Economic Benefits of Independent Bookstores

Jeff Milchen's article on the downturn in retailing in Sunday's San Francisco Chronicle, The next bubble to burst?, talks about the importance of independent retailers to communities. Independent bookstores and other locally-owned businesses provide more economic benefits to communities than chain stores.

It's too late for this bubble to deflate without damage, but states and communities should act promptly to reverse some of the conditions that encouraged the bubble and to build a more sustainable economy.

Economic misconceptions, as well as speculation, played a huge role in creating our retail bubble. For example, big-box chains inevitably promise to create hundreds of jobs and bring millions of dollars in sales tax revenue when lobbying to build a new store. The claims are not false, but grossly misleading.

Without population growth, spending on typical big-box goods like hardware, basic clothing or housewares is a relatively fixed pie. Though we might shift our shopping, we don't increase our consumption of socks or toasters much just because a new venue is selling them. "New" sales tax proceeds and jobs simply displace jobs and revenue at existing area businesses.

The community may see an immediate spike in revenue from the new store, but once newly generated public costs for traffic signals, sewer, water, and fire protection are calculated, cities often experience a net loss. This is one reason why, despite the new receipts accompanying retail sprawl, taxes often rise fastest in rapidly growing communities.

A community loses big, however, when a chain displaces sales at an independent business (or displaces entire businesses). Why? A new chain store typically is a clone of many other units, eliminating the need for local planning, and using a minimum of local goods and services. Profit is exported to corporate headquarters and almost all local jobs are low-skill positions.

In contrast, independent business owners typically spend much of their profit locally, give back more to the community, and create jobs for local accountants, Webmasters, ad agencies and many other higher-skilled people. In addition to offering greater career potential, these jobs are a training ground for future generations of entrepreneurs.

A 2007 study in San Francisco by Civic Economics is one of many to quantify the premium that cities derive from local ownership. It found that dollars spent at independent businesses yielded nearly three times more local economic benefit than those spent at chain competitors, and created about 80 percent more jobs.