Chains are multiplying much faster than locally owned businesses in Santa Fe, New Mexico, according to a new study commissioned by the Santa Fe Independent Business & Community Alliance (SFIBCA). The study concludes that the decline of independent retailers is eroding Santa Fe’s distinctive character and undermining its economy.
The study was conducted by Angelou Economics, a consulting firm based in Austin, Texas, that helps cities draft and implement economic development plans.
Using a database of the nation’s 12 million businesses maintained by Dun & Bradstreet, which indicates where a business is headquartered and whether it is a single- or multi-location operation, Angelou Economics found that “independent businesses comprise a higher share of Santa Fe’s economy than the national average.”
But this is rapidly changing, especially in the retail sector. Between 1998 and 2003, the number of non-local retail businesses in Santa Fe grew by 38 percent and employment at non-local retailers increased by 25 percent. Over the same period, the number of local retailers expanded by 17 percent, with employment at local retailers growing by just 9 percent.
The database does not contain information that would enable researchers to determine what percentage of retail sales are captured by chains compared to independents. Because several large superstores have located in Santa Fe over the last five years, the data on number of non-local businesses probably understates the growth of chains within the city’s economy.
The study also concludes that, “dollar for dollar, money spent in locally owned shops has a larger impact on the community than money spent in shops headquartered outside of the region.”
Using grocery stores as an example and relying on US Census figures on operating costs, the study estimates that 25 percent of a national grocer’s operating costs leave the local area compared to 12 percent for locally owned grocers. After accounting for a multiplier (the dollars spent locally by the grocer’s vendors and employees), the study roughly estimates that the value of a dollar spent at a local retailer is two times higher than the impact generated by a chain store.
The response to the study has been very encouraging, according David Kaseman, co-founder of SFIBCA. Five of eight city councilors attended a press conference announcing the results. Both local newspapers carried front-page stories. The Santa Fe New Mexican editorialized, “The success of Santa Fe’s economy is in large part tied to the success of the many men and women who run small businesses. Those businesses need—and deserve—our support.”
As a result of the study and SFIBCA’s advocacy, several pro-local business initiatives may be included in Santa Fe’s new economic development plan. Angelou Economics was also hired by the city to draft the plan, which should be completed in the next few months.
SFIBCA, formed a little over one year ago, has 500 members, about half of which are independent businesses. The rest are community organizations and individuals. The association, which is affiliated with the American Independent Business Alliance, has published an independent business directory and increased business-to-business local purchasing. It plans to launch a “buy local” campaign this year.