An Outlook

The city of Sturgeon Bay was presented with the much-anticipated economic impact analysis for the proposed Wal-Mart supercenter last month. The report was prepared by a firm called Vierbicher from Madison, WI and focused primarily on the impact of the new store on the city of Sturgeon Bay (though there is some acknowledgment of impact in the rest of the county).

Those who have studied this document have undoubtedly reached the same conclusion I reached: the document is filled with unsubstantiated assumptions, ignores standard business practices of corporately owned national retailers, utilizes questionable population projections, and minimizes the impact of a supercenter on existing businesses within the city and the county as a whole.

Space restrictions do not allow me to detail all of the study’s failures, though I point out several below. I encourage everyone to read the study for his or herself. You can find it at http://www.sturgeonbaywi.org.

1) The study talks extensively about the city of Sturgeon Bay “leaking” almost 50 percent of household purchases to areas outside of the city, and adds that these lost sales are “likely [to] Green Bay.”

While no one disputes that city, and county residents, do shop in Green Bay to varying degrees, there is no attempt in the study to identify sales that happen within the county, but outside of the city. Sales within Door County are subject to the county sales tax thereby benefitting the every resident of the county – whether they occur within the city limits or not. Without some calculation of the county’s “capture rate” it is impossible to determine how much is truly being “leaked.”

2) The study anticipates that the supercenter will generate $41 million more in sales than the existing discount store. In order to achieve this figure the new Wal-Mart will result in the closing of at least one existing grocery store in the city and the remainder will come from increased capture of “leaked” sales and a steadily growing number of households within the supercenter’s defined trade area (all of Door County, with small areas in northern Kewaunee and Brown counties).

As I stated above, the amount of “leaked” sales is already in question. Additionally, studies have shown that most of a supercenter’s sales come from within the existing trade area. One study, entitled “What Happened When Wal-Mart Came to Town? A Report on Three Iowa Communities with a Statistical Analysis of Seven Iowa Counties,” found that 84 percent of all sales at a new Wal-Mart store came at the expense of existing businesses within the same county – which refutes the argument that Wal-Mart draws customers from a wide area and thereby benefits existing businesses.

Another study, entitled “Competing with the Discount Mass Merchandisers,” by Iowa State University economics professor, Dr. Kenneth Stone, argues that the retail “pie” in any community is relatively fixed and increases only incrementally when population or incomes grow. This study of Iowa towns found that supercenters cost other merchants in the community approximately $12 million a year in sales (in 1995 dollars – the year of the study).

Dr. Stone’s study goes on to state that these sale losses “resulted in the closure of 7,326 Iowa businesses between 1983 and 1993, including 555 grocery stores, 291 apparel stores, and 298 hardware stores. According to the study, while communities initially experienced a growth in retail sales, within three years retail sales began to decline – with one in four stores ending up with a lower level of retail activity than they had prior to Wal-Mart’s arrival.

The simple fact that the Vierbicher study overlooks is that a supercenter seldom reaches its revenue projections by capturing leaked sales: the majority always comes from the target market at the expense of existing businesses.

3) As I noted above, Vierbicher’s study claims that the growth in the number of households within the supercenter’s target market will contribute significantly to the $41 million more in sales the new store proposes to realize. In order to demonstrate this growth their study anticipates a one percent annual growth in the number of households based on “historical trends as provided by US census data, as well as the projections of the Wisconsin Department of Administration.”

According to Vierbicher there were 13,842 households in the trade area in 2008 and by 2010 this number will be 14,120. And, incredibly, by 2030, the number of households will total 17,230 creating a total growth from 2008 to 2030 of 3,387 new households.

Among the things that is curious about these projections is that the Wisconsin Department of Workforce Development is not used as a source. Each year the DWD updates a profile for Door County.

According to the DWD’s most recent profile of Door County, the peninsula’s population was approximately 30,043 on Jan. 1, 2007. By 2010 the profile anticipates the population to be 30,204, by 2020 the population is at 31,832, and by 2030 the population is anticipated to be 32,090. In other words, Door County’s population is not anticipated to grow at anything resembling one percent per year – let alone the number of households – and the household projections in the Vierbicher study are, quite simply, preposterous.

4) A prevalent assertion in the Vierbicher study is that existing businesses in the city of Sturgeon Bay will survive the arrival of a supercenter because the city has had a Wal-Mart discount store for years, thus businesses have learned to compete with Wal-Mart throughout the years. The study notes, for example, that Third Avenue businesses stated on surveys that 50 percent of their business comes from tourists, thus – the study asserts – they are better positioned to weather the arrival of a supercenter.

This assertion is logically invalid, however. Ask any business owner, anywhere on the peninsula how much of his or her gross revenue comes during the tourist season and I guarantee that every owner will state at least 50 percent. The abiding fact of this peninsula is that the tourist season is when every business is the busiest and is making the most money – whether or not they cater directly to tourists. The rest of the year we just get by.

I could go on for pages about the problems of the Vierbicher study and the concerns I have about the potential arrival of supercenter in Door County. Ultimately this is a decision that rests with the city of Sturgeon Bay but will directly affect all of us. Please read the Vierbicher study carefully and critically, and then go to http://www.bigboxtoolkit.com to see the alternative studies I referenced above along with a myriad of other professional and academic studies of the impact of Wal-Mart supercenters on communities. The outcome of the city’s decision will have some of the most far-reaching implications Door County is likely to see for years to come.