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Andersonville is an urban neighborhood near Chicago's northern border. According to Matt Cunningham, partner with Civic
Economics, it has a thriving business district that is comprised of locally owned businesses with only a few exceptions.
Although the lot sizes in Andersonville aren't conducive to big box retailers like Wal-Mart, Target and Home Depot that build
100,000-square-foot stores, there is growing pressure on the neighborhood's family businesses.
Rising affluence in the area has drawn the national chains that are locating stores in nearby areas outside of
the city, according to Cunningham.
"Andersonville has really taken off in the last five to 10 years," he said. "Prices have jumped dramatically and there's a
lot of changeover with the shops here now. With the whole changeover and the rising rents, a lot of the chains are starting to
take notice and smaller national chains are starting to look at the area. The ADC wanted to get the cart in front of the horse
and has a study in place. Usually we're brought in when it's too late for anything to be done," he added.
The ADC recruited 10 local businesses to participate in the study, opening their books to CivEc. These were compared to 10
chain competitors.
Among the firms studied, the national chains averaged more than twice the revenue and occupied twice the square footage of
the locally owned stores. When figures were adjusted for this difference in physical size, CivEc found that the locally owned
stores produced average sales of $246 per square foot - compared to $243 per square foot for the national chains.
But the big difference in economic impact arose, Cunningham said, when CivEc looked at how many of those dollars would stay
in the local area. For every $100 in consumer spending with the chain stores, just $43 remained - compared to $73 out of every
$100 for the locally owned store.
These figures were based on four findings:
One, the locally owned firms spent an average of 28 percent of their revenue on labor, compared to 23 percent for chains.
Two, the profits of the locally owned stores remained in the area - whereas chain store profits went to their headquarters.
Three, locally owned companies tended to do business with other locally owned businesses, the CivEc found, whereas the
chains used national procurement policies - and professional services like accounting and legal were provided through the
corporate office.
Four, the locally owned businesses contributed more to local charities and fundraisers than did their national
counterparts.
Cunningham said that while this study focused on the Andersonville area, he thinks the basic findings have broad
applicability.
Les Woerther, executive director of the Fairview Heights Chamber of Commerce, agrees in part with the study's findings.
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"The sales tax dollars generated by the chain stores are going to be way more than a locally owned store," said Woerther,
"giving the city the income it needs to operate. The locally owned firms will have a tough time competing with the national
chains, but those that have been around for awhile are smart enough business people that they can compete and still be active
in the chamber and other activities," he added.
Corporate philosophy and turnover rate are keys to chain store involvement, according to Woerther.
"The crux of the thing is that the local guy who might be a third-generation owner has more of a philosophy of dedication
to the community and of being involved than the nationals do," he said. "They (nationals) know ahead of time when they come in
here that they're only going to be here for three or four years and then they're off to someplace else. They just don't want
to get involved."
Monica Bristow, executive director of the Growth Association of Southwestern Illinois, agrees.
"Your local owners are the ones that support the charitable causes and the nonprofits," she said. "When you're calling on
big box retailers, whether it's for a $25 prize or a $1,000 sponsorship, they don't make that decision locally. It goes to
national and national says, 'We give to the national Boys and Girls Club, or the national Girl Scouts or the national Boy
Scouts.' They do do their part, but as far as locally, it's the local shops that give to the local charities," said Bristow.
The CivEc study cautions that replacement of local businesses with chains will reduce the overall vigor of the local
economy. It urges consumers to spend more money with locally owned stores and calls on government to make policy decisions
that will protect and promote locally owned businesses.
Cunningham said leveling the playing field for all businesses would be a good start.
"One major problem is that for big redevelopment projects, the developer picks from a couple of chains like Barnes & Noble
or Borders for books and Starbucks for coffee without even seeing if a local player is interested," he said. "Also, all the
TIF (tax increment financing) money available to subsidize these larger projects is not available to the smaller businesses
that do just as much sales per square foot."
Cunningham said Elmhurst, Ill. has an interesting grant program for retailers moving into their central business district.
"They can apply for a $10,000 grant to help with start-up costs which are pulled from its (Elmhurst's) TIF," he said. "This
is a big help to independents, but not worth the hassle for a chain moving in."
Cunningham said another solution might lie in zoning.
"A lot has been done with zoning but it will take awhile to see how effective zoning codes alone can be in keeping out
larger stores and chains," he said. "We have our eye on these ordinances to see how they play out, but so far it's too soon to
tell."
According to Bristow, the most important job in economic development is taking care of what you already have.
"Business growth is with current businesses," she said. "Whether it be manufacturing, retailers or restaurants, it's with
our current folks - and that expansion is where the growth is, not with bringing in new folks and chasing out the old ones,"
she said.
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