Study Finds Chains Could Harm Cape Cod Economy

Date: 3 Oct 2005 | posted in: Retail | 0 Facebooktwitterredditmail

A study commissioned by the Massachusetts-based Smart Planning & Growth Coalition has concluded that additional chain retail expansion on Cape Cod would undermine the region’s economy.

The study, “Assessment of the Direct, Indirect, and Induced Economic Effects of Chain Stores on the Regional Economy of Cape Cod,” was conducted by FXM Associates, an economic and planning research firm.

SPGC commissioned the study in part because of concerns about Cape Cod’s rapid growth. The region is currently home to about 230,000 residents and is expected to add an additional 27,000 people over the next decade. With limited land and a fragile coastal environment, SPGC believes the region should adopt policies that foster commercial development that maximizes local economic benefits while minimizing land consumption.

The study suggests that locally owned businesses provide greater economic returns with less negative impact compared to big-box retail.

FXM considered future growth in retail spending on the Cape and compared two scenarios, one in which the growth in spending was captured by locally owned businesses and another in which half of the new spending went to new chain stores.

The researchers concluded that the chain store scenario would produce 9,400 fewer jobs. Their estimate is based on the fact that big-box retailers accomplish the same sales volume with fewer local workers and do not spend nearly as much with local suppliers and service providers as independent merchants do.

The study also found that large retailers pay less than small retailers. Job quality is a major issue in Cape Cod. Although the region is often thought of as the summer retreat of wealthy families, the average wage for year-round residents is about 25 percent lower than the state as a whole.

Additional chain retail development could reduce government revenue, according to the study. Chains generate about the same amount of sales per square foot as local stores, but, because most favor low-value warehouse-type buildings, they generate lower property tax revenue per square foot than independent retailers located in town centers.

The researchers reviewed many other studies on the impacts of big-box retailers and concluded that “the burden of proof would now appear. . . to have shifted from opponents of chain stores to the proponents themselves to show” that a proposed store would a net benefit to the economy.

SPGC has been instrumental in blocking several big-box retail projects planned for the region. On Cape Cod, retail developers must obtain approval from both the host town and the Cape Cod Commission, a regional body made up of representatives of each of the Cape’s towns. Until recently, the commission primarily considered the environmental and tax impacts of development. SPGC was influential in the commission’s creation of a technical bulletin that defined other relevant issues regarding retail development, including wages and effects on existing businesses.


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Stacy Mitchell

Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and designs policy to counter concentrated corporate power and strengthen local economies.