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This is to certify that the

thesis entitled

Superstore Development on the
Fringe of Rural America:
A Case Study of Charlotte, Michigan

presented by

Laura Marie Cruce

has been accepted towards fulfillment
of the requirements for

M asters ( MSdbgree in ReSource ‘ Development

 

   

Major professor

Date September 26, 1997

 

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1/98 chiRClDatoDquS—p.“

Superstore Development on the Fringe of Rural America:
A Case Study of Charlotte, Michigan

By

Laura M. Cruce

A THESIS
Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

MASTERS OF SCIENCE

College of Agriculture and Natural Resources

1997

ABSTRACT

SUPERSTORE DEVELOPMENT ON THE FRINGES 0F RURAL AMERICA:
A CASE STUDY OF CHARLOTTE, MICHIGAN

By

Laura M. Cruce

The paper examines the fears held by many merchants in small towns across the
nation when superstores such as Wal-Mart develop on the edges of town. The contending
theme of the study was that small town business merchants feared corporate takeover of
superstores, especially when unmanaged growth and “fringe” development threatens to
drive businesses in the central business district (CBD) into bankruptcy. Property
assessments from 1988-1995 were used to analyze the economic history of the businesses
located in the CBD and surveys were administered to both business merchants and
building owners to determine vacancy rates, rent fluctuations, and business patterns
during the 1985-95 period. The results indicated that high number of retail spaces turned
over during the 1988-95 period, and revealed that CBD merchants feared the takeover of
superstores. However, survey respondents also revealed the measures they took to stay in

business. Today, Charlotte’s CBD is still a functioning economic component of the city.

Copyright by
LAURA MARIE CRUCE
1997

ACKNOWLEDGMENTS

I would like to acknowledge my three committee members Professors Ken
Verburg, Rene Rosenbaum, John Schweitzer for their time and commitment to my thesis
project. I also want to thank my parents Anne and Doug Cruce for insisting I get my
masters and Sean Stringer who stuck by me through all the stress and late nights. Thank

you! !

iv

TABLE OF CONTENTS

LIST OF TABLES ............................................................................................................. vii

LIST OF FIGURES ............................................................................................................ ix

CHAPTER 1

INTRODUCTION ............................................................................................................... 1
“Superstore Phenomenon” ....................................................................................... 2

CHAPTER 2

A HISTORY OF LAND DEVELOPMENT IN CHARLOTTE .......................................... 7
Expansion in Charlotte Stimulates Fear ................................................................... 8

CHAPTER 3

LITERATURE REVIEW .................................................................................................. 14
How Can a Community Manage Growth? ............................................................. 15
Community Viability and Vitality - How Does a Community Benefit from
Economic Development? ....................................................................................... 16
What Does a Wal-Mart Want Out of a Relationship with a Community .............. 18
Case Studies of Superstore Development in Small Town America. ...................... 20

CHAPTER 4

METHODOLOGY ............................................................................................................ 24
Selection of the Area .............................................................................................. 24
Selection of Subjects .............................................................................................. 26
Hypothesis 1 - Relationship of CBD Property Value Change with Superstore
Development .......................................................................................................... 27
Hypothesis 2 - Superstores Development Related with Instability of Ownership
and Changes in CBD Rents .................................................................................... 27
Hypothesis 3 - Superstore Affects on CBD Business Merchants .......................... 29
Analysis of Data ..................................................................................................... 31

CHAPTER 5

RESULTS .......................................................................................................................... 32
Hypothesis 1 ........................................................................................................... 34

Property Assessments Between 1988-1995 ............................................... 34
Hypothesis 2 ........................................................................................................... 36
In the Eyes of the Building Owners ........................................................... 36

Title Transfers ............................................................................................ 36

Building Ownership ................................................................................... 37
CBD Rent Fluctuations .............................................................................. 40
Building Owners as Stakeholders in the Community ................................ 41
Hypothesis 3 ........................................................................................................... 44
Wal-Mart in the Eyes of the Merchants ..................................................... 44
Business Owner Survey ............................................................................. 45
Businesses Negative Toward Wal-Mart .................................................... 48
Businesses Positive/Neutral Toward Wal-Mart ......................................... 49
Businesses that Responded to Wal-Mart Competition .............................. 49
Advertising Strategies ................................................................................ 51
Businesses that Changed Hours of Operation ............................................ 52
Changes in the Number of Employees ....................................................... 54
Business Merchants as Stakeholders in the Community ........................... 55
Building Ownership ................................................................................... 56
The Downtown Development Authority ................................................... 56
The Charlotte Chamber of Commerce ....................................................... 57
Involvement in Other Community Organizations ...................................... 58
Residency of Building Owners .................................................................. 59
What can Charlotte do in the Future to Preserve the CBD? .................................. 59
Stimulating the CBD .................................................................................. 59

CHAPTER 6
CONCLUSIONS AND IMPLICATIONS FOR FURTHER RESEARCH ....................... 62
Conclusions ............................................................................................................ 62
Implications for Further Research .......................................................................... 64
Business and Community Groups Functioning Together ...................................... 66
Marketing the Image of Charlotte: Ideas for Future Research ............................... 67
BIBLIOGRAPHY .............................................................................................................. 69
APPENDIX A .................................................................................................................... 72
APPENDIX B .................................................................................................................... 75

vi

LIST OF TABLES

Table 1 - Transfer of Title Between 1988-995 of CBD Building Ownership ................... 37
Table 2 - Number of Building Owned in Charlotte CBD .................................................. 38
Table 3 - Years First Buildings Were Purchased in CBD .................................................. 39
Table 4 - Years Second Buildings Were Purchased in CBD ............................................. 40
Table 5 - Changes in Rent Afier Wal-Mart in 1991 .......................................................... 41

Table 6 - Number of Building Owners that are Members of the DDA .............................. 43

Table 7 - Number of Building Owners that are Members of the Charlotte Chamber of

Commerce .......................................................................................................................... 43
Table 8 - Building Owners Who Belong to Other Community Organizations .................. 43
Table 9 - Residency of Building Owners ........................................................................... 44
Table 10 - Service Industry Classification Codes .............................................................. 46
Table 11 - Types of Businesses that Responded to Survey ............................................... 47
Table 12 - Businesses Affected By Wal-Mart ................................................................... 48
Table 13 - Business Response to Changing Markets in 1990 ........................................... 50
Table 14 - Merchants that Made Adjustments to Advertising Strategies .......................... 52
Table 15 - Changes in Business Hours During the 1985-95 Period .................................. 54
Table 16 - Business Merchants that Own Buildings .......................................................... 56
Table 17 - Business Owner Involvement in DDA ............................................................. 57

vii

Table 18 - Business Owner Involvement in the Charlotte chamber of Commerce ........... 58

Table 19 - Business Owner Involvement in Other Community Organizations ................. 58
Table 20 - Building Owner Suggestions to Stimulate the CBD ........................................ 60
Table 21 - Merchants’ Suggestions to Stimulate the CBD ................................................ 61

viii

LIST OF FIGURES

Figure 1 - Map of the City of Charlotte ............................................................................... 5
Figure 2 - Boundaries of the Central Business District in Charlotte, Michigan ................ 25

Figure 3 - Property Assessments for Competitors and Non-Competitors During the
1988-95 period ................................................................................................................... 35

Figure 4 - Number of Buildings Purchased by Survey Respondents Between
1974-1992 .......................................................................................................................... 39

Figure 4 - Changes in the Number of Employees Between Competitors and Non-
competitors during the 1985-95 Period .............................................................................. 55

ix

CHAPTER I
INTRODUCTION

In the early 1800’s, people did not have the hundreds of stores to shop in that they
have today. Many years ago towns were built around one general store which sold
everything they needed fiom eggs to fabric. The general store was usually the only place
to buy food and dry goods for up to a hundred miles. The early mercantile provided the
same “one-stop” shopping conveniences that are present today in the form of multi-
million dollar “superstore” conglomerates such as: Wal-Mart and Kmart. However,
consumers have a much larger selection of goods in the 1990’s than they did 200 years
ago.

As populations grew in the United States, people settled and developed small
towns across the nation. Long before the giant superstore corporations were ever
developed, small towns grew in size, more stores Opened for business, and main streets
formed across the United States as the central core of many communities. Since main
street properties are already utilized, new commercial and industrial growth is occurring
on the edges of the small towns, usually in the adjacent townships, areas that have
primarily been “hotspots” for Wal-Mart and Kmart developments. The “superstore

phenomenon” can be documented across the nation and this study examines the concern

that stores such as Wal-Mart and Kmart are associated with the demise of main streets
across the nation.
“The Superstore Phenomenon”

The purpose of this study was to address fears expressed by Main Street business
merchants and building owners when superstores such as Wal-Mart and Kmart develop
and operate a store on the edge of town. The agricultural land is usually lower in price
than the developed city land. Consequently rural communities also have lower property
taxes. This study suggests that many rural communities may not be protected fi'om quick,
unmanaged growth because of their master plans. Even though superstores and strip malls
are developing throughout Michigan, they do not necessarily indicate that the integration
of these companies into a rural community will drive up the economy and its property
values. In addition, the commrmities existing central business districts are threatened with
corporate competition and the loss of business from local consumers.

