Study Reports Chains Contribute Less to Local Economy

On December 10, Austin-based Liveable City, a local nonprofit group, released an economic study claiming that local merchants contribute significantly more money to the local economy than do retail chains. Steve Bercu, owner of Austin's BookPeople, told BTW that the study proves what local retailers have known all along through anecdotal evidence. "We knew that chain stores impacted the local economy in a negative way," he said. "We just never knew why."

The study, "Economic Impact Analysis: A Case Study, Local Merchants vs. Chain Retailers," commissioned by Liveable City, (http://www.liveablecity.org/lcexecsum.pdf) was conducted by the Austin-based economic analysis firm Civic Economics, and focuses on a new development at Sixth Street and Lamar in downtown Austin. One of the planned tenants of the new development, which is situated across the street from the 32-year-old BookPeople and a local record store, Waterloo Records, will be Borders Books & Music.

Schlosser Development Corporation has been planning to develop the area between Sixth Street and Lamar in downtown Austin for almost a decade. However, plans initially had called for a pedestrian plaza, with a movie theater and locally-owned businesses, as previously reported by BTW (http://news.bookweb.org/read/669). When the movie theater backed out, Borders was brought in as a tenant.

Both Bercu and Waterloo Records are concerned that Schlosser will receive public funding from the city for a retail center that will be anchored by national chains. For the pedestrian plaza project, the development company was allocated $2.1 million in incentives, of which it has already spent about $700,000, Bercu said. As of yet, nothing has been built at Sixth and Lamar.

About six to eight weeks ago, Bercu said, Liveable City contacted Waterloo and BookPeople in regards to helping commission the study. Both helped fund the study and provided research support.

"What surprised me, the economists have never done this type of study until now -- this may be the first one," Bercu said. "[Civic Economics] said there was no information [on the economic impact of retail giants] out there."

The economic analysis reported that local retailers return more than three times as much economic value back to the community than do chain retailers such as Borders. The estimated annual economic impact per store was $2.8 million for BookPeople, $4.1 million for Waterloo, but just $800,000 for Borders. Moreover, for every $100 consumers spend at Borders, only $13 has local economic impact. Conversely, $100 spent at BookPeople or Waterloo returns $45, the study showed. After the release of the report, Borders spokeswoman Emily Swan said, "We co-exist with independent bookstores in markets across the country…. There is no intention to squeeze anyone out. In fact, in many cities there is a feeling that having a couple of different bookstores in one area attracts more book lovers," as reported by the Austin Business Journal.

While the findings confirm what the local retailers already thought to be true, it has raised the ire of Schlosser Development. Brad Schlosser, a principal for Schlosser, told the American-Statesman that he expects people to be skeptical of studies supporting the companies that pay for them, and quipped, "I'm sure [the study] will be great for their Christmas sales."

Bercu said there is nothing to be gained by releasing a biased study. "We wanted to know what the effect is [of bringing in Border's]," he explained. "Liveable City wants accurate information. They're not interested in making book people feel good. And I don't know if the study makes us feel good about it anyway." He contends Sixth and Lamar should seek a store selling something different from records or books. "To carve up what's already here doesn't help anybody," he stressed.

In the meantime, Bercu noted that the Liveable City study has been sent off to the mayor, the city manager, and city council members for their review, all of whom are meeting with Schlosser next month about development subsidies, he said. "We're going to do all that we can to make sure the builder does not get subsidies for something that will negatively impact the economy," he said. --David Grogan