outlets in Puerto Rico, including eight Sam's
>Club stores and one supercenter. Last February the company announced its
>intention to purchase the 36-store Amigo chain, which employs 4,800 people
>and takes in about $500 million annually. The Federal Trade Commission
>(FTC) approved the merger in November, provided that Wal-Mart divest four
>of the Amigo units in areas where the agency believed the deal would
>restrict competition.
>
>Puerto Rican antitrust officials, however, did not bless the merger,
>contending that it could severely curtail competition and harm the
>island's farmers and distributors. Nevertheless, Wal-Mart closed the deal
>in early December. Local officials immediately sought an injunction from a
>Puerto Rico court. Wal-Mart appealed to a federal court, which ruled that
>the Puerto Rico Department of Justice had illegally sought to protect
>local suppliers and interfere with interstate commerce. The judge also
>found that Justice Secretary Anabelle Rodriquez had abused her
>authority---a decision that, if upheld, could result in jail time.
>
>The case could affect how much authority states have to review and block
>federally approved mergers. The district court's decision concludes that
>state power is very limited.
>
>"This is a serious issue if a company can get a federal injunction barring
>a state from pursuing a claim," said Albert Foer of the American Antitrust
>Institute (AAI).
>
>Meanwhile, several agriculture, retail, and legal groups have filed
>letters with the FTC arguing that the consent decree is insufficient and
>violates agency policy. The FTC will review these letters and possibly
>revise the terms of its approval over the next few months.
>
>The Organization for Competitive Markets (OCM) raised concerns about
>Wal-Mart's power as a buyer and the impact on Puerto Rican farmers. "Local
>farmers. . . already faced limited channels of distribution and potential
>purchasers of their products due to. . . geography. [This merger will]
>further concentrate the buying power of Wal-Mart to the detriment of local
>farmers."
>
>The deal could "destroy or at least strongly disadvantage the distribution
>system that supplies the remaining competitors, thereby raising the costs
>of Wal-Mart’s rivals," noted Albert Foer of the AAI. "But, without
>explanation, the Commission ignores Wal-Mart’s buying power."
>
>The National Grocers Association points out that the FTC did not explain
>its criteria for requiring the sale of only four Amigo stores. The NGA's
>own market share calculations suggest problems in at least five other
>local markets.
>
>Concerns have also been raised about the divestiture's ability to
>alleviate anticompetitive harm in the four local markets. The FTC insisted
>that a buyer for the stores be identified before the acquisition. But the
>company slated to buy the stores is owned by a principal shareholder of
>Amigo. "His motives for purchasing the stores are not to maintain the
>levels of competition existing before he sold his business to Wal-Mart," a
>group of Puerto Rican grocers argues. "They are clearly to induce the FTC
>to approve the acquisition without further delay or investigation."
>
>-- American Antitrust Institute comments to the FTC
>http://www.antitrustinstitute.org/recent2/221.pdf
>-- Organization for Competitive Markets comments to the FTC
>http://www.competitivemarkets.com/news_and_events/pressreleases/PR.Walmart-Amigo.122002.htm
>
>
>
>Copyright 2003 by the Institute for Local Self-Reliance.
>
>No portion of this bulletin, except for brief quotations with attribution,
>may be reproduced or utilized in any form without permission from the
>Institute for Local Self-Reliance, 1313 5th Street SE, Minneapolis MN
>55414 - Tel: 612-379-3815 - Fax: 612-379-3920 - Web: http://www.ilsr.org -
>Email: smitchell@ilsr.org.
>
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