Throughout the years, many merchants have expressed fear that Wal-Mart and
other superstores would draw customers away from the town’s central business district
(CBD) because superstores carry a large variety of merchandise and commonly practice
discount pricing. The case studies reviewed for this study revealed that CBD merchants
believed they would not be able to compete, property values would decline, and
eventually drive specialty retail stores out of the CBD and therefore lead to the demise of
Main Street. Not all of the superstore sales come fiom the CBD merchants. When
superstores open for business, the superstores’ total market expands because companies

such as Wal-Mart and Kmart reach out to a larger number of people in a broader

geographical area. At the same time, the local market can experience a significant impact
because the CBD stores tend to be specialty stores serving a relatively small market.
Should any of these stores that are direct competitors lose customers to the superstores
they could lose a large percentage of their clientele.

However, it is important to note that the level of fear in a particular community
would be affected by the number of merchants considered to be direct competitors of the
superstores. If a large number of retail stores located in the CBD were direct competitors
with Wal-Mart, the fear level would likely be a greater. At the same time, if the majority
of businesses located in the CBD were not direct competitors, the level of fear would be
less. The levels of fear, however, go beyond just the merchants. For example, the
Downtown Development Authority, the Chamber of Commerce, and the City may all
have their own levels of concern when economic development is occurring. These fears
may be associated with the economic tax base, membership, and property assessments.
This study examines these fears in further detail.

Charlotte, Michigan provides an excellent example of the Wal-Mart phenomenon.
In 1980, Kmart, a corporate store with a very diverse inventory, opened its doors for
business in Baton Township. Refer to Figure l for a map of the Charlotte area. Only ten
years later, Wal-Mart, a store with a similar inventory to Kmart’s, located next door and
was open for business in 1991. Interestingly, the opening of Kmart did not warrant the
same fear among Charlotte’s CBD business merchants as did the Wal-Mart. A series of
events transpired in Charlotte and were documented in the Charlotte Shopper and Eaton

County Newspaper from 1980 to 1991. The newspaper clippings captured the

accumulation of fear among the merchants. Some of the same merchants quoted in the
articles were also apart of the surveys administered for this study.

Throughout this study, the CBD business merchants and the CBD building
owners were seen as the prime stakeholders in the preservation of the CBD. These
merchants were also identified as belonging to Charlotte’s Downtown Development
Authority (DDA) and the Charlotte Chamber of Commerce. These organizations are also
stakeholders because, while the Chamber generates its operating revenue from
membership dues, the DDA relies on the taxes collected from the growth of property
assessments in the CBD. Both organizations benefit from economic development and
growth. In addition, the Charlotte city government is recognized as a prime stakeholder
because first, the Interstate 69 expansion would likely contribute to growth in both the
city and Eaton Township and would pit the two jurisdictions in competition with each
other for new tax base. Second, the City of Charlotte entered into a legal agreement with
Eaton Township to facilitate sewer and water services in the township. The agreement
included a provision that a business utilizing city services would make a payment in lieu

of taxes to the City of Charlotte.1

 

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Figure 1. Map of the City of Charlotte.

A literature search regarding rural economic and community development, and
the development of superstores on the fringes of rural communities unveiled theory and
case studies, but data to support the contention that such development causes the demise
of the central business districts (CBDs) was insufficient. The case studies reviewed,
however, revealed a fear held by residents and merchants that CBD businesses would
close, property values would decrease, and essentially small communities would suffer

economically. This study will focus on the CBD business merchants, CBD building

owners, the Charlotte DDA, Charlotte Chamber of Commerce, and the Charlotte City
government to examine the effect of the Wal-Mart phenomenon in the following ways:
reviewing the history of Charlotte, highlighting the relevant factors associated with the
construction of Interstate 69, reviewing the contract signed by the City of Charlotte and
Eaton Township to extend sewer and water beyond the city limits, examining CBD
property assessments during the 1988-95 period, and surveying current CBD business

merchants and CBD building owners.

CHAPTER II

A HISTORY OF LAND DEVELOPMENT IN CHARLOTTE, MICHIGAN

The unending prairies of Charlotte made an appealing place for weary settlers to
locate as they journeyed across Michigan in search of land on which to homestead. The
open space and viable soil were enticing enough for Jonathan and Samuel Searls as they
cut a path from Bellevue, Michigan to the township line just two miles south of Charlotte
in 1835.2 The Searls moved the rest of their family up the track and established various
households in the area surrounding Charlotte. As it became apparent that Charlotte would
be an enduring community, the Michigan Legislature designated Charlotte to be the seat
of county government for Eaton County on December 29, 1837 (Strange 1923). In 1863,
the Village of Charlotte was incorporated by Eaton County. Eight years later, the
Michigan Legislature incorporated the village as a city and designated Charlotte as the
Eaton County seat.3 As the town grew it began to develop its own business district. The
first stores to open for business on Main Street were a grocer, a dry goods retailer, a hotel,

a hardware store, a newspaper, and a bank. Charlotte continued to grow and experienced

 

2 Daniel Strange served as member of the Eaton County Pioneer Society 1923 and documented the
settlement and establishment of Baton County Michigan (Strange 1923)

3 Strange, Daniel, 1923.

an economic boom at the end of the Civil War. When the soldiers returned with their
money, the Charlotte settlers multiplied their wealth and began rapid development of
roads and agricultural land to make their community (Strange 1923).

Charlotte grew as an agricultural community and began incorporating industry in
the late 1970’s. In 1976, Spartan Motors, a car parts manufacturer, located in Charlotte’s
industrial park. By 1997, Spartan Motors employed 550 people. The second largest
industrial firm, Carefree Windows, a window supplier to car companies, opened in 1980.
Carefiee Windows currently employs over 1000 people.4
Expansion In Charlotte Stimulates Fear

In October 1990, Interstate 69 (I-69) was extended to Lansing from south of
Charlotte. In the process an interchange was constructed to provide access to the
highway. The highway construction brought with it the possibility of more commercial
and retail business in the vicinity of the new interchange. Background research in the
Charlotte Shopper and Eaton County News provided material indicating that the
community was distressed over how they would deal with the new expansion in their
rural town.

K-Mart had already located in Charlotte in October 1981 before the completion of
I-69. By 1990 the store expanded to include a pharmacy, restaurant, lumber supplies,
hardware, and a larger clothing department. Kmart’s expansion was perceived to be a
threat to the existing businesses in downtown Charlotte (Serene 1990). Kmart took

advantage of the area ten years before I-69 was completed. It was obvious that the City of

 

4 Charlotte Chamber of Commerce

Charlotte was aware of the potential for growth in the area because the city entered into a
legal agreement with Eaton Township in 1979, one year before the Kmart development,
to receive payments in lieu of taxes for city sewer and water. The city expressed a sense
of fear of losing money to Baton Township if they did not develop a contract to capture
the economic base.

At that same time, Mayor Kathy Wright expressed to the residents that the city
government was proposing a three mill increase in property tax to be used for road
construction (Wright 1990). The city, interested in development, needed the money to
improve the road within the city where new commerce developed as a result of 1-69. In
addition, the City of Charlotte expanded water, sewer, and utilities to Baton Township to
support the township’s new growth. It is apparent that the City of Charlotte was looking
after itself by making improvements inside the city as well as forming the contract with
Eaton Township. The city invested money to facilitate commerce in the city and created a
means of capturing money from economic development in the township.

In November 1990, Richard’s Appliance Store moved out of the downtown, an
action that may have contributed to the fears that other businesses would soon follow.
Eventually, these fears were supported by the closing of Johnson’s Hardware Store
(Krizack 1990). Throughout this period, concerned citizens wrote numerous letters-to-
the-editor of the Charlotte Shopper and Eaton County News. The main goal of the
citizens was to keep a healthy balance between new commercial development and
existing downtown businesses. Another concern was that Charlotte needed a better master

plan that would guide enhancements and economic growth for the downtown and

10

promote community pride (Serene 1990). Ron Sherman, a resident of Charlotte, indicated
that Carter’s Grocery Store threatened to leave the downtown area and relocate by the
Wal-Mart (Sherman 1990). The owners of Carter’s Grocery Store feared that if people
drove to Wal-Mart to shop they would not drive back downtown for their other grocery
needs, therefore, leaving the downtown area without a convenience store (Sherman
1990). As growth expanded the city’s capabilities, workshops on the I-69 and the
development of Wal-Mart in 1990 were held in conjunction with the Eaton County
Cooperative Extension office to allow concerned residents and merchants to voice their
opinions and address apprehensions of the new development (Krizack 1990). The
background research indicated that Charlotte CBD merchants feared too much retail and
commercial development near the I-69 interchange and little development in the CBD.
The fears associated with the closing of many CBD stores may have warranted
enough concern by Charlotte merchants and residents to form the group “Future
Charlotte” in cooperation with the Eaton County Cooperative Extension office (Serene
1990). “Future Charlotte” addressed the business and land uses changes that would occur
due to the I-69 expansion.5 Additionally, the role of the city became a focal point for the
discussion because it possessed the authority under Michigan law to adopt a master plan
and implement zoning ordinances.6 The Charlotte Planning Commission would oversee
the master plan and monitor all new development (Moore 1990). Charlotte created and

adopted a master development plan in 1972, but these plans did not include the concept

 

5 “Future Charlotte” was a group established in Charlotte by the Eaton County Extension office and with
the help of Mark Wykoff, a leader in mid-Michigan in community planning and growth management
(Serene 1990).

