Local Retailers Can’t Grow in the Shadows of Supercenters

Big box retailers are rapidly rolling out stores throughout Minnesota. Wal-Mart and Target are leading the pack with plans to build hundreds of new “supercenters” nationwide. These giant 200,000-square-foot stores are twice the size of a standard Wal-Mart and include general merchandise and a full supermarket, plus dozens of specialty vendors, from florists to gas stations.

Wal-Mart is scouting locations for a supercenter on the North Shore of Lake Superior. Small townships like Lakewood are likely sites. Wal-Mart is already building a supercenter in Cloquet and plans to abandon its existing 100,000-square-foot outlet when the new store opens.

Big box stores contribute to sprawl and traffic congestion, consuming vast stretches of land, generating thousands of car trips daily and draining downtown vitality. They are eroding the special character and qualities that make northern Minnesota a great place to live.

Most people assume that these costs are simply the price of progress. We take as self-evident truth that giant chains generate economic development, create new jobs and tax revenue, and provide lower prices.

But a growing body of evidence and real-world experience is finding that the opposite is true. Communities that succumb to chain-store sprawl are far worse off economically than those that protect the vitality of their downtowns and strengthen their locally owned businesses.

Big box retailers claim that their stores generate new jobs and tax revenue. But dozens of studies have found that these stores destroy as many jobs and as much tax revenue as they create.

This is because retail spending is a relatively fixed pie; just because Wal-Mart builds a new store, it doesn’t mean people will need more gallons of milk or pairs of socks. Adding a large amount of new retail development invariably forces sales to decline at existing businesses, many of which will be forced to downsize or close altogether.

The resulting job losses typically equal or exceed the job gains from the new development. The same is true for tax revenue.

The jobs gained, moreover, are not necessarily equivalent to the jobs lost. Minnesota’s unionized supermarket employees earn about 50 percent more than their counterparts at Wal-Mart and Target. They also have health and pension benefits. Most supercenter employees have no benefits, and many rely on food stamps and other taxpayer-funded programs to survive.

Direct job and tax losses are only part of the economic drain caused by chain stores. Consider what happens to a dollar spent at a locally owned business. Not only do profits stay in the community, but local retailers support a variety of other local businesses. They bank with local banks, advertise in local newspapers and purchase local services such as accounting and printing.

In contrast, much of a dollar spent at a chain leaves the communities immediately.

Perhaps more important than the economic considerations, locally owned businesses build strong communities. One study has found that small businesses give more than twice as much per employee to charitable causes as do large companies.

Altogether, it’s a high price to pay in order to save a few bucks. And even that benefit may not last for long. Surveys have found that prices at Wal-Mart and Home Depot stores are significantly higher in areas where the local competition has been eliminated.

Contrary to conventional wisdom, chain-store growth is not simply the result of market forces. It is a trend that has been driven in no small part by public policy. Land use and transportation policies often fuel the growth of large retailers on the outskirts of town, while making it more difficult and expensive to maintain a downtown business. Big box retailers routinely receive tax breaks and subsidies that are not available to locally owned businesses.

Hundreds of communities nationwide are adopting new land use policies to curb the proliferation of chains and strengthen local businesses. Others require comprehensive economic and community impact reviews before approving large-scale development. Many also are working with neighboring towns to develop regional strategies for limiting commercial sprawl and rebuilding downtown business districts.

Given the development pressures building in northern Minnesota, it’s essential that the region’s communities take steps to protect their quality of life, local jobs and homegrown businesses.

STACY MITCHELL is a researcher with the Institute for Local Self-Reliance in Minneapolis (www.newrules.org) and author of “The Home Town Advantage: How to Defend Your Main Street Against Chain Stores and Why It Matters.” This column is excerpted from her speech Tuesday in Duluth.