By: John Kerr - Owner at Metro Wines
A few months ago, I noticed an unusually long string of emails in one of Asheville’s neighborhood forum-style email groups. Normally these posts cover topics that are perfunctory but essential for the neighborhood.
It’s rare to see much beyond an alert about whose trash cans were hit by bears last night or a plea for the name of a good handyman. But this email string covered an entirely different subject. So it was with some interest that I read the original emailer’s request, followed by the neighborhood’s reaction.
The email string began with a request for neighbors to join an effort to bring Costco to Asheville. As a coalition, they would actively lobby Costco to build a store here. The authors said they missed living near a Costco and all the benefits it brought them. They liked Costco’s proprietary products and low prices, and a local store would eliminate their regular two-hour road trips to the Costco in Greenville, South Carolina.
But beyond missing what they had back home, they also touted Costco’s contribution to the local community. They said Asheville would benefit because they felt Costco pays its employees well. Out of the string of 20 or so emails, only two disagreed whether Costco would improve Asheville.
Asheville has the most aggressive “shop local” campaign I’ve ever seen, so I was a bit surprised to read the resounding support for an international corporate chain. I think the “shop local” ethos is firmly ensconced in people’s brains, but for many of us, it seems like shopping local applies primarily to restaurants and farmers markets; beyond that, it’s touch and go.
What I love about living here is that we all have the freedom to do pretty much what we want. I fully support people shopping wherever they like—but are you really saving if you buy from big-box stores? If you look at the total picture, I think you’ll find the benefit is not as big as it seems.
Cost & Convenience
First, let’s look at the actual price of the item. Big-boxes have branded themselves as the lowest-cost stores, but from my own experience, I know this is not always true. As a wine shop operator, I compete with big wine stores that ship from New Jersey and California. Our walk-in prices are quite competitive and generally lower, once you take the cost of shipping into account. But many people just assume that those online prices are lower and don’t give us or other local businesses an opportunity to compete.
Then there’s the convenience of big-box shopping. You point and click, and in a day or two, your item arrives. At our shop, we either have it in stock or can get it to you in a day or two. Perhaps it’s a bit less convenient to shop local, but so is having to hang around the house to sign for your shipped wine or take a two-hour road trip to a discount retailer.
Next, let’s look at the employee “high pay” structure at big-boxes. I googled the salary structure for Costco, and found that Costco’s median pay for cashiers is $15 per hour, and stockers at $16 per hour. I think you’ll be pleased to know that Asheville has an organization that promotes living wages, Just Economics. Employers can join only if they pay their staff at least $20 an hour. Most of the employers I know in town pay more than this. If you’re concerned about wages at your local business, look for the Just Economics decal the next time you’re out shopping. It’s usually on the entrance door.
Where Do You Live?
But the real cost of big-box shopping is the one most hidden. And that is the money funneled out of Asheville, North Carolina, and/or the United States. Employee salary is spent in Asheville. But profits, the lion’s share of a large company’s take, is often transferred to countries with the lowest taxes. For this reason and our tax structure, Amazon and many other corporations pay no federal taxes.
But don’t they pay state taxes? Major companies put their building location up for bid. Cities and states compete for the business by offering deep discounts on property and other taxes. Small businesses in those same communities pay full freight.
At least all the sales tax is collected, right? There is at least one community that won its bid for a large company through sales tax kickbacks. Unknown to shoppers, however, about a third of the sales tax collected was returned to that company. So even sales tax is up for negotiation.
Lower taxes and kickbacks mean that large companies make higher profits than small ones, even when they charge the same or a lower price. This creates an uneven playing field between large and local companies, plus it creates a race to the revenue bottom for the communities that “win” the bid. For this reason, tax bids such as this are prohibited throughout much of Europe.
It’s true that no one has to open a business—I knew more or less what I was getting myself into—but the results of all this affect you too. Every community needs a certain amount of funds to operate. If the largest few get a big tax break, that means the rest of us have to make up for it in one way or another. So, indirectly, you’ll eventually get less benefit for low-cost items once you combine it with higher taxes.
But it really comes down to the type of community you want to live in. To preserve what we have and perhaps make it better, we need to keep the profits and taxes flowing within our own community. The more funds that leave, the fewer businesses and employment opportunities there are. And it will be harder for us to expand beyond our hospitality-based economy to something even more vibrant and diversified.
Please spend your money where you wish—we all balance the many choices we make each day. Just keep in mind that our decisions are not benign. There is no such thing as a free (or low cost) lunch.
Personal Property, Subletting Rights, Required Hours, Building Rules, Rights of First Refusal, and the list goes on.
As you can imagine, there are countless other considerations that landlords and tenants can take into account, which will allow them to serve as better landlords and tenants to one another. Good communication and a thorough commercial lease agreement will get them there. Effective brokers and attorneys will have seen so many of these business relationships and leases that they will be capable of reminding the parties to think of things that are otherwise innocently overlooked and ignored, such as: At the end of the lease term, what personal property items can the tenant remove, and which ones have become “fixtures” and must remain on the landlord’s property? If the tenant realizes in year 3 of 10 that it doesn’t use all 3,000 square feet, can the tenant sublease 1,000 of those square feet to a separate business to run a coffee bar, and can the sublease be profitable to the tenant or must tenant turn over any rent monies collected to landlord? Does the building have overarching building “Rules and Regulations” applicable to all tenants, that require a tenant to abide by certain mandatory hours of operation? If the landlord wants to sell the leased space in year 3 of 10, does the tenant have the first crack at purchasing it? Can the landlord lease space in the same building to an unrelated party that runs the same kind of business operations as an existing tenant?
All of these questions can be addressed with creative thinking, clear communication, and experienced brokers and lawyers leading the parties to consider issues beyond lease term, rental costs, and security deposits. Ultimately, good communication and a thorough commercial lease agreement will lend the relationship a solid foundation from which to build upon—and hopefully the landlord and tenant will live happily ever after.