6 County Rural Zoning and Enabling Act 183 of the Michigan Public Act of 1943.

ll

of extending sewer, water, and utility extensions into Eaton Township. At that time, the
Charlotte Planning Commission would not have known where the new I-69 development
would occur. In 1972 the Michigan Department of Transportation was still debating
whether the freeway would utilize new farmland or be developed over an existing route.
The Planning Commission was unable to make a decision before any plans dealing with
the economic development adjacent to the freeway could be developed. Consequently,
these decisions may have affected master plans focused on the preservation of the CBD.

As one device to make improvements in the CBD area and to attract new
businesses to the area, the merchants and Charlotte city officials created the Charlotte
Downtown Development Authority (DDA). The Downtown Development Authority
(DDA) was established in 1988 to manage and attract new businesses to the CBD. The
boundaries of Charlotte’s DDA include all business located within the CBD (Fig. 2). The
DDA was created pursuant to an act of the Michigan State Legislature and allowed the
community business organization to collect taxes on the growth of property assessments
each year through tax increment financing authority.7 The capabilities of the DDA are
essential to the enhancement of the CBD because the DDA finances its improvements
and debt from increases in the property tax revenues from the CBD. The DDA thus seeks
to promote growth and a positive image for downtown because if the DDA is successful
in creating a market demand for storefronts in the CBD then property assessments will

greatly increase. Money collected from the growth in property assessments and tax

 

7 Downtown Development Authority Act, Public Act 197 of 1975, and the Tax Increment Finance
Authority Act, Public Act 450 of 1980.

l2

collections is allocated to different downtown projects that are intended to enhance the
CBD area.

In a similar respect, the Charlotte Chamber of Commerce has a stake in the
preservation of the CBD. This private organization of businesses also works to promote
economic development in the area. However, the CBD is not the its only area of concern.
The Charlotte Chamber of Commerce is a nonprofit organization that promotes economic
development and enhancements specifically for its members. The Chamber of Commerce
has an interest in promoting development throughout the entire community rather than in
just the CBD.8 The Chamber’s area of focus includes the entire City of Charlotte and the
respective townships in Baton County. This is important because the Chamber’s effort is
to stimulate, promote, and encourage business activity throughout the area, not merely in
one small geographic area of the city. Thus, Chamber leadership may be saddened by the
closing of downtown establishments and the loss of such members, however, its major
area of concern is the well being of business over a wider area. The Chamber indicates
that at least five businesses have closed in the CBD within the past two years.9 Rudicels,
a men’s clothing store had operated in the CBD for 25 years and in 1997 the store closed.
The Chamber of Commerce believes that it is very likely Rudicels is closed its door
because of the store’s inability to compete with the superstores.

Many rural, small towns have fought the “Wal-Mart Battle.” Some communities

have “won” by deterring the development of a Wal-Mart while others have “lost.” Small

 

’ Mission of the Charlotte Chamber of Commerce.
9 Charlotte Chamber of Commerce.

13

communities appear to share a common fear that superstores will wipe out the local
downtown business centers. It is common for the merchants in small communities to fear
that businesses will be hurt economically and that people abandon the traditional
merchants and switch to a superstore for the convenience of one-stop shopping, greater
variety, and competitive prices. This study focuses on the City of Charlotte to examine
the effect the superstores have on the commerce of the city and how the merchants and

municipality responded to the apparent threat.

CHAPTER III
LITERATURE REVIEW

The community is defined as a group of people interacting together in social,
political, and economic activities to develop a satisfactory quality of life depends on an
active economy (Schwartz 1991). Aspects of commercial and corporate enterprises
contribute to the economic well-being of the community, but affect the social
development of the community as well (Adams 1995). A community’s development can
create economic prosperity, especially when the community is aware of its land use
capabilities. The following review of literature examines the issues of growth
management, community vitality and viability, how Wal-Mart benefits from a
community, and case studies of superstore development in small towns.

Community change is inevitable and ideally growth and change can be
incorporated without destroying the value and interest in the traditional portions of a
community. Growth management is a term that identifies a bundle of tools governments
use to achieve broad based community objectives and policies (Brower et al. 1984). If
communities are to be effective in managing their growth and development, leaders need
to adjust for technical and administrative capabilities, political and legal situations, the
community growth pressures, and the community’s budget in order to determine future

industrial, residential, and commercial development (Brower et a1. 1984). The growth

14

15

management tools of a community should fit with the needs and aspirations of the
community (Brower et a]. 1985). Brower et al. (1984) expresses that growth management
coordinates three local conditions; social, economic, and the natural environment.

How Can a Community Manage Growth?

As mentioned earlier, Michigan cities, villages, and counties are empowered to
adapt zoning ordinances and master plans as growth management tools. Local
jurisdictions in Michigan exercise zoning powers on the basis of the Township Zoning
Act of 1943. The authority to plan and zone is spread among cities and townships and if
these local jurisdictions cooperate in their planning and zoning, they have a chance to
achieve coordinated development. If local jurisdictions do not cooperate together, and
competition is more common than cooperation, uncoordinated and fragmented growth
will likely be the result.

According to the growth management literature, the quality of growth in a
community is affected by the timing and rate of new growth, the geographic location of
new growth, and the density of the new developments (Brower et al. 1984). Access to a
new highway may influence change in a community’s current pattern of growth. In this
case study, [-69 is the force influencing economic development in the “fi'inge” area, the
area outside Charlotte’s central core. Burchell (1996) indicates that the radiating growth
of fringe development requires more land and public infrastructure and increases the
under use of core land and infrastructure.

The essence of growth management is based on the decisions made by

organizations on balancing new growth with existing businesses, preserving natural areas,

l6

and maintaining community interaction (Brower et al. 1984). According to Bolman et al.
(1991) organizations are dependent on the people who comprise them. Bolman et al.
(1991) express that organizations make the decisions and produce plans that effect the
future. Community leaders should seek to balance new growth with the community’s
resources, maintenance of the resources, and the community’s adaptability to changing
conditions (Summers et al. 1988). Culture, socialization, and the environment are
essential elements in planning future development and accommodating pressures for
change. As mentioned earlier, the CBD business merchants, CBD building owners, DDA,
Chamber of Commerce, and the city government are all stakeholders in the preservation
of the CBD. However, all five organizations have somewhat different agendas. These
agendas need to be addressed by the community and all parties involved so a well
balanced development plan can be established for the area.

Community Viability and Vitality - How Does a Community Benefit from Economic
Development?

Boschken (1982) indicates that the local units of government are often unable to
predict the consequences a new private development will have on a locality. According to
Summers et. a1 (1988), public investments shape land use and land values and can create
a magnet for attracting labor and capital investments. North (1990) explains that
constraints in the organizational structure of communities determine people’s
opportunities. Furthermore, political and economic entrepreneurs will maximize present
conditions for short-run profits (North 1990). The national corporations locating in rural

commrmities are not interested primarily in the long-term economic stability of a

17

community. North (1990) explains that organizations are continually evolving and the
bargaining strength of the people involved in the final decision-making affects the total
economic exchange. Once the infrastructure is in place, it becomes difficult to deter new
development from locating in the vicinity. It can be argued that even though superstores
may have a negative economic affect on main street competitors, corporate businesses
such as Wal-Mart, Kmart, and other superstore corporations make significant economic
contributions to a local economy. These stores hire area residents as store employees and
thereby expand the “community payroll.” Additionally, through property taxes, these
stores pay for police and fire protection, and snow removal. They typically employ local
companies to remove waste, repair plumbing, and it is likely they used area contractors
for the store’s construction. Economics affect the decisions communities are faced with
when considering new development proposals. According to Rubin (1994) the prospects
of new businesses, taxable income, and jobs stimulate the economy. Rubin (1994)
expresses that the financial balance of development with social change empowers the
individuals of the community.

The community’s institutional structure is embodied by its ability to garner both
public and private capital (Summers et al. 1988). According to Summers et al. (1988), the
commrmity’s ability to influence change depends on its ability to manage resources, and
evaluate current economic and capacity policies. In sum, many developers are concerned
with developing a site into a product that relates to supply and demand. New building and

rapid growth, however, may not incorporate the community’s capacity limitations and the

18

implications a new corporation may have on the existing small businesses located in the
CBD.
What Does WaI-Mart Want Out of a Relationship with a Community?

