National chains should invest more in the local community
Many of us remember a time when the pillars of our communities owned and operated most of the businesses in town. They were often the entrepreneurs of the era, taking risks, investing in the area and becoming well-known and respected.
Their efforts resulted in jobs and commerce. They fueled the economic engine that brought prosperity to the community. The library, Little League, concerts in the park and even the park itself sprang from the doings of these pillars. Nonetheless, their motivation came not from altruism but rather from an understanding that as the community prospered, their net worth grew. The pillars knew that their long-term prosperity depended on a vibrant community.
Fast-forward to the present when such pillars hardly exist.
Regional and national behemoths swallowed the banks the pillars once ran. The pharmacist quietly closed his doors. It was true for the grocer, the hardware store operator, and even the bar and grill owner. Powerful chains, bankrolled with cash and smarts, moved in and muscled out virtually every independent. Their motivation, although the same as the early pillars from a profit point of view, did not similarly align with regard to growing and maintaining the prosperity of the community they entered.
The chains follow a proven plan. Through sophisticated demographic studies, they identify those communities and sites with the most profit potential, generally areas poorly served by other competing chains. They move in, often with local and state tax subsidies, grow by taking share from independents, and then operate as a “cash cow” enabling expansion in other communities. A very effective business plan indeed, which gave rise to some of the largest and most profitable retailers the world has ever known.
What happens when the communities they occupy fall on hard times — when the local manufacturer goes out of business — when homes foreclose, storefronts empty, and the tax base declines? The chains see a loss of opportunity. They see their “cash cow” as dry. They move on to greener pastures.
Would the pillars of yesteryear have made a difference in a downturn?
Could they have staved off the decline? Very possibly yes. Since their motivation went beyond immediate profit, they would work hard to attract another manufacturer. They would use their influence to rally the community to stick together, to ride out the tough times. They invested in the community, and they saw a connection between the prosperity of the community and themselves. That connection would motivate them to do almost anything in their power to maintain the status quo.
Communities all over the country find themselves dominated by chains that lack a commitment to the area they occupy. Ironically, however, the fault lies not with the chains. Their mission is to return a profit to their shareholders, and their current business model does that nicely.
No, the fault lies with each of us. We have been complacent and weak when dealing with the chains. We have not demanded that they invest in the community — the source of their profit. We have been too eager to allow new chains in after they leave another area in decline. We allow them tax breaks and special treatment, and at the same time naively believe they will produce jobs and tax revenue.
The unfortunate reality is that it is often a zero-sum game; no new jobs and no new tax revenue usually result. Still, we view their entry as a measure of our growth and even our esteem. We are enamored with their glitz and size, but we soon discover they have but a single focus — to use our community as fuel for their engine. Shared prosperity is not part of the equation.
The following anecdote illustrates the point. A local not-for-profit, serving hundreds of families, solicited a donation from a regional chain with a large local presence. The chain’s annual sales total about $3.5 billion with an estimated $60 million yearly net profit. The local store alone does an estimated $30 million in sales. After several attempts, the local store manager ultimately provided a $20 gift card as a donation.
Put in context, many local independent business owners contributed many times the actual cash value of that donation, even though their gross sales and net profit would amount to less than a rounding error for the chain. Further, unlike the chain whose customers were many of the families served by the not-for-profit, some business owners had nothing to gain directly from their contribution, but still donated without fanfare at a level hundreds of times greater than the chain.
Moreover, while this regional did very little, the national chains did virtually nothing. Clearly, the local business owners view their responsibility to the community much differently than the chains.
Make chains step up
Chains need to become the new pillars of the communities they occupy.
They need to invest in the community’s well-being for the long haul, not in word but in deed. However, it will not happen unless each of us demands more. We need to get the decision-makers from these chains on our local boards. We must not be dissuaded when our requests for support and participation are met with a subtle “go away” — the national chains have made saying “no” an art form. We must work to educate our corporate neighbors as to their proper role in preserving and improving our communities, for in the end it is in their best interest as well as ours.
It will be difficult and frustrating, but if we persevere, they may ultimately view their responsibility to the community in much the same way as the early pillars. Let us not be content with a $20 gift card.
Larry Jordan lives in Amsterdam.