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THE BOX
Introduction
Magazine Street represents a form Since Katrina, the people of New
of urban development characterized Orleans have debated the best way
by narrow streets with a decidedly to restore commercial services to
pedestrian orientation, a focus on the entire city. Two strategies pres-
serving adjacent neighborhoods, ent the most immediate prospects
smaller storefronts opening onto for success:
the sidewalk, and a rich mix of local
proprietors focused on serving a 1. The suburban model requires
local market. the development of large-format
retail on large parcels, anchored by
In years past, right up to Hurricane general merchandise and home im-
Katrina, New Orleanians were provement warehouses augmented
served by a number of similar by a mix of junior anchor and small
commercial corridors and districts. in-line spaces.
However, time and the storm have
severely damaged other urban 2. The urban model involves the
commercial areas, including such restoration and rejuvenation of
distinct areas as Gentilly, St. Claude existing commercial corridors like
Avenue, and Oretha Castle Haley those named above.
Boulevard, to name just a few.
This study was undertaken to provide the people and policy makers
of New Orleans with tangible economic guidance in choosing between
strategies to restore commercial services to the entire city.
p.1
Prior Research
The underlying methodologies for economic activity than chains on (www.CivicEconomics.com/SF)
this study have been developed in comparable revenue. The Ander-
previous Civic Economics studies in sonville Study further reviewed In 2008, Civic Economics under-
Austin (2002), Chicago (2004), San impacts on a per-square-foot basis, took the broadest study to date in
Francisco (2007), Phoenix (2007) and found similar economic advan- Grand Rapids, Michigan. We had
and Grand Rapids (2008). tages provided by local firms. the opportunity to analyze market
(www.AndersonvilleStudy.com) shares of chains and locals in four
In the Liveable City study in Austin, lines of goods and services, survey
the study compared revenue and In 2007, Civic Economics worked a number of local businesses
expenditures at two local mer- with business coalitions in San in each for comparative impact
chants against those at a competi- Francisco to broaden these studies, purposes, and forecast the local
tive chain store slated for a publicly- focusing on the market shares held impact of a 10 percent shift in con-
subsidized development across the by independent businesses and ex- sumer purchasing from chains to
street. In that case, the local retail- trapolating economic impacts to be locals. The findings: $137 Million
ers were found to generate three gained by increasing local market in additional local economic
times the local economic activity as shares by just 10 percent. activity, with more than 1,600 jobs
the chain store. generating $53 Million in wages.
That change, in a city of already (CivicEconomics.com/localworks)
Building on that study, the Ander- strong independents, would gener-
sonville Study of Retail Econom- ate an annual economic impact This study expands on the earlier
ics in Chicago conducted similar of nearly $200 Million and create study to provide New Orleanians
analyses of ten local retailers, 1300 jobs with over $70 Million in with analysis of these issues.
restaurants, and service providers payroll.
and their chain competition. While
the impact differential varied among
firms and sectors, the results were
again striking, with locals producing locally-owned businesses
an average of 70 percent more local generate as much as two-
to three- times the local
economic activity as do
chains.
p. 2
This study set out to take a new approach,
comparing the local recirculation of dollars
by Magazine Street merchants with that of
a large general merchandise store such as a
SuperTarget.
p. 3
Generic SuperTarget Store
Civic Economics began the study by analyzing publicly available data to identify revenue and expense patterns for
a generic SuperTarget store. 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.
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iÊÀ>}iÊvÊ reasons, we do not include them here. This is true
merchandise typically found in a supermarket. for both local firms and Target.
Unfortunately, the company does not reveal enough
information to confidently allocate square footage to UÊi>`µÕ>ÀÌiÀÃÊ
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each line of goods. mated labor expenses for Target’s 12,000 Minneapolis
headquarters employees.