It is very common for superstores to target rural communities because of their
attractively inexpensive land and low taxes. According to Stone (1995) Kmart expanded
rapidly in its early years and located in larger cities, but in Kmart’s attempt to compete
with Wal-Mart, it too began to target small towns. Stone (1995) explains that Wal-Mart
began an aggressive expansion in 1980, targeting small towns. Wal-Mart’s sales grew
from $1.2 billion in 1980 to approximately $56 billion by the end of 1993. Browcr et al.
(1984) explains that in the face of fringe development, cities and townships can create
urban and rural commercial development areas. Urban and rural development agreements
help to finance the costs of infrastructure and development and allow local units of
government to collect taxes on a more equitable basis. Businesses locating in these
development areas are required to pay both city and township taxes (Brower et al. 1984).
As mentioned earlier, the city of Charlotte has a similar agreement with Eaton Township
whereas businesses located in the township commercial development area, adjacent to the
city, must make annual payments in lieu of taxes to the city while paying the local
township property tax.

Wal-Mart is a superstore business that primarily establishes its outlet stores on the
land next to a small town. Dovring (1987) demonstrates that location is a primary factor
for commercial and corporate development. According to Gunn et al. (1991) it is

common for Wal-Mart to set terms with real estate agents and land developers that

19

include water and sewer service and an agreement with the town to eventually annex the
land. Annexation in Michigan is highly contested and it is unlikely that Eaton Township
would ever release the land to Charlotte. Gunn et al. (1991) indicate that townspeople
usually are persuaded to agree to Wal-Mart’s offers because the prospect of added tax
revenues and new revenues from a broader market area. Stone (1995) notes that much of
Wal-Mart’s merchandise is targeted to lower-income consumers. People in lower-income
categories generally have little discretionary money and tend to shop where they perceive
they are receiving the best value for their dollar (Stone 1995).

Once the superstore opens, however, people may shift their shopping from the
downtown stores to the superstores. The loss of business in downtown stores may result
in a lowering of property value in the city. Gunn et al. (1991) states that Wal-Mart’s
financial affect on the town is not always what the townspeople anticipate. According to a
study conducted by Gunn et a1. (1991) in Independence Iowa, Wal-Mart used its own
corporate banks in distant cities, which meant no monetary investment to the town, and
the store relied on corporate attorneys to handle legal matters. In addition, many of the
small businesses lost their employees to Wal-Mart (Gunn et al. 1991). The unrestricted
out-migration of businesses and residences into the neighboring townships can contribute
to a void in the economy of the core areas (Burchell 1996.) It can be argued that Gunn et
al. (1991) has a limited view of Wal-Mart because as was mentioned earlier, corporations
such as Wal-Mart provide jobs for area workers, and services in the local economy, as
well as contribute taxes to pay for fire, police and other services. In relation to this case

study, the store’s location at I-69 makes it easy for people to get off the highway, buy all

20

of their goods in one location, and then return home. Not only does this access provide
people with “one stop shopping,” thus eliminating the Shopper’s need to depend on
Charlotte’s CBD, but also gives shoppers a larger choice of goods for lower prices.
Case Studies of Superstore Development in Small Town America

Charlotte was not alone in its experience as a small town dealing with the “Wal-
Mart” phenomenon. Some communities have actively attempted to keep superstores
away. For example, the Cape Cod Commission, an organization consisting of 15 area
communities, struggled to keep the Price/Costco superstore out of Sandwich,
Massachusetts.10 The Cape Cod Commission rejected Price/Costco’s proposal for
development. Price/Costco, in turn, filed a lawsuit alleging that the commission was
acting contrary to the Massachusetts’ constitution by not allowing them to develop land
the company had purchased (1994). The Cape Cod Commission said that the town’s
businesses would not be able to compete with Price/Costco. In addition, the commission
feared that traffic would increase by 4,700 car trips per day, at least 20 new traffic lights
would be needed, and 26 miles of road would need widening. Furthermore, the
commission argued that the town would not be able to meet the waste storage needs of
the store (1994). Price/Costco lost the battle in Sandwich and chose to locate elsewhere
in Massachusetts. The company eventually built four superstores in Massachusetts.

In 1996, the local writ of government in Ferry Farm, Virginia, the home of George

Washington, was attempting to rezone land from agricultural to general commercial

 

'0 New York Times published the article “Superstore stirring up old debate on Cape Cod” depicting the
community’s battle to keep a superstore from developing on the fringes of the town (June 20, 1994).

21

originally belonging to George Washington. Ferry Farm, Virginia is located within
Stafford County in Northeast Virginia. The Wal-Mart Corporation and the Richmond
Group, an area developing company, planned to develop on this site (Lease, 1996). The
Stafford County Planning Commission protested the proposed development of Wal-Mart
in Ferry Farm, Virginia because the planning commission said Wal-Mart contributed to
the closing of three “five and dime” stores and one hardware store in Culpeper, Virginia.
According to the Stafford County Planning Commission (Lease, 1996) traffic counts rose
by an estimated 10,500 vehicle trips per day in Culpeper, Virginia. In addition, the
planning commission estimates that Stafford County would get $4,000 in sales tax per
year compared to Wal-Mart’s $40 million estimated annual sales (Lease, 1996). This
example illustrates the fears that the development and operation of a superstore will lead
to unmanaged growth and the loss of business by the established retail center.

The City of Petoskey, Michigan began struggling with the fear of a superstore
location in 1996 when Wal-Mart purchased land adjacent tot the city in Petoskey
township to develop a superstore (Cantor 1996). The fear was that Petoskey would lose
business in the CBD and that property values would decrease. Developers in the area
argued that Wal-Mart would encourage other retail businesses to relocate in the area and
stimulate the overall economy. Merchants who were dependent on their businesses in the
gas-light district though remained opposed (Cantor 1996).

According to Cantor (1996) merchants in Hearne, Texas feared their downtown
would be fiscally devastated because of the development of Wal-Mart. The merchants

were concerned the businesses in the CBD would close because the stores were losing

22

sales to Wal-Mart. After a few buildings in the CBD became vacant, the merchants feared
they would be negatively affected again when Wal-Mart shut down and left the city
(Cantor 1996). This article reported a fear of losing business in the CBD, but did not
include data validating the fears.

Another example of the Wal-Mart war occurred in Litchfield, Minnesota. In this
case, the owner of a boys and girls clothing store waged a campaign against the
corporation by raising awareness among neighbors. The local grassroots activists
educated neighbors about Wal-Mart’s repeated development in inexpensive, unzoned,
greenspace outside the city limits; how Wal-Mart channels resources out of the
community; about the job losses the small towns incur when Wal-Mart leaves town afier
all the local business have gone bankrupt; and finally about how to rebuild the small town
“resurgence of appreciation for main street,” (Anderson 1994). The city of Litchfield is
similar to the other case studies because the merchants of Litchfield fear the CBD will be
lost completely to corporate development.

After an extensive review of literature on the subject of superstore developments
and their affects on small towns, the case studies demonstrate a consistent theme. The
theme is that the CBDs of small commrmities will dry up under the heat brought by Wal-
Mart and other superstore competitors. While the arguments exist, the case studies do not
provide data to support the claims of decreased property values and loss of businesses.
Even though businesses closed in the prospect and experience of competing with a
superstore, as was the case in Culpeper, Virginia, variables other than the presence of a

superstore may have been important contributing factors. Therefore, this research was

23

necessary to analyze factual data to examine the claims mentioned above. This case study
examines the concerns addressed in the literature review and focuses on the variables

such as property values, vacancy rates, and rent fluctuations.

CHAPTER IV
METHODOLOGY

The central hypothesis for this study is that superstore development adjacent to
small rural communities diminishes the economic viability of the central business
districts (CBD). If this is true, the negative effects of superstore development may be
reflected in a decrease in property values and an increase in title transfers. Superstore
development on the fringe the city limits of Charlotte, Michigan was correlated with an
objective measure of property values, title transfers, and the business decisions of
business merchants and building owners located in Charlotte’s CBD. For the purpose of
this study, property values and title transfers were the indicators of economic viability of
the CBD located in Charlotte. The following report on the methodology used in this study
includes the selection of the area, selection of subjects, hypotheses tested, and the
analysis of data.
Selection of the Area

The area of study is Cochran Avenue, the “main street” in Charlotte, Michigan.
Charlottes “main street” still has some of the old town flavor of dated brick buildings,
remnants of 19th century architecture, and people walking along the sidewalks window
shopping. The main street still is home to a variety of business including the five and

dime drug store, a restaurant, a local pub, a jeweler, beautician, and the local newspaper.

24

25

Being relatively an agricultural community, it is common to see the local farmers in their
overalls and cowboy hats, and many of the children participating in 4-H and Frontier
Days, the local rodeo. Cars have replaced the horse and buggy and the hustle and bustle
of the local entourage is slightly less noticeable, however, Charlotte’s “main street” is
still a functioning economic component to the area. This study focuses primarily on

businesses merchants and building owners located on Cochran Avenue, the CBD for

Charlotte (Fig. 2).

