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Big Box Stores

Just What Shoppers Want or Just Plain Evil?

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     The Iwilei area of Honolulu, once solely an industrial and warehousing
     district, is now home to the largest concentration of adjacent big-box
     stores in Hawaii. It’s also home to a series of small businesses –
     almost all of them restaurants and fast-food outlets – that feed off the
     traffic that big boxes attract.
     Photo: Google Earth, Illustration: istock
     Click to enlarge image.

The critics' story is familiar: Giant stores move into an American community and destroy its small businesses, local values and sense of place.

The same story is being told now in Hawaii, as shoppers abandon longtime neighborhood businesses to buy at the big-box stores owned by outside corporations.

The truth is that this retail trend has been occurring in Hawaii for almost a century and the outcome is more complicated than this simplified tale suggests.

"Success depends on the whim of the consumer," says Carol Pregill, executive director of the Retail Merchants Association of Hawaii. "Stores show up, are great for a while, then they disappear."

Shoppers always like extra options, Pregill says, and whether you like them or not, the big boxes have brought "excitement" into Hawaii's retail market.

Big boxes often present a difficult choice for local shoppers: supporting Island businesses vs. saving money. The state government has not acted against big boxes, but there has been action and concern at the local level:

• Kauai County Council has banned "super-stores";

• Maui County Council had considered a similar proposal but it's on the back burner for now;

• On Oahu, some Kailua residents tried to stop a Target store there, but the landowner has signed a lease to move the project forward.

Back in 2003, state legislators asked the Legislative Reference Bureau to study the impact of big retailers on small and medium businesses in Hawaii. Researcher Peter G. Pan took on the study, largely using data from the state Department of Business, Economic Development and Tourism.

It was clear that the arrival of Costco, Home Depot and Walmart coincided with the decline of smaller, independent retailers. For instance, after Barnes & Noble and Borders came to Hawaii, the Honolulu Book Shops chain folded.

     Illustration: istock

But was correlation causation?

After studying the issue, Pan was not sure.

"This is a demanding if not impossible task," he reported. "Businesses close for a host of reasons aside from competition from big boxes." Such reasons range from land, inventory and labor costs to family decisions, leasing costs, insurance and more.

"Even if the DBEDT could identify small and medium locally owned retailers that claimed big-box competition caused them to close down, there is no reason to guarantee those claims were true."

From an overall state economic standpoint, DBEDT said, the impact of big boxes is minimal, with consumers shifting spending from one place to another but not increasing or decreasing it dramatically. "The winner in this new retailing era would, thus far, appear to be the consumer."

More recently, DBEDT analysts considered taking a fresh look at this issue but decided it was a nearly impossible assignment.

"From our point of view," says analyst Eugene Tien, "the (total) of state income is fixed. If you spend at this store, you will not spend at another. That means to some extent the big-box stores will force out the smaller ones, but it is hard to quantify."

Some at DBEDT wondered if the decline in small, individual stores might be more associated with generational change, shifting priorities and the fact that many established locations are worth more as real estate than as retail operations.

"There is disagreement among economists about whether a small shop went out of business just because Sports Authority or Walmart was there," says one DBEDT official. "Just to say so many mom and pops have gone away since the big boxes came in is not enough to (persuade) our economists."

A 2010 study commissioned by Sarasota County in Florida was not so equivocal. The city wanted to know the impact of big boxes on property taxes, and J. Patrick Whalen and Joseph Minicozzi of Public Interest Projects (a group that promotes, among other things, "smart growth") concluded that dense, mixed-use urban development generates much more property tax revenue per acre than big boxes or isolated shopping malls.

"What is most surprising to me is that it's taken planners so long to ask such questions and begin looking at the data in this way," says Peter Katz, director of urban planning for Sarasota.

A 2007 report by Elena G. Irwin and Jill Clark of Ohio State University, published in the Journal of Regional Analysis and Policy, looked at the many other studies of big boxes around the nation. They said these various other reports concluded:

     Illustration: istock

• Big boxes force some existing retailers out of business.

• Consumers save a lot of money when grocery superstores open in their community. Competition from the superstore drives down prices at other grocery stores, so all local households – not just those who shop at the superstore – save an average of 25 percent in food expenditures.

• Retail wages at the county level decline by about 7.5 percent as a result of the opening of a Walmart store.

• Higher infrastructure costs occur due to traffic congestion and other factors.

The threat of bigger stores is old news for the Mainland and Hawaii. From the time the S.H. Kress Department Store opened in Hilo in 1932, local people have worried that big outside retailers would destroy our Island economy and bankrupt countless mom and pops. The same arguments were heard when Sears, Longs and Safeway first entered the market. In each case, they changed the retail landscape and pushed a few stores over the edge, always because local customers wanted to shop at the new stores.

When Ala Moana Center opened after statehood, the downtown Honolulu shopping district centered around Fort Street slumped. Who would go into a local dress shop when there was a huge Sears nearby, with long hours and plenty of free parking? Many people see big-box stores as simply another turn of the wheel in the hyper-competitive world of retail sales.

Kauai County councilwoman JoAnn Yukimura, who led the successful effort to ban superstores there, recently attended a conference in Florida at which researchers Whalen and Minicozzi spoke.

"They would have put our small businesses out of business," Yukimura tells Hawaii Business. "There was also a question of scale. We have a four-story height limit on buildings, but the square footage still would have been immense. It just didn't fit with our community."

Hawaii Business magazine invites you to comment on our articles and the issues they raise. Comments are moderated for offensive language, commercial messages and off-topic posts and may be deleted. Some comments may be chosen for inclusion in the magazine on the Feedback page.

May 3, 2011 03:21 pm
 Posted by  konaken

Hawaii stores, could, if they wanted to, fight back. Many Big Island big box stores sell more local produce than the big Hawaii owned groceries! It would be nice to buy local from local but if I can't i'm gonna buy local being sold by a mainland big box.. Its not price, its just that they sell it and others dont.

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