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Tuesday, June 8, 2010

Diggin' Deep - Part I

When I first started this blog I was thinking along the lines of helping to promote not only specific businesses within our community, but to try and make the case as to why it's important for us as consumers to patronize those local businesses.

I started to do some research and I found some really good resources out there with specific facts pointing to the degradation of local business and as well as a lot of opinion.

National chains continue to displace the small local businesses and they would have you believe that it is symptomatic of our own loss of community.  That may be true in some areas around the country.  It may even be true of some areas in our own community.  With larger corporations who are head-quartered in Montgomery County that tend to hire from outside of the area, bringing in talent from other divisions from out of state, or hiring new graduates from Universities all over the country, they certainly don't help with providing a stable community feel.

These people don't have a sense of community outside of the work place (because they aren't from here), and with the median tenure of all waged and salary employees (according to the Employee Benefit Research Institute) at 4.9 years, they never get a chance to lay down roots.

Local politicians are often lured by the political gain that bringing in a chain store can provide.  On the surface they will point to the new employment benefits and tax revenues that the new store will provide to the community.  Sometimes they will offer public funds or tax rebates to do so, but they will often ignore the greater costs in doing so.  Those costs include new road development, safety measures, and the fact that the jobs that are actually being created are lower paying part time jobs eventually displacing higher paying full time jobs from the business that is now going to have to slim down or even close up shop with not being able to compete with the new national chain.

Barnstable, Massachusetts performed it's own study to asses the local impact of national chains and concluded that it actually cost the tax payers more money providing those services and tax breaks to even get the chains in than would return to the community.

Of course there is then the question of where does the money come from to support these big chains?  According to the American Independent Business Alliance, a 1995 study of new Walmart stores across the country by Iowa State professor Kenneth Stone showed that 84% of Walmart's sales simply shifted dollars away from existing local businesses.  This included existing chain stores as well. 

He did yet another study on Home Improvement Stores in 2001 and concluded, "Is it fair to give taxpayers' money to big corporations that will then use it to help put existing firms out of business?"  Another  issue with Home Improvement Stores specifically is that they develop whole shopping centers that attract other chains to gain as much market share from the community as they can, therefore bolstering their profit margins. 

These larger stores have also focused on real estate.  In fact it could be said that Walmart, Home Depot, and even Wawa are now more interested in their real estate business than in providing 2x4's or coffee.  Not only are they making it hard for the local business to compete, they are buying up community land.   It's important to understand how vicious a cycle this can be.  When empty land is purchased it provides much needed real estate taxes to the township which were never realized before.  So it's understandable for a community politician to think that this can only be a good thing. But at what costs to the community?  How are those added tax revenues being used?  Are they going to the schools?

I don't want you to think that I am making a political statement here, nor am I suggesting that these national big box stores are the devil.  After all, we do live in a capitalist country.  One that I subscribe to and enjoy.  Anyone can start their own business, anyone can grow it to their abilities.  Survival of the fittest, and all that stuff.  What I am doing is laying the ground work to show WHY local business is the most important thing to focus on in our economic climate today.

In the next installment of this series I will be posting some facts pointed to small business.  What it does, what it creates, how it effects the community, and why it is important to understand those aspects and what effects the life of a local business has on the community it resides in.  

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