 

 

 

 

 

 

 

 

 

MINORITY
an or arms. mam
an. rue

W. ‘0'

 

Figure 2. Boundaries of the Central Business District in Charlotte, Michigan

26

Selection of Subjects

CBD merchants and CBD building owners were identified as stakeholders in the
preservation of Charlotte’s CBD. Charlotte’s Downtown Development Authority (DDA)
defined the boundaries of the CBD and provided data and mailing lists for the area
described as the CBD. (Please refer to Fig. 2). The mailing list from the DDA was used to
identify all businesses and building owners located within the CBD. The merchants in the
CBD were put into two categories: competitors and non-competitors. The Standard
Industrial Classification Code (SICC)ll which categorizes merchandise was used as a
means of classifying or categorizing these outlets. Merchants that sold merchandise in
their stores similar or the same type as Wal-Mart sell were classified as competitors of
Wal-Mart. Merchants who did not sell merchandise comparable to Wal-Mart were
classified as non-competitors. The reason for distinguishing competitors and
noncompetitors is that the two groups are likely to be affected differently by the presence
of a superstore in the area. Those merchants carrying similar merchandise- competitors-
could be affected very directly by and quite soon after the opening of the superstore
doors. Noncompetitors, or those businesses providing services or selling merchandise not
sold by the superstores, it is thought, would not be so likely to experience superstore
impacts immediately. Rather, such establishments might decline over longer periods as
the CBD declined, if in fact the superstore phenomenon proved to be destructive to the

city’s business district. The researcher was particularly interested in competitors to learn

 

” US Bureau of the Budget, StandardjndustriaLClassificatignManual, Washington: US Government
Printing, 1976.

27

just about the impact they experienced and secondly the types of adjustments they made
to deal with the new circumstances.
Hypothesis 1

Relationship of Property Value Change with Superstore DcchOpment

The first hypothesis asserts that declining property values in the CBD were
associated with superstore development. If the value of the business, measured by
property assessments, declines, the value of the property including the land and the
building, will presumably depreciate. To test this hypothesis, State Equalized Values
(SEVs) data for the period 1988-95 for property parcels locates within the area of study
were obtained from the Charlotte city clerk.. The mean value of properties was taken for
competitors, non-competitors, and unknowns during the 1988-95 period. The “unknown”
designations were related to properties listed by the tax assessor as retail properties in the
CBD, but the merchandise traded in their buildings was unknown by the researcher.

Buildings for which assessments for particular years were missing were not considered.

Hypothesis 2
Superstores Related with the Instability of Ownership and Changes in CBD Rents
The second hypothesis asserts that the pressure of a superstores led to instability
among the merchants and other businesses in the affected area. The expectation is that
such instability would be more pronounced among competitors than noncompetitors. The
researcher surmised that if the forgoing were true, the instability would be reflected in the

level of turnover in building ownership. Further theory underlying this line of inquiry is

28

that as merchants experienced financial difficulty in conducting their businesses, they
would close their business. Thereby rendering vacant the storefronts in which the
business was located.

If this scenario played itself and in any substantial way, then, it was expected that as
businesses closed the vacancy rate would increase and rents, because of the declining
demand for space, would drop. These factors, it was thought, would lead to building
owners to sell out.

To determine whether such a hypothetical construct was true in this case, the
researcher gathered data on these points. Data on the change in ownership were secured
from the records in the tax assessor’s office. The records covered the period beginning in
1988-1995. The researcher gathered other data from a questionnaire and survey to
determine when buildings may have experienced vacancies in conjunction with the
superstore development. A series of questions was used to determine the building owners
background and involvement in the community. Refer to Appendix A for the Building
Owners’ Confidentiality and Instruction Form, and survey. The questionnaire includes
inquiries regarding the following topics:

0 Date the building was purchased.

0 Business turnover (e.g., the number of businesses that have left the CBD

building during the period 1985-96.
0 Fluctuations in rent per square foot.
0 Ownership of buildings near 1-69 interchange.

0 Demand for space near I-69 interchange.

29

0 Differences in rent between rent per square foot for buildings in CBD and
buildings near I-69 interchange
o Involvement in community and residency.

Data on the sale and purchase prices of buildings also would have been helpful to
determine the effect of superstores on the marked value of the properties. Such data , had
they been available, could have been used to gain an indication if whether the conclusions
theoretically brought in by the superstores depressed the marked value. These data,
however, were not made available.

Hypothesis 3
Superstore Affects on CBD Business Merchants

The third hypothesis is stated as follows: certain business decisions of merchants in
the CBD were associated with superstore development. This hypothesis asserts that CBD
merchants will change the volume, type, and price of the merchandise sold as ways of
adjusting to the competitive conditions brought by the superstore. To test this hypothesis,
the researcher surveyed the merchants located in Charlotte’s CBD to explore the changes
in business practices of CBD merchants. A series of question was also used to determine
the business owners residency and involvement in the community. (See Appendix B for
the Business Merchants’ Confidentiality and Instruction Form and Survey.) The
questionnaire includes sections on the following areas:

0 Type of merchandise sold.
0 Changes in revenue from sales and services between 1985-95 of each business

in the CBD.

30

0 Relationships between changes in revenue between 1985-95 and business in

the CBD that sells merchandise similar to that sold in superstores.

0 Changes in the number of part-time and full-time employees between 1985-

95.

0 Relationships between changes in the number of employees and the

goods/services sold.

0 Relationships between retail/services and changes in business volume between

1985-95.

0 The merchant’s stake in the building in which business is located, i.e.,

building owner or renter.

o The extent to which merchants changed the amount spent on advertising

between 1985-95.

0 The business owner’s residency and involvement in the community.

Both surveys were mailed to the merchants and building owners located within
Charlotte’s CBD as indicated by the DDA mailing list. All surveys were attached with a
cover letter that explained the purpose of the survey and the support and endorsement of
the DDA. Because of the low number of surveys returned by mail, the researcher
personally visited the merchants and hand delivered the survey. A greater number of
surveys were retrieved during that visit and a greater number of responses were received

in the mail after the visit.

31

Analysis of the Data

The SEV data collected from the Charlotte City Clerk’s office were compiled into
a Statistical Package for Social Science Research (SPSS) matrix.12 A graph was produced
to assess changes in CBD commercial property values and title transfers. A chi-square
test was used to determine if the number of title transfers between 1988-1995 were
associated with a particular type of business.

Survey data from the building owners’ survey was compiled into a SPSS matrix.
The matrix was comprised of survey responses from each individual building owner.
Tests of central tendency, means, and percentages were used to examine the answers to
the building owners’ questions.

The survey data from the survey of merchants were compiled into another SPSS
matrix to analyze the categorical data. Tests of central tendency, means, and percentages
were used to examine the data for each question. Furthermore, respondents were
categorized as competitors or non-competitors depending on the type of merchandise
sold. Chi-square tests were used to determine statistical significance, if any, between the
number of employees hired during the 1985-95 period and the type of business, and
changes in business operation hours during the 1985-95 period and the type of business.
A chi-square test was used to determine a statistical significance between the type of
business and whether the business merchant believed to be affected by Wal-Mart. In
addition, the amount of rent per square foot in the CBD before and after the superstore

development was examined. Graphs and tables were used to describe the results.

 

'2 Nurusis, Marija. 1996, WWW Prentice Hall, Inc.

CHAPTER V

RESULTS

Residents in the United States continue to move away from larger, dense cities to
rural and less populated communities. However, as populations grow, it is not long before
new commercial development occurs to meet consumer demands in the area. Often, such
new commercial establishments develop on agricultural open land on the fringe of the
city. Depending on the nature of the developments, merchants in the nearby city can open
an additional store to take advantage if the market being created. In other situation,
however, the fringe commercial development is a superstore such as Wal-Mart or Kmart.
Usually, these establishments are built in the rural fringe area in a format that does not
accommodate additional merchant competitors.

This study addressed the fears that central business district (CBD) merchants and
CBD building owners experience when superstores develop and operate in the edge of
small, rural communities and how these groups responded to this fear. According to the
literature, Wal-Mart has a practice of targeting smaller towns and lower income areas for
its store locations (Stone 1995). Superstore development and the threat of bankruptcy
throws many small towns into a panic. The case studies, discussed earlier, reported that

merchants fear the presence of Wal-Mart and other similar superstores because they

32

33

believe the Main Street merchants will not be able to compete and will thus have to close
their businesses.

Charlotte, become one of these cases when, 1990, Wal-Mart opened one of its
stores on the edge of the Charlotte city limits. The focus of the study is to determine
whether certain economic changes that occurred in Charlotte’s CBD could be related to
Wal-Mart’s superstore. Background research revealed that some Charlotte residents were
concerned about two things: the expansion of the I-69 and the development of Wal-Mart.
The I-69 corridor was completed in 1990 about the same time Wal-Mart was developed.
Local merchants from Charlotte formed the group “Future Charlotte” and collaborated
with Eaton County Extension to address the issues associated with the two projects.13
Although business merchants of the small central business district feared the loss of
businesses and declines in property values, they came to the realization that their fears
would become real only if the merchants would take action to adjust to the new
competitive environment.