Estimating the proportion of that revenue that recir-
culates locally is more difficult. Publicly traded firms UÊ`ÛiÀÌÃ}ÊÊ/>À}iÌ]ÊiÊÃÌÊ>Ì>ÊÀiÌ>iÀÃ]ÊV-
reveal little operational data beyond that required by the ducts very little advertising that is truly local. Rather, it
federal regulations and the informational needs of share- purchases advertising spots on a national market and dis-
holders. However, Target Stores, Inc., provides a great tributes printed circulars to local newspapers for delivery.
deal of additional information to facilitate our analysis.
From those deductions, Civic Economics estimates that,
The accounting category of "Sales, General, and of the $50 Million in revenue associated with a generic
Administrative" includes all significant expenses SuperTarget store, approximately 16 percent is recircu-
reasonably expected to occur in the communities in lated locally through wages paid to local employees.
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constitute just over 20 percent of company wide retail Of course, that number is an estimate and may be as
revenues, including online sales. From that figure, much as a percentage point higher or lower.
Civic Economics deducted the following items:
p. 4
All Lines of Goods
The next step in our analysis is to develop comparable recirculation
numbers for a range of locally owned merchants offering lines of goods
in competition with Target. To do this, Civic Economics undertook to
survey merchants doing business on or near the Magazine Street
corridor in New Orleans.
p. 5
The BIG Benefit
The chart below represents the local expenditures, as a share
of revenue, for all 15 participating businesses
Source: Survey of Magazine Corridor Merchants Total Local Recirculation Total Local Recirculation
of Revenues: 35.2% of Revenues: 37.1%
Source: Survey of Magazine St. Merchants Source: Survey of Magazine St. Merchants
Total recirculation of
revenue for a hypothetical
SuperTarget store is 16%. Home Furnishings and Decor Consumables and Commodities
Businesses participating in
this survey return dollars to 6% 5%
Profit 14%
the New Orleans economy at Profit
16% Labor
Labor
approximately twice that rate. 1%
Services
11%
Goods
1%
Goods
1%
Charity
Source: Survey of Magazine St. Merchants Source: Survey of Magazine St. Merchants
p. 6
These findings, which are consistent with earlier studies in other
American cities, demonstrate again that locally-owned businesses
provide a local economy with tremendous returns compared to
their chain competitors. As a share of revenue, Magazine Street
merchants surveyed keep twice as much of their revenue
local as do chain competitors.
Policy Considerations
On any given transaction, the Therefore, the difference between
difference may appear small, but an all-local retail economy and an
carried throughout the $3.8 Billion all-chain one is $2.35 Billion dollars
Orleans Parish records annually in in local recirculation in the New
retail sales (2008, Claritas) the im- Orleans area. The reality is some-
pact is astounding. For example, if where between these extremes,
all Orleans Parish retail transactions but the clear implication is that local
in 2008 had taken place at locally business matters, especially in a
owned businesses, $1.2 Billion of rebuilding and growing city like
that would have remained in the New Orleans. Indeed, without
local economy – providing more knowing current market shares,
opportunity to local residents. we can say the following:
By contrast, had those transactions
taken place at chains, only $600
Million would have remained locally.
At the regional level the potential
additional activity is even more
If Orleans Parish consumers, including residents, institutions, and
substantial. The seven parishes of
the New Orleans-Metairie-Kenner
visitors, were to shift just 10 percent of all retail activity from chains
Metropolitan Area generate $14.6 to local merchants, the result would be equivalent to injecting an
Billion in retail sales annually. additional $60 Million annually into the local economy.*
(* in the form of recirculated dollars that would otherwise have left the area)
p. 7
Land Use Considerations
The survey data and analysis omics looked at space dedicated to Participating businesses report
present another issue for consider- retail services, excluding additional total sales per square foot of $587
ation. Civic Economics asked each spaces. This was done to account per retail square foot. Therefore,
participating business to provide for the odd configurations of many 179,000 square feet would gener-
data about the size and use of its Magazine Street spaces, with deep ate an estimated $105 Million in
facilities. Our goal was to quantify narrow storefronts and often ad- annual sales revenue across as
sales per square foot, a common ditional rental space on upper floors many as 100 individual stores.
