Main Street Fights Chain Street

By Carolyn Said, San Francisco Chronicle Staff Writer

Last year, Neal Sofman had a eureka moment in response to a wonky economic analysis of locally owned stores compared with chain retailers.

Sofman, president of San Francisco's A Clean Well-Lighted Place for Books, was reacting to a study of Chicago merchants showing that local retailers recirculate far more of their sales dollars within the local economy than do chain stores.

"I thought, 'Now we've got something to tell the public,'" Sofman said. "With this new study, we've got a tool in our arsenal to tell people, 'Here's a good reason to shop at your locally independently owned business.'"

He showed the study to other San Francisco merchants. They invited still more local business leaders to discuss it. They formed a steering committee. Things kept snowballing and this autumn they formed a group called San Francisco Locally Owned Merchants Alliance.

Its goal is modest: Identify locally owned businesses and urge consumers to shop locally because it benefits their community.

While merchants associations have been around for generations, the alliance is on the cutting edge of a burgeoning grassroots movement: Local businesses are joining forces to woo shoppers with public education campaigns appealing to their civic pride rather than their pocketbooks.

Instead of "prices slashed" ads, the groups promote such concepts as fostering a sustainable local economy and preserving unique regional character.

This year, with movements against big-box retailers, particularly Wal-Mart, gathering steam, buy-local campaigns are taking on extra resonance as small businesses from booksellers to flower shops to pharmacies try to persuade shoppers that they benefit in numerous tangible and intangible ways by patronizing locally owned concerns rather than chain stores.

"There is a growing consciousness and in turn more volume. We have thousands of businesses participating," said Don Shaffer, head of the Business Alliance for Local Living Economies, a San Francisco nonprofit group that acts as an umbrella organization for 22 local-business alliances across the United States and Canada, including San Francisco's new merchants group.

Besides retail, the business alliance encompasses food, building materials, energy, capital, media, and manufacturing sectors. Shaffer is co-owner of Comet Skateboards, a San Francisco solar-powered factory producing skateboards made from sustainable materials.

A similar umbrella group, the American Independent Business Alliance in Bozeman, Montana, supports about 20 local coalitions nationwide and organizes an annual campaign called America Unchained that encourages shoppers to eschew chain stores for one day. This year the day was Nov. 19.

Both umbrella groups provide how-to guides and other resources for local merchants who want to start buy-local campaigns. For the crucial holiday sales season, several dozen alliances of local retailers around the country are campaigning. Their names make their missions clear -- Sustainable Chicago, Keep Louisville (Kentucky) Weird, Buy Local First Utah, Raleigh (North Carolina) Un-Chained, and Homegrown El Paso (Texas).

San Francisco will have a Shop Local First Week from December 5 to December 10, culminating in a Shop Local First Day on Dec. 10 showcasing local artisans and manufacturers of everything from jewelry to guitars to fair-trade coffee at retail booths in Union Square. The campaign is backed by the Small Business Commission and Mayor Gavin Newsom, who will present an award to the five most innovative small-business entrepreneurs.

All the campaigns carry a similar message.

"The idea is to get people to think more about where their dollar is being spent and what it means to the community," Shaffer said. "There is a strong undercurrent of people who want to maintain the unique character of their neighborhoods and towns. Having a flourishing small-business sector is key to that; otherwise everywhere ends up looking like suburban Phoenix or Dallas."

Shop-local advocates say this is a critical juncture for American towns. The rise of discount mass-market merchandisers like Wal-Mart has siphoned shoppers away from mom-and-pop stores, forcing many to close and leading to the decay of downtowns across the country, they say.

"There's a danger we'll pass a point of no return and lose that part of the fabric of American life," said Stacy Mitchell, a senior researcher in Maine with the Institute for Local Self-Reliance, an organization focused on community-based economic development.

Mitchell cites a litany of grim statistics from her 2000 book, The Hometown Advantage: How to Defend Your Main Street Against Chain Stores and Why It Matters.

The United States has lost 5,000 independent hardware stores since the late 1980s, she said. From 1990 to 2000 it lost more than 10,000 independent pharmacies. More than 2,000 independent booksellers closed in the 1990s.

"Corporate retailers have taken over a huge chunk of our economy," she said. "If we lose such a mass of independent businesses that the distribution channels and whole infrastructure that supports them becomes too anemic" it may be too late to reverse the trend, she said.

But some in the retail industry say the data are misleading and chains don't hurt small stores.

"The failure rate in the first few years for all retailers has stayed consistent over many years at above 90 percent," said Ellen Davis, a spokesperson for the National Retail Federation, a Washington trade group representing thousands of retailers both large and small.

"There is a perception by some that large retailers don't have a place in many communities," Davis said. "It's certainly opinion but not necessary fact. There are many instances where large retailers have very much helped the communities in which they're located -- bringing in jobs and tax revenue and also helping small retailers by bringing in customers from wider geographic areas."

Davis said she thinks most people like chains because they're familiar and have low prices, while they like small stores for quality and customer service.

"People have proven they like to shop where prices are low," Davis said in defense of chain stores. "They like to know when they travel to Cleveland and go to a restaurant, hotel or retail store, they will be able to get what they need quickly, or when they buy a gift for their niece in New York, she can return it at a store close to her."

Davis cited a study by Global Insight Research showing that Wal-Mart (which is not a member of her group) contributes to lower consumer prices. Wal-Mart financed the study and provided data for it, but did not otherwise influence its findings, Global Insight said. The study said that although Wal-Mart "seems to displace other retail establishments," that was offset by an overall increase in retail jobs.

But buy-local advocates point to a range of studies showing that locally owned businesses contribute more to local economies than do chains.

One of the most frequently cited is the one that inspired San Francisco bookstore owner Sofman.