For the purpose of this study the following variables obtained in the business
merchant survey were used to indicate alterations in the business merchants market
behavior were adjusting business hours, changing product/service lines and prices, and
changing advertising strategies. This study seeks to examine whether the Charlotte CBD
merchants and building owners feared these changes, and what actions they took to

maintain the business to sustain the CBD.

 

’3 Serene, Della, “Future Charlotte,” Charlotte Shopper and Eaton County News, 1990.

34

HYPOTHESIS 1
Property Assessments Between 1988-95

The first hypothesis asserts that the construction and opening of superstores in the
region would lead to a decline in property values. The concern of merchants, owners of
business properties, and officials is that superstores draws business from the CBD, and
the market values of the building in the CBD would decline. To measure the effect of the
superstores on CBD property values, records from the tax assessor’s office were
reviewed. (Tax assessments are calculated to reflect one-half of “true cash value” or
market value.

Fifteen of the businesses were categorized as direct competitors because of the
merchandise sold in the storefronts. The second category- noncompetitor- consisted of
businesses that occupied space in the CBD but not conducting business that competed
with Wal-Mart. The third category, as noted earlier, were buildings in which the type of
business or merchandise was unknown to the researcher.

Property values did not drop dramatically following the opening of Wal-Mart as
merchants and building owners in the CBD fear. In fact, property assessments during the

1988-85 period actually rose. The analysis, however, is a little more complicated.

35

Changes in Property Assessments for
Conpetitor & hbn-Oonpetitor Bu'ldings
1985-1995

 

30000'/ / _m~oaw=enrms

1988 1999 1991 1992 1993 1994 1995

is...”
i
i

 

 

 

Yeas

Figure 3 Property Assessments for Competitors and Non-competitors during the
1988-95 period.

State equalized values, according to the state constitution, state statutes and
administrative rules, are to reflect “true cash value.” Property tax assessors use a
combination of ways to determine their values-replacement cost, sales value of
comparable buildings, and, in some instances, the income (rents) a building may generate.
However, a valuation is not made each year. Rather, once a thorough evaluation has been
made, its value for the subsequent year is usually adjusted for inflation to reflect
replacement costs. Further adjustments would also likely be made to reflect

improvements made to the building.

36

HYPOTHESIS 2
In the Eyes of the Building Owner

The second hypothesis asserts that the pressure of a superstores leads to instability
among the merchants and other business in the affected area. The expectation is that such
instability would be more pronounced among competitors than noncompetitors. To
determine the validity of the hypothesis, data was gathered from records in the tax
assessors office, as well as from a survey administered to the current CBD building
owners.
Title Transfers

Transfers of title for buildings located within Charlotte’s CBD during the 1988-95
period revealed that more retail/store space than office space, and restaurant space had
turned over. The title transfers correlated with competitors and non-competitors was
statistically significant (X2: .0032). Sixty-eight buildings were examined for this
analysis. Table 1 reveals that competitors had 30 total title transfers during the 1988-95
period. This was 25 percent more than non-competitors. The high number of stores that
turned over during the 1988-95 period may indicate that business merchants could not

compete, were losing money, and were forced to move out of the CBD.

37

TABLE 1. Transfer of Title During the 1988-95 Period.

 

 

11 ET] I E E EB '11'

Competitors 30 44
Non-competitors l 3 1 9
Unknown 2.5 31
Total 68 100

 

The building owner survey tells the story from the perspective of the building
owners. Therefore, it was necessary to conduct a survey of both building owners to obtain
facts about the business turnover and economic factors that may have affected the CBD
between 1988-95. The building owner survey measured the second hypothesis by
examining changes in the vacancy rates of the CBD storefronts from the period 1985-95.
The survey was administered to 59 building owners, 19 of whom responded. In addition,
the purpose of the survey was to determine building ownership, and fluctuations in rent.
Building Ownership

Respondents indicated that 69 percent owned one building in the CBD and 31

percent owned at least two or more buildings in the CBD between 1974-96 (Table 2).

 

 

38

TABLE 2. Number of Buildings Owned in Charlotte’s CBD.

 

NumhemenildingLQmed Number Extent
1 1 1 69
2 5_ Bl
Total 1 6 100

 

If building owners felt threatened by the development of superstores, a decrease in
the number of buildings purchased in the CBD should have occurred around 1981 at the
time Kmart opened a superstore and again in 1991 when Wal-Mart opened. According to
survey respondents, building owners must not have felt threatened by the existence of
Kmart in 1981 because they continued to purchase buildings in the CBD between 1980-
86 (Table 3). There is, however, a decrease in the number of buildings purchased
occurred between 1986-91 , the same time as the development of Wal-Mart (Fig. 4).
Buildings were purchased immediately following the opening of Wal-Mart by two buyers
after 1991.

Furthermore, table 4 indicates that survey respondents purchased at least one more
building in the CBD between 1982-96. The second buildings were not purchased between
1991-92 at the time of Wal-Mart’s grand opening. The Wal-Mart development may have
influenced decisions of survey respondents not to purchase any additional buildings

between 1991-92, but purchasing activity quickly resumed in 1993.

 

 

39

TABLE 3. Years First Buildings Were Purchased in CBD.

 

 

 

leer Number Element
1974 1 6.3
1975 1 6.3
1977 2 12.5
1978 3 18.8
1980 l 6.3
1982 1 6.3
1984 1 6.3
1985 3 18.8
1991 l 6.3
1992 l—Ql
Total 16 100
Puchase Date of Buldlngs In CBD

 

 

 

 

1974 1975 1977 1978 1980 19& 1984 1985 1986 1991 1992

Year

Figure 4. Number of Buildings Purchased by Survey Respondents Between 1974-92.

40

TABLE 4. Years Second Buildings Were Purchased in CBD.

 

 

lemmechaseliumherBersem

 

 

1982 1 6.3
1985 1 6.3
1989 1 6.3
1993 l 6.3
1996 1 6.3
N/A 1 1 68.8
Total 16 100.0
CBD Rent Fluctuations

The hypothesis asserts that if businesses closed, the vacancy rate would increase
and rents, because of the declining demand for space, would drop. These factors, it was
thought, would lead to building owners to sell out. This study examined the changes rent
during the 1985-95 period. Building owners were asked to report any increases and
decreases in rent that occurred during this period. If businesses experienced negative
affects from the superstore development and became less profitable, the changes would
be reflected in rental changes. On the other hand, businesses in the CBD were profitable
then the building rents were not directly affected by superstores. Of the number of
building owners that responded to the survey, 18.2 percent reported that per square foot
rents rose after Wal-Mart began operations (Table 5). Only 9.1 percent reported decreases

in rent rates. Most respondents- 72.7 percent- reported rent prices stayed the same.

 

41

Because a high percentage of building owners reported that rent prices did not fluctuate,
it appears reasonable to concluded that Wal-Mart did not affect the value of the building
space. Inflation and building improvements could account for the 18.2 percent of survey

respondents that indicated rent prices increased.

TABLE 5. Changes in Rent after Wal-Mart in 1991

 

 

 

Number Esteem
Increased 2 18.2
Decreased 1 9. 1
Stayed the Same 8 72.7
N/A 8
Total 19 100.0

 

Building Owners As Stakeholders in the Community

Fringe development can have a significant effect on the existing business
community and preservation of the CBD depends a great deal on the dedication of the
members of the business community. This study was interested in determining the level
of commitment that building owners had in the community. Their commitment to the
community and maintaining the vibrancy of the CBD is important to offsetting pressures
Wal-Mart could have on the CBD. The owners of the buildings in Charlotte’s CBD
should have a high interest in the economic well-being of the CBD if they wish to
maintain the value of their buildings. It is possible that many of the building owners have

significant portions of their estate mortgaged in the building. Additionally, many of the

 

42

CBD merchants have little to gain by walking away from buildings and allowing them to
be abandoned. Therefore, their long term economic success is linked to their commitment
to the commmrity.

The survey instrument included questions about their involvement in the
community and business organizations such as the DDA, the local Chamber, and service
clubs. The instrument also asked whether they resided in the city. All of these questions
were posed to provide an indication of their economic and social stake in the community
and the premise that the building owners who were strongly involved in the community
would be more strongly motivated to maintain the economic vitality of the Charlotte
CBD. Thus to the extent that the building owners had deep economic and social stakes in
the Charlotte commrmity could explain, at least in part, the effect or lack of effect the
superstore development would have.

An overwhehning number of survey respondents revealed that they belonged to
the Charlotte Downtown Development Authority, the Charlotte Chamber of Commerce,
other community organizations, and actually resided in Charlotte. Of the building owners
surveyed, 81.3 percent belong to the DDA and 18.8 percent are not members (Table 6).
In addition, only 53.3 percent of the survey respondents are members of the Charlotte
Chamber of Commerce (Table 7). Of the building owners surveyed, nine belong to the

Rotary Club, the Lions Club, GFWC, and Kiwanis (Tables 8 and 9).