measure of commercial success in or outbuildings. A more convention- Buildable ground floor space on a
the retail sector, to identify opportu- al, purpose-built store like Target, typical Magazine Street block is
nities for the most productive use by contrast, dedicates nearly all 20-25,000 square feet, so these
of land in a rebuilding New Orleans. space to retail purposes, so this businesses would occupy roughly
analysis uses the full 179,000 four blocks, fully built out on both
For local businesses, Civic Econ- square feet. sides of the street.
p. 8
Converting the local recirculation In addition, while the eight blocks This widely divergent contribution
figures from the previous section to of Magazine Street merchants of land use to the local economy
account for the full 179,000 square would utilize mostly on street is especially important in New
feet yields an estimated local recir- and other existing parking, a large Orleans. The commercial district at
culation of $188 per square foot. format supercenter like a Super- Gentilly and Elysian Fields presents
For the entire four block stretch Target typically requires roughly an excellent example. The existing
illustrated above, total local recircula- 300,000 square feet of parking, area would be completely swal-
tion in the form of wages, profits, nearly seven acres in a surface lot lowed by just two buildings as big
procurement of goods and services, configuration. The current Wal- as a SuperTarget or a Wal-Mart
and charitable giving reaches $33.6 Mart Supercenter on Tchoupitoulas Supercenter. The Gentilly Woods
Million per year. Street is roughly the same size of Shopping Center recently acquired
The same calculations for the hypo- the hypothetical SuperTarget used by the New Orleans Redevelop-
thetical SuperTarget store yield total for analysis here, and its total site ment Authority, at roughly 13 acres,
sales of $50 Million, with local recir- sprawls across 12 acres on the could accommodate only one su-
culation of only $45 per square foot New Orleans riverfront. percenter, providing little opportu-
or a total of only $8 Million annually. nity for New Orleanians to capture
the benefits of redevelopment.
Conclusion
Civic Economics appreciates this If New Orleans consumers, includ- some thriving and some struggling
opportunity to analyze current and ing residents, institutions, and visi- but these corridors were always
prospective retail economics in tors, were to shift just 10 percent closely associated with the adjacent
New Orleans. We believe the find- of all retail activity from chains community of residents.
ings detailed above provide New to locals, the result would be the
Orleans residents and policy mak- equivalent of injecting an additional As redevelopment progresses in
ers with ample reason to provide $60 Million annually into the local storm-damaged areas of the city,
conscious support for independent economy in the form of recirculated policy makers will be confronted
businesses in the rebuilding city. dollars that would otherwise have with stark choices between tradi-
Magazine Street and its diverse left the area. At the metropolitan tional urban retail districts such as
businesses provide an example level, which constitutes seven existed before or wholesale redirec-
of small business doing big things, parishes, the same 10 percent shift tion of commercial activity to large
generating higher revenue per would inject an additional $235 Mil- format chain stores.
square foot than a leading chain lion into the regional economy.
competitor and providing greater We believe this study provides a
benefits to the local economy These findings provide the basis strong basis for emphasizing the
while they are at it. for a strengthened education and former. In the portions of the city
awareness campaign aimed at New that were largely built-out before
This study did not provide the op- Orleans residents and visitors. New the storm, the advantages of
portunity to analyze market shares Orleanians have always enjoyed compact, traditional commercial
of locals and chains in the rapidly the benefits of small-scale, neigh- districts become far greater, with
evolving New Orleans retail econ- borhood-focused retail convenient each square foot of independent
omy. However, if the results above to homes and businesses. The city business generating four times
hold true across the community, before Katrina was blessed with the recirculation of dollars in the
we can say the following: numerous commercial corridors, local economy.
p. 9
Executive Summary
Civic Economics was retained by The Urban Conservancy to expand upon research begun in 2002, evaluating
the comparative economic impact of local businesses and their chain competitors. Prior studies have confirmed
that, to varying degrees, locally-owned businesses generate as much as two- to three-times the local economic
activity as do chains. This study set out to take a new approach, comparing the local recirculation of dollars by
Magazine Street merchants with that of a large general merchandise store such as a SuperTarget.