Studies That Support Local Living Economies

Local Procurement Impact

Procurement Matters: The Economic Impact of Local Suppliers, November 2007, by Civic Economics

A Civic Economics study commissioned by Local First Arizona reveals that public procurement from a local supplier generates "dramatically greater local economic activity" than procurement from a chain business. This study compared the local economic impact of Wist Office Products, a local supplier and LFA member, with Office Max Contract, a division of Office Max, after the state of Arizona dropped Wist from its stable of office suppliers.

Retail Diversity

The presence of a Wal-Mart store hinders a community's ability to move families out of poverty, according to this study. After controlling for other factors that influence poverty rates, the study found that U.S. counties that had more Wal-Mart stores in 1987 had a higher poverty rate in 1999 than did counties that started the period with fewer or no Wal-Mart stores.

Andersonville Study of Retail Economics, October 2004, by Civic Economics

• Every $100 spent with a local firm leaves $68 in the Chicago economy; $100 spent at a chain store leaves $43 in Chicago.

• For every square foot occupied by a local firm, the local economic impact is $179, versus $105 for a chain store.

Shopping for Subsidies: How Wal-Mart Uses Taxpayer Money to Finance Its Never-Ending Growth, May 2004, by Good Jobs First

Key finding: Wal-Mart has received more than $1 billion in economic development subsidies from state and local governments across the country. Taxpayers have helped finance not only Wal-Mart stores but also the company’s huge network of distribution centers, more than 90 percent of which have gotten subsidies. The report also includes policy proposals.

Good Jobs First also offers a guide to investigating development subsidies, a comprehensive guide to researching state and local subsidies, economic development agencies, and companies.

Supercenters and the Transformation of the Bay Area Grocery Industry: Issues, Trends, and Impacts, January 2004, by the Bay Area Economic Forum

Key findings:

• This study examines the potential impact of supercenter development in the 12-county region around San Francisco. It concludes that consumers would see a reduction in the price of groceries, at least initially, but that these savings to the region would be offset by declining wages among supermarket workers. Unionized supermarket workers, according to the study, receive on average $11.68 an hour more in wages and benefits than supercenter employees. Wal-Mart's arrival would likely lead to both job losses and wage concessions at unionized supermarkets.

• Although many cities assume superstores will provide tax benefits, the study examined 116 cities in the 12-county area and found that the presence of one or more big-box stores did not in fact correlate with higher per capita sales tax revenue except in very small towns. The study also discusses the impact of supercenters on rural versus urban markets, traffic, tourism, and retail vacancy (excerpted from ILSR).

Santa Fe Independent Business Report, November 2003, by Angelou Economics

Key findings:

• Small businesses account for 90 percent of all businesses in Santa Fe and employ 30 percent of all private sector workers.

• Dollars spent at independent businesses deliver twice the economic impact of those spent at national chains.However, national chains in Santa Fe are growing faster than independents - 2.5 times faster - and bring new competition and pressure to the small business community.

Key findings:

• Study concludes that big-box stores would harm low-income neighborhoods in Los Angeles by reducing competition, creating blight, lowering wages, and forcing new costs onto taxpayers. By pricing groceries as "loss leaders" and using higher margin non-grocery items to make up the difference, supercenters often force existing supermarkets out of business. Because grocery stores anchor many neighborhood business districts and shopping centers, their closure would harm other retailers and lead to vacancies in areas that are only now beginning to recover from years of economic decline.

• The report also finds that supercenters would hurt job opportunities by replacing union-wage supermarket jobs with a smaller number of lower-paying jobs. Fewer workers would have health care benefits, further burdening public hospitals and health care programs (excerpted from ILSR).

Time to Switch Drugstores? October 2003, by Consumer Reports

Based on a yearlong survey of more than 32,000 readers about their drugstore experiences.

Key finding: Independent drugstores outranked all other pharmacies - including drugstore chains, supermarkets, mass merchandisers (e.g., Wal-Mart), and internet companies - in terms of providing personal attention, offering health services such as in-store screenings, filling prescriptions quickly, supplying hard-to-find drugs, and obtaining out-of-stock medications within 24 hours. Prices at independent pharmacies were lower than at chain pharmacies, but higher than at mass merchandisers and internet companies (excerpted from ILSR).

The Economic Impact of Locally Owned Businesses vs. Chains: A Case Study in Mid-Coast Maine - September 2003, by Institute for Local Self-Reliance

This study tracked the revenue and expenditures of eight locally owned businesses in mid-coast Maine, as compared to big-box stores.

Key findings:

• Locally owned businesses spent 44.6 percent of their revenue within the surrounding two counties, and another 8.7 percent elsewhere in Maine, largely on wages and benefits paid to local employees, goods and services purchased from other local businesses, profits that accrued to local owners, and taxes paid to local and state government.

• Big-box retailers return an estimated 14.1 percent of their revenue to the local economy, mostly as payroll. The rest leaves the state, flowing to out-of-state suppliers and back to corporate headquarters.

Charitable Contributions Comparison, January 2003

Documents small business contributions to the economy and comparisons of charitable contributions from small, medium, and large businesses.

Key finding: Small firms give an average of more than two and a half times the amount per employee than do medium or large firms (small firms give $789 per employee, medium-sized firms $172, and large firms $334).

Economic Impact Analysis: Local Merchants vs. Chain Retailers, December 2002, by Civic Economics, Austin IBA

Key finding: For every $100 in consumer spending at a national chain bookstore in Austin, Texas, the local economic impact was $13. The same amount spent at locally based bookstores yielded $45, or more than three times the local economic impact.

Fiscal Impact Analysis of Residential and Nonresidential Land Use Prototypes, July 2002, by TischlerBise

Key findings:

• Big-box retail, shopping centers, and fast-food restaurants cost taxpayers in Barnstable, Massachusetts, more than they produce in revenue. The study 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.

• Big-box retail generates a net annual deficit of $468 per 1,000 square feet, shopping centers a deficit of $314, and fast-food restaurants a deficit of $5,168 per 1,000 square feet. In contrast, the study found that specialty retail, which includes small-scale 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 (excerpted from ILSR).

The Impact of 'Big-Box' Building Materials Stores on Host Towns and Surrounding Counties in a Midwestern State, 2001, by economics professor Kenneth E. Stone and extension program specialist Georgeanne M. Artz, Iowa State University

This study examines several Iowa communities where big-box building supply stores, such as Menard's and Home Depot, have opened in the last decade.

Key finding: Sales of hardware and building supplies grew in the host communities, but at the expense of sales in smaller towns nearby. Moreover, after a few years many of the host communities experienced a reversal of fortune: sales of hardware and building supplies declined sharply, often dropping below their initial levels, as more big-box stores opened in the surrounding region and saturated the market (excerpted from ILSR).

By England's New Economics Foundation (NEF).

Plugging the Leaks is a community-led economic development strategy tool that enables a community to identify the economic resources in their local economy and determine ways to use them more effectively.

Local Multiplier 3 is an impact measurement tool that measures how income is spent and re-spent in the local economy. The purpose of tracking and measuring this spending is to identify opportunities to strengthen linkages in the local economy so that efforts can be made to keep money circulating locally.

For additional studies, we recommend the New Rules Project section of the website of the Institute for Local Self-Reliance. Or download the list below of studies of the impact of chain stores on local economies.