 

 

 

43

TABLE 6. Number of Building Owners Who are Members of the DDA

 

NumherRercent

 

Yes 13 81.3
No 3 18.8
Total 16

 

 

TABLE 7. Number of Building Owners Who Belong to the Chamber of Commerce

 

Numberfiercent

 

Yes 8 53.3
No 7 46.7
N/A 1

Total 16

 

 

TABLE 8. Building Owners Who Belong to other Community Organizations

 

NumberPersem

 

Yes 9 56.7
No 7 43.3
Total 16

 

Of the building owners surveyed, six are residents of the City of Charlotte, four
live outside the city but within the Charlotte School District, two live outside of Charlotte
but in Baton County, and only two report living outside of Baton County. One of the

survey respondent who reported living outside of Baton County is retired and resides in

 

44

another state. These data, then indicate that building owners, for the most part, are
generally involved in community organizations and 6 out of 14 reside in City of Charlotte
(Table 10). Therefore, survey respondents are probably concerned about their community

and would benefit from a well-balanced community development plan.

TABLE 9. Residency of Building Owners

 

 

Numbsrflercmt

 

 

Charlotte City Limit 6 42.9
Charlotte School District 4 28.6
Outside Charlotte, but in Baton County 2 14.3
Outside of Baton County 2 14.3
Total 14 100.0
HYPOTHESIS 3

Wal-Mart in the Eyes of the Merchants

The third hypothesis is stated as follows: certain business decisions of merchants
in the CBD were associated with superstore development. This hypothesis asserts that
CBD merchants will change the volume, type, and price of the merchandise sold as ways
of adjusting to the competitive conditions brought by the superstore. The merchants
appear to have a large stake in the health of the CBD. According to the literature,
merchants fear that stores will lose revenue, as mentioned earlier in the case study review.
If the merchants fear loss of revenue and the loss of customers to the giant one-stop

shopping conglomerates, then what are the merchants doing to adjust? In order to

 

45

understand any changes in merchant business patterns between 1985-95 it was necessary
to conduct a survey of all business merchants located within Charlotte’s CBD (Fig. 2). To
test this hypothesis, a survey was administered to business merchants located on Cochran
Avenue, Charlotte’s CBD.
Business Owner Survey

A total of 28 merchants in Charlotte’s CBD responded to the Business Owner
Survey. Of these establishments, 16 were classified as direct competitors because of the
merchandise they sold. The categories considered as direct competitors were
pharmacy/drug, furniture/appliance, and clothing/sports/shoes. As mentioned in the
methodology, each business was also associated with its proper Service Industrial
Classification Code (SICC). These codes are used to create a uniformity by numbers of
all industry’s (Table 10). The breakdown of survey respondents and businesses is as

follows (Table 11):

46

TABLE 10. Service Industrial Classification Codes

 

 

prccflndllstrx

Eating & Drinking Places
Grocery Stores

Drug Stores &

Propriety Stores
Furniture & Home
Furnishings

Men’s & Boys Clothing
Sporting Goods & Bicycle
Shops

Shoe Stores

Gift, Novelty & Souvenir
Shops

Mortgage Bankers & Brokers
Real Estate Operators &
Lessors

Legal Services

Beauty Shop

Carpet and Rugs

SILLCQde

581
541

591

571
561

5941
566

5947
616

651
81 1
723
227

 

 

 

47

TABLE 11. Types of Businesses that Responded to Survey

 

 

Business SIELCcde Nrmhercfkespmdents
Restaurant/Bar 581 1
Food Store 541 1
Pharmacy, drug store 591 2
Furniture, appliance 571 1
Clothing 561 1
Shoes 566 1
Sporting Goods 5941 2
Retail Unknown 5
Floral, gifts 5947 4
Beauty Shop 723 1
Banking 616 2
Real Estate 651 1
Legal Services 811 4
Carpet and Rugs 227 1
Sendeelndustlfllnkncwn 1
Total 28

 

Classifying the merchants into two groups, competitors and non-competitors
allowed the researcher to categorize the merchants responses and focus on businesses
only considered to be competitors. This was significant in the research because
competitors would be more fearful of stores such as Wal-Mart than non-competitors and
would be more likely to make changes to business practices. The researcher surmised that
a statistical correlation would exist between competitors and their response regarding
whether competitors were affected by Wal-mart, competitor response to competition,
changes in hours of operation, advertising strategies, and long term investments to the

community.

 

48

The first category analyzed was competitor and non-competitor response to Wal-
Mart’s location and operation. A correlation between competitors and non-competitors
and whether they were negatively or positively affected by Wal-Mart proved to not be
statistically significant. However, the test indicated that 83 percent of competitors were
negatively affected by Wal-Mart (Table 12). Only 50 percent of the non-competitors
were negatively affected by Wal-Mart and the other 50 percent of non-competitors were
positively affected by Wal-Mart. The 50 percent of non-competitors negatively affected
sold arts and crafts. These stores were not included in the competitors category because

the majority of goods sold were not comparable to Wal-Marts merchandise.

TABLE 12. Businesses Affected by Wal-Mart.

 

 

l l . E . .
Competitors 5 1
Non-competitors 2 2
Total 7 3

 

Businesses Negative toward Wal-Mart

Five competitors believed that they were negatively affected by the introduction
of Wal-Mart to the Charlotte area. Two of these merchants believed that fewer people
came to the downtown area because of the convenience Wal-Mart’s one-stop shopping

provided. Three merchants felt that Wal-Mart cut into their general sales, and two

 

49

merchants believed Wal-Mart sold merchandise at a lower price than merchants were able
to buy wholesale. However, all five merchants indicated that in order to compete, they
were forced to become more specialized and more personalized.
Businesses Positive/Neutral toward Wal-Mart

One competitor indicated that Wal-Mart did not provide the same product quality
that was provided in their store. Presumably this merchant perceived his/her merchandise
to be better than Wal-Marts. Another furniture/appliance store revealed that they were not
affected by Wal-Mart, but changed product line/services in 1995. Of the non-competitors,
three banking, insurance, and real estate owners revealed that they were not affected by
the opening of Wal-Mart. One of these merchants believed Wal-Mart was a positive
aspect of the community in the minds of people moving to Charlotte. The eight remaining
service oriented businesses revealed that they were not affected by Wal-Mart and
remained neutral on the issue.
Businesses that Responded to Wal-Mart Competition

The following examines the different conditions that merchants had to adjust to
meet the needs of the new market. If the fears expressed in the case studies regarding loss
of revenue to Wal-Mart and the threat that businesses would be forced out, the business
owners in Charlotte’s CBD would have either closed down or found a new niche in the
market. It was necessary to ask Charlotte CBD merchants what changes they may made
to product lines, services, and prices when Wal-Mart opened for business in 1991.

Responses from both competitors and non-competitors were examined in this section,

50

however, responses from competitors were considered to be more closely associated with
Wal-Mart.

Competitors and non-competitors were examined for changes in product lines,
services and prices for 1985, 1990, and 1995. The merchant’s responses for 1985 were
not statistically significant. In 1985 there was an equal percentage of non-competitors, 50
percent, and competitors, 50 percent, that changed product lines and services. Merchants
revealed in the survey that they changed product lines and services to meet the needs of
the changing market. One competitor also extended business hours to meet the needs of
their customers. Twenty-two merchants did not respond to this question, suggesting that
many stores did not take action to adjust to the changing market.

However, the statistically significant (X2=.049) correlation between responses and
competitors and non-competitors for 1990 indicates that more competitors made
adjustments to merchandise and product prices (Table 13). In 1990, 80 percent of the
competitors changed product lines and services and 20 percent had other strategies. Only

one non-competitor changed product prices in 1990.

TABLE 13. Business Response to Market Change in 1990

 

 

Numberllcrcent

Competitors that changed product lines/services 4 80.0
Competitors that changed product prices 1 20.0
Non-competitors that changed product prices 1

 

Total Businesses Surveyed 28 100.0

 

 

51

In 1995, four business merchants were still making adjustments to goods and
services because of Wal-Mart. The correlation between merchant responses in 1995 and
competitors and non-competitors was not statistically significant. Although the test was
not significant, of the competitors, 67 percent changed their product line/services, and 33
percent changed product/service prices. There was only one non-competitor changed
product lines and services. Although Wal-Mart had been in operation for five years,
competitors may have felt it was still necessary to make product and price adjustments to
meet consruner demands.

Advertising Strategies

Any of the businesses merchants that believed Wal-Mart was taking away
customers and profit during the 1985-95 period could have changed advertising strategies
to tap into more prosperous markets. Merchants could have marketed products to a
different clientele, placed more advertisements on radio and television stations, changed
the way products were revealed, as well as other product/service enhancing techniques.
The survey revealed what business merchants actually did try to adjust to market
demands and competition.

