New Orleans Study Finds Local Retailers Have Four Times the Economic Impact as Chains

[1]A recently released study of 15 locally owned New Orleans merchants in the Magazine Street area found that local retailers generate twice the annual sales, recirculate revenues within the local economy at twice the rate, and on a per-square-foot basis have four times the economic impact. The Urban Conservancy [2], a New Orleans nonprofit group founded in 2001 that looks to inform the public on land-use decisions and promote sustainability, commissioned the report, Thinking Outside the Box: A Report on Independent Merchants and the Local Economy [1], which was conducted by Civic Economics [3].

Dana Eness, executive director of UC, told BTW that, as money begins to flow back into a post-Katrina New Orleans, the issue of how to redevelop areas that were destroyed by the flood has come to a head. "We're in this stage of post-Katrina land development," Eness said, noting that there is growing pressure to expedite development. "We're seeing activity in some areas ... and it's a combination of a desperation for a return of business services and politics, as there is a mayoral election coming up."

Importantly, UC wanted to make sure that the city's policies took a long-term perspective, one that took into account the issue of promoting sustainability through local business. The group commissioned the study of 15 Magazine Street retailers in an effort to back up that argument.

One such business that provided data for the study was Octavia Books [4]. " I think the results are very important to understanding what direction places like New Orleans and other places should go in terms of economic development," said Octavia's Tom Lowenburg. "It confirmed what we believed all along about what's really driving the economy."

The New Orleans local economies study took a somewhat different approach from earlier studies of the economic effects of locally owned businesses. This time, the study compared the local recirculation of dollars by Magazine Street merchants with that of a large general merchandise store, such as a SuperTarget.

The study found:

• The average supercenter format Target occupies 179,000 square feet and achieves sales of $282.51 per square foot, yielding total store revenue of approximately $50 million. Participating local businesses reported total sales-per-square-foot of $587-per-retail-square-foot. As such, 179,000 square feet of locally owned businesses would generate an estimated $105 million in annual sales revenue across as many as 100 individual stores.
  
  
• Total recirculation of revenues for the hypothetical SuperTarget store was 16 percent and total recirculation of revenues for the Magazine businesses was 32.1 percent.
  
  
• If New Orleans consumers -- including residents, institutions, and visitors -- were to shift just 10 percent of all retail activity from chains to locals, the result would be the equivalent of injecting an additional $60 million annually into the local economy in the form of recirculated dollars, which would otherwise have left the area.
  
  
• Comparing the local economic activity in respect to land use, 179,000 square feet of local merchants would achieve sales of $105 million, of which $33.6 million would recirculate through the local economy. The same 179,000 square feet of retail supercenter would consume an additional 300,000 square feet of parking and would achieve sales of $50 million, of which only $8 million would recirculate through the local economy.

The study noted, "This divergent contribution of land use to the local economy is especially important in New Orleans. The commercial district at Gentilly and Elysian Fields presents an excellent example. Just two building as large as SuperTarget or a Wal-Mart Supercenter would swallow the existing area. The Gentilly Woods Shopping Center (recently acquired by the New Orleans Redevelopment Authority), at roughly 13 acres, can accommodate only one supercenter, which provides little opportunity for New Orleanians to capture benefits from redevelopment."

In its conclusion, the report recommended that the city could stimulate "wealth creation and retention by developing a coordinated strategy that focuses on local business growth."

Though only released last week, Eness noted that the report has caught the attention of city legislators. "We received a call from a council member from the New Orleans Economic Development Committee asking us to testify on October 13 at a hearing to present our findings," she said, and added that several Mayoral candidates have indicated support of the study. -David Grogan [5]