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New Arrivals & Store Recommendations
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May 03, 2007
A new economic and market share analysis of the
city of San Francisco has provided some surprising
results. Despite recent high-profile closings of
independent bookstores in the Bay Area, the new "San
Francisco Retail Diversity Study" shows that, as a whole,
independent bookstores in San Francisco are not only
thriving but are dominating the city's book market.
Furthermore, the study clearly demonstrates yet again
that independent bookstores provide more economic value
to a community than do chains. The study, which creates a
model that can be used to conduct similar studies in
other markets, was commissioned by the San Francisco
Locally Owned Merchants Alliance (SFLOMA) and conducted
by Civic Economics.
Independent bookstores aren't the only retailers
contributing significantly to San Francisco's economy;
the study focuses on four other retail segments (sporting
goods, toys and gifts, limited service dining, and
hardware) in which locally owned merchants also have
strong market shares. Hut Landon, executive director of
the Northern California Independent Booksellers
Association (NCIBA), who provided oversight for the
study, said, "This study shows the market strength of
independent bookstores and other locally owned businesses
and underscores their value to San Francisco's economic
well-being."
While previous economic studies have gauged independents'
local economic impact, this new study went a step
further. It analyzed locally owned merchants' total
market share in the San Francisco area and determined
what the effect would be if there were an increase in
consumer spending in locally owned businesses.
Overall, the goal of the study was "to provide consumers
and policy makers with an understanding of the economic
benefits of redirecting spending from chains to
independents." And, importantly, the study created a
model that can be used to conduct similar market share
studies in other communities.
Among its highlights, the report noted that books
purchased from a locally owned bookstore bring
approximately one-third of the revenue back through the
economy as compared to less than 20 percent for national
chains. Furthermore, online merchants bring only "nominal
value" back to the local economy.
The study also provides an analysis of what the economic
impact on the city of San Francisco would be if there
were a 10 percent increase in the market share of locally
owned businesses. Among the findings for the book market,
the study found that redirecting 10 percent of book
purchases to the local market would result in an
increased economic input of approximately $3.8 million,
25 additional jobs, $1.3 million in new income for
workers, and almost $325,000 in additional retail
activity.
Further, the study notes that a 10 percent increase of
the total independent market share across the five
studied categories "would yield nearly $200 million in
economic activity and nearly 1,300 new jobs; [however,]
it must be remembered that the reverse is also true:
shifting a further 10 percent of sales to chain merchants
would deprive the community of that same $200 million and
put those 1,300 employees out of work."
Oren Teicher, COO of the American Booksellers
Association, one of the study's sponsors, said, "With
each new economic impact study, it becomes more evident
that, regardless of the region of the country,
independent booksellers -- and independent retailers as a
whole -- bring far more economic value to their
communities than do chain stores." He noted that "this
San Francisco study takes it a step further and provides
a clear example of how a small shift in spending toward
local businesses would be a significant boon for a
community's local economy. This is a crucial tool that
any bookseller can use to open the eyes of their local
officials as they strive to help maintain their town's
uniqueness and its economic vitality."
The study underscores that very little is required of
consumers and policy makers to reap these economic
benefits for the local economy. For consumers, the study
notes, "it simply means directing an occasional shopping
trip to a locally owned business." For policy makers, it
means a reexamination of "thoughtlessly drafted and
applied zoning and permitting processes that tend to
favor large chains and the developers who build them" and
an end to subsidized developments designed to house
chains.
For the "Retail Diversity Study," Dan Houston and Matt
Cunningham of Civic Economics estimated the market share
of independent businesses in each category, calculated
the economic impact of those independent businesses, and
forecast enhanced impacts associated with redirected
consumer spending. The report notes that, in selecting
lines of goods for the study, the number of chain
competitors likely to be present was one significant
factor. In the five categories, "the chain competitors
were both limited in number and largely publicly held,
allowing a somewhat labor-intensive but achievable
analysis."
"What pleases me the most about this is that the study
has created a way to figure locally owned business market
share in communities," said Landon. "The San Francisco
study clearly has some great information for San
Francisco, and it will help locally owned merchants make
a case for their value and importance in the city."
Of the study's findings, perhaps most remarkable is that,
unlike many other communities, independent bookstores in
the area own an unusually high market share, estimated at
between 55.4 percent to 58.8 percent, while chain
bookstores account for between 12.6 percent to 15.5
percent of the market. In addition, the study found that
the Internet accounted for about 19 percent of area book
sales; general merchants between 2.6 percent and 3.3
percent; and book clubs about 7 percent.
Landon emphasized that the bookstore component
underscored that media reports "writing off independent
booksellers may be significantly premature. San Francisco
is a hugely important channel for new books. This is a
big city market, and independents are selling a lot of
books here."
The study notes, however, "Barnes & Noble ... and Borders
have each made significant inroads into the City of San
Francisco. Urban expansion of large-format book chains
has been easier than for other lines of goods due to the
smaller footprint of the stores."
The San Francisco data confirmed the findings of previous
economic studies that local economies receive far more
from dollars spent in locally owned businesses that those
spent in chains or with online retailers. "Looking at the
book sector ... it is easy to see how dramatic an effect
Internet sales have on a local economy," the study
states: "Buying a book from an online merchant such as
Amazon there is basically no economic impact at all for
San Francisco. There are no local employees to pay a
salary to, no local services are contracted for, and the
profit is divided up to shareholders across the country.
Additionally, no sales taxes are collected and the loss
of revenue for the city actually results in a loss of
sales tax revenue."
While Landon acknowledged that the retail environment in
San Francisco, where chains struggle for market share,
was somewhat unusual, he stressed that this new study is
not only helpful to San Francisco merchants, but to
independents everywhere. "We knew San Francisco would not
be reflective of most other communities -- we recognize
that this market share is probably not reflective of
anywhere else ... and that booksellers elsewhere might
think, 'This doesn't help me.'" But, he added, "The study
shows the benefits that a shift in spending can create.
Just a 10 percent shift to locally owned retailers has an
enormous impact. And that's not just true of San
Francisco; it would have a similar impact in other
communities."
Moreover, the model that Civic Economics devised to
conduct the San Francisco study can now be readily
applied to other communities. As an example, Landon noted
that Civic Economics is considering conducting the same
type of study in Phoenix, Arizona, an area of the country
where chains dominate. One of the reasons that NCIBA
helped to fund the study, he said, was "to create a model
so [other community] studies would be more
cost-effective."
In addition to NCIBA and ABA, other funding for the study
was provided by the Great Lake Booksellers Association,
the New Atlantic Independent Booksellers Association, the
Pacific Northwest Booksellers Association, the Mountains
& Plains Independent Booksellers Association, along with
individual San Francisco booksellers and SFLOMA
merchants. --David Grogan
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