To test whether merchants were making adjustments to advertising strategies,
competitors and non-competitors were correlated with the respondents answer to
advertising strategies. This test was close to being statistically significant (X2=.054)
However, the test indicated that a larger proportion of competitors and non-competitors

did not change advertising strategies. Of the competitors, 33 percent changed advertising

52

strategies and 67 percent did not change advertising strategies. In the same manner, 100
percent of the non-competitors surveyed did not change advertising strategies (Table 14).
The 33 percent of competitors that changed their advertising strategies revealed that they
had to specialize their market, unify their business to make downtown a shopping
destination, emphasize services, and run promotional price advertisements. Therefore,
four business merchants felt the economic pressure of Wal-Mart competition and
addressed the situation with new business campaigns. Overall, business merchants were
not concerned with Wal-Mart competition because 24 other businesses did not need to

adjust any advertising strategies.

Table 14. Merchants that Made Adjustments to Advertising Strategies.

 

 

Yes Ne
Competitors 4 8
Non-competitors O 4

 

Businesses that Changed Hours of Operation

Another response by merchants in the presence of Wal-Mart and Kmart
competition was changes to hours of operation. Hypothesis three tested changes CBD
merchants made to their hours of operation during the 1988-95 period. A correlation

between competitors and non-competitors and changes in business hours of operation

 

53

during the 1988-95 period was statistically significant (X2=.015) (Table 15). This test
indicated that the majority of business hours changed in 1988, a possible result of direct
competition with Kmart, and 1995, a possible association to Wal-Mart and Kmart
competition. Of the survey respondents, 83 percent of the competitors and only 38
percent of non-competitors found it necessary to change their business hours during the
1988-95 period. The following reasons were given by survey respondents: customer
complaints, slowdown of business, no shoppers downtown afier 6:00 W customer counts
were down, customer shopping habits, determined after 6:00 FM. to be unprofitable in the
fall, people not in town shopping on Sundays, seasonal changes, expanded hours to be
more available to customers. However one business merchant revealed that business
hours were extended to increase business opportunities.

One floral and gifts merchant indicated that hours were adjusted because of
community pressure and the area school schedule. A local banking institution augmented
hours of operation to increase customer service. These extended hours may stimulate later
shopping activity in the CBD. Two service oriented merchants changed operating hours
because of seasonal change and one legal/accounting/real estate business owner changed

office hours due to customer demands.

54

TABLE 15. Changes in Business Hours During the 1985-95 Period

 

 

Changed Business Hours

Yes Ne
Competitors 1 O 2
Non-competitors 6 1 0

 

Changes in the Number of Employees

 

For the purpose of this study, it was hypothesized that if the number of employees

for CBD merchants decreased during the influx of superstores, the CBD merchants were

negatively affected by Wal-Mart. All respondents were categorized as either a competitor

or non-competitor. There was no significant correlation, however, between the number of

employees hired during the 1988-95 period and whether the respondent was a competitor

or non-competitor. Figure 5 shows that employee number of employees stayed fairly

constant. One respondent from the competitor category indicated in their survey response

that business was prosperous in 1988 and they were able to triple the size of the staff.

However, the merchant was forced to layoff all employees when the store closed in 1991.

The merchant believed that the store closing was associated directly with the

development and operation of Wal-Mart.

55

Ganges in the Nrrber of Errployees
Between Corrpetitor & bbrr-Corrpetitor Mercharts

 

1 19881998

E .1985
.1988

g .1991

g .1994
.19%

 

normnpetita' oorrpetitor
Type d Nbehat ((Dorr'petitor, bur-carpenter)

Figure 5. Changes in the Number of Employees Between Competitors and Non-competitors, 1985-96.

Business Merchants as Stakeholders in the Community

The literature on communities indicated that the economic condition of the
community was the backbone of the community’s prosperity. Investigating Charlotte’s
history revealed that many residents came forward with a concern about the growth of the
community. '4 The survey of business merchants attempted to determine their
involvement in Charlotte’s economic and community prosperity. For the purpose of this
study, the indicators for long-term community investment were building ownership, the

merchants involvement in community organimtions, and the merchants residency.

 

” Serene, Della, “Future Charlotte” Charlotte Shopper and Eaton County News, 1990.

56

Building Ownership

Owning the building in which the store is located indicates a monetary investment
in the community. Of the business owners surveyed 69.2 percent own the buildings that
the business is located and 30.4 percent of the business owners are renters. Two of

business merchants did not respond (Table 16).

TABLE 16. Business Merchants that Own Buildings

 

 

Numberllereent

 

Businesses Owners That Own Building 18 70
Businesses Owners That Rent Space 8 30
N/A 2

Total 28 100

 

The Downtown Development Authority

The mission of Charlotte’s Downtown Development Authority (Fig. 2) is to unify
and beautify downtown Charlotte, provide for the enhancement and economic growth of
the downtown area, and promote community pride.15 As mentioned earlier, the DDA’s
funding source comes from the taxes collected each from the growth in property
assessments of CBD buildings (Fig. 2). Merchants located in the CBD are asked to
become members of the DDA. Membership allows the merchants to be key players in
promoting Charlotte’s CBD. Participation in the DDA was correlated with competitors

and non-competitors (Table 17). This test was not statistically significant, but of the

 

'5 Taken from the Charlotte Downtown Development Authority Mission Statement, 1988.

 

57

merchants surveyed, 82 percent of the competitors and 69 percent of the non-competitors
belong to the Charlotte DDA. Even though more than half of the survey respondents
participate in the DDA, there are still merchants in the CBD who do not express concern

with the economic development and enhancement of the area.

TABLE 17. Business Owner Involvement in the DDA

 

 

Yes No
Competitor 82% 1 8%
Non-competitor 69% 3 1%

 

The Charlotte Chamber of Commerce

As was mentioned earlier, the Charlotte Chamber of Commerce has a mission to
create economic development in Charlotte and the respective townships adjacent to
Charlotte. However, the chamber also responds to its membership. The Chamber of
Commerce operates by dues collected from its members.16 Therefore, if CBD merchants
are not members of the Chamber of Commerce, they may not see the Chamber
participating in economic and enhancement activities in the CBD. To test this,
participation by survey respondents in the chamber was correlated with competitors and
non-competitors. Of the two categories, 58 percent of the competitors and 54 percent of

the non-competitors belong to the Charlotte Chamber of Commerce (Table 18).

 

‘6 Mission statement of the Charlotte Chamber of Commerce.

 

 

 

58

TABLE 18. Business Owner Involvement in the Charlotte Chamber of Commerce

 

Yes No
Competitors 58% 42%
Non-competitors 54% 46%

 

 

Involvement in Other Community Organizations

In the same manner, involvement in other community organizations was
correlated with competitors and non—competitors. Of the merchants surveyed, 50 percent
of the competitors and 36 percent of the non-competitors belong to other community
organizations. The other organizations that the active business owners belong to are the
Rotary Club, the Optimists Club, the Lions Club, GFWC, and the Kiwanis Club (Table

19).

TABLE 19. Membership in other Community Organizations

 

 

WWW

Rotary 6
Optimists 1
Lions Club 1
GFWC 1
Kiwanis 1
Total 1 O

 

 

 

59

Residency of the Business Owners

The residency of the merchants was considered to be a significant indication of
community involvement. The researcher believed that if a higher percentage of merchants
lived within the city limits than there would be a stronger indication of community
preservation. The assumption that residency can be correlated with one’s desire to
preserve the community was difficult to test. Although. the correlation between
competitors and non-competitors and their residency was not statistically significant, of
the merchants surveyed, 50 percent of the competitors and 53 percent of non-competitors
live within Charlotte City limits. Furthermore, of the competitors 25 percent live within
the Charlotte School District. Only 17 percent of competitors live outside Charlotte in
Baton County, and the remaining 8 percent of competitors live outside of Charlotte. Of
the non-competitors 20 percent live within the Charlotte School District. Only 20 percent
of the non-competitors live outside Charlotte, but in Baton County, and the remaining 7
percent live outside of Baton County.

The residency of the business merchants clearly indicates that a majority reside
and work within the city limits. The results of the survey indicate that the current
business merchants are actively involved in the Charlotte business and social functions of
the community.

What Can Charlotte Do in the Future to Preserve the CBD?
Stimulating the CBD
In order to increase rent and create demand for space in the CBD, consumers need

to be attracted to the area. To drive up market demand for the buildings people must be

 

6O

convinced that the CBD is an excellent place to do business. Both CBD building owners
and CBD merchants were asked questions associated with marketing and public relations
for the CBD. Building owner revealed suggestions to stimulate business activity in the
CBD (Table 20). Of the building owners surveyed, 33.3 percent believed a community
picnic would attract people downtown, 44.4 percent were in favor of DDA sponsored
sidewalk sales, and 22.2 percent believed that the only way to get people downtown is to
clean up Cochran Avenue, make parking accessible to the shopper, and re-route highway

traffic off of Cochran Avenue.

TABLE 20. