Posts Tagged ‘IKEA’

Someone’s idea of economic development

The Oregonian continues to cover the opening this week of the IKEA store near the Portland airport. Sunday’s article looked at what we might see happen here based on what has occurred in the year since IKEA opened in West Sacramento. Here are a few revealing excerpts:

• Ikea not only has delivered a tidy sales tax boost to West Sacramento…it also has attracted several big-name retailers that have provided further construction and retail jobs. In addition, the store has drawn shoppers from as far as Redding, Calif., and Reno — overnighters staying in local hotels and dining at restaurants serving dishes other than the store’s gravy-soaked meatballs.

• Within the first year, West Sacramento received $1 million in sales-tax revenue from the store, amounting to 7 percent of the city’s overall sales-tax proceeds, said Kay Fenrich, chief executive of the West Sacramento Chamber of Commerce. The figure does not take into account revenue from stores that have since flocked to be near Ikea. “Before Ikea, we had no retail,” Fenrich said. “You had to cross the bridge for furniture, sheets, a dress, anything. Once Ikea made their announcement about opening here, the other big-boxes couldn’t scramble here fast enough.”

• Ikea cites Target and Wal-Mart as competitors, but retail experts say independent discount furniture stores could at least briefly say goodbye to as much as 25 percent of the customer traffic, said George Whalin, a San Diego retail consultant who grew up in Sacramento and followed Ikea’s opening there. “Ikea impacts everybody who serves consumers who want inexpensive furniture,” Whalin said. “There’s not anybody that’s immune.”

• “They’re killing us,” said Haide Critcher, who, with her husband, opened Big Al’s Furniture in the 1960s. The large warehouse store in Sacramento, like Ikea, offers affordable furniture that sometimes comes boxed for customers to assemble.

• “Ikea put West Sacramento on the map,” said Diane Richards, West Sacramento’s economic development coordinator. “Everyone thinks you’re so much more fun and exciting.”

These observations and quotes are revealing in many ways. First, they underscore why municipalities, especially in states with sales taxes, like big boxes — they generate more sales tax receipts. From the first big box, then from the subsequent big boxes that follow magnets like IKEA. But the question is at whose expense? If people are traveling from Reno and Redding, they are not spending their money in those communities and those cities lose tax revenue as a result. Oregon does not have a sales tax, but IKEA will surely pull in shoppers from the region’s smaller communities whose business base will suffer as a result.

Second, what happens to West Sacramento tax receipts when Reno and Redding (or some other nearby city) gains an IKEA or some similar trendy big box to stay competitive in the retail arms race, as they most certainly will?

Third, even though national big box retailers tend to see other national big boxes as their competitors, it’s the independent locally owned stores that take the brunt of the competitive hit, such as Big Al’s in nearby Sacramento. Cities across Americas now share a soul-killing homogeneity as their retail landscapes are littered with the same chains. Meanwhile, the big boxes fight it out over who can extract a larger share of local incomes (and ship it off to who knows where).

Fourth, what does it say about our society when the arrival of a retailer is seen as putting a community “on the map” and making it “much more fun and exciting”? Public officials in towns across America still equate suburban strip-mall retail development with economic development and, in the case of West Sacramento, raising a town’s self-esteem. I can only shake my head.