The study of Chicago's Andersonville neighborhood compared the economic impact of 10 local businesses and their chain competitors. It found that for every $100 the retailers brought in through sales, the local firms returned $68 to the Chicago economy through wages and benefits, purchase of goods and services like office supplies and accounting, profits to local owners, and charitable giving. At the chain stores, $43 of every $100 in spending was recirculated in the local economy.

"We found it's pretty stark how much money stays within the community in a locally owned business compared to nationally owned," said Matt Cunningham, a partner in Civic Economics, the firm that did the study. One big factor, he said, is that chains tend to hire contractors for such things as advertising, computer work and public relations through their corporate headquarters, while local firms hire local vendors.

A surprising discovery, Cunningham said, was that local firms bring in about the same amount of revenue per square foot as do the behemoths. "Of course, Wal-Mart generates more sales in a 180,000-square-foot store because it's so big, but it doesn't make more sales dollars than however many small businesses you add together to get 180,000 square feet," he said.

The shop-local movements are so new that there isn't much data on their effectiveness. Mitchell from the Institute for Local Self-Reliance said a survey of 1,000 shoppers after a one-month Buy Local campaign in Philadelphia found that 17 percent of them were aware of the campaign and 7 percent said it made them more likely to patronize independent businesses.

Meanwhile, 57 percent of the participating stores said the campaign had a positive impact on their business, 21 percent said they had an increase in sales, and 90 percent said they would participate again.

Experts said that amount of change may be enough.

"If (local merchants) can influence even 5 percent (more) consumers to spend in their stores, that's significant impact," said Richard Feinberg, professor of retail management at Purdue University in Indiana and director of its Center for Customer-Driven Quality. "It can make the difference between life and death for a small retailer."

Consider Kepler's bookstore in Menlo Park, which was forced to close this fall because chains and online stores had depressed its sales, but re-opened a month later after rallying new investors and community support. One of its messages to customers, according to Hut Landon, executive director of the Northern California Independent Booksellers Association, was that they could support it by simply switching some of their purchases away from other sources to Kepler's.

Studies show that frequent book-buyers purchase 20 volumes a year, eight of them at independent bookstores and the rest either online or at such sources as airports, chains and discounters, Landon said. "If people just buy 12 out of 20 (books at independent stores), that's all you have to do and we'll be fine," he said.

While the current crop of campaigns focuses on shoppers, appealing to legislators may be the next wave. Many merchants have begun to protest when their city or county offers financial incentives to a chain store to move into the region.

In Austin, Texas, local merchants used another study by Civic Economics that focused on Borders versus local booksellers. It found that Borders returned $13 out of every $100 spent to the community, while the independent stores returned $45. That data helped convince the city not to subsidize a development that included a Borders store.

The San Francisco Locally Owned Merchants Alliance, the Business Alliance for Local Living Economies, and the San Francisco Small Business Commission are now in full swing with a shop-local campaign using the tagline "Shop here and your money stays here." A list of 10 reasons to shop locally draws upon studies like that by Civic Economics.

On a recent afternoon, Shaffer and Agnes Briones, executive director of the commission, went door to door in the West Portal neighborhood to talk to merchants about the campaign and offer them promotional literature to display to customers.

At West Portal Books, a second-hand store overflowing with used books, they found a case study on the timeliness of their campaign. Diane Goodman, who has owned the store since 1992 with her husband, Jeffrey, said that, like many small booksellers, they're struggling to compete with big chains like Barnes & Noble and Borders and online sellers like Amazon.com and eBay.

"We've seen a steady drop in sales," she said. "We're not making it with books. We may get into another product before we go into debt."

She planned to attend a business expo to get ideas about different type of merchandise. The couple had also discussed becoming a nonprofit outlet where people can trade books, she said.

Living a few blocks away, the Goodmans feel tied to the neighborhood. They don't aspire to riches -- "We don't own a car and probably never will," she said -- but they can't continue to have their sales dwindle while rent, utilities, and other costs rise.

Goodman took a Shop Local sign to hang in her window and some literature to hand out to customers.

"This is hopeful," she said. "We need all the publicity we can get."

Resources for shop-local movements:

Organizations

-- Business Alliance for Local Living Economies, www.livingeconomies.org: San Francisco umbrella group for independent local business networks around the country; provides resources and information on starting shop-local campaigns.

-- American Independent Business Alliance, www.amiba.net: Bozeman, Mont., consortium of local business alliances. Sponsors America Unchained, annual campaign to encourage shoppers to eschew chain stores for one day; this year it was on November 19.

-- San Francisco Locally Owned Merchants Alliance, www.sfloma.org: New organization to promote locally owned independent businesses in San Francisco through education about their positive economic impact on the community.

-- San Francisco Made, www.sfmade.org: Nonprofit that promotes San Francisco manufacturers of consumer products.

-- Oakland Unwrapped, www.oaklandunwrapped.org: Nonprofit group being formed to support local stores in Oakland. Founder Erin Kilmer-Neel is seeking funding and hopes to start this spring with an e-commerce site featuring local merchants.

-- Institute for Local Self-Reliance, www.ilsr.org: Promotes sustainable communities. Its retail section is at www.hometownadvantage.org.

Reports

-- Andersonvile study, www.andersonvillestudy.com: 2004 report by Civic Economics comparing the economic impact of 10 local businesses in the Andersonville neighborhood of Chicago versus their chain competitors. Links to other studies are at www.sfloma.org/studies.htm and www.livingeconomies.org/localfirst/studies.

-- Global Insight, www.globalinsight.com/walmart: For the other side of the story, this independently produced study financed by Wal-Mart says the giant retailer has helped drive down prices and its impact on small stores is offset by a net increase in jobs.

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Reprinted with permission of the San Francisco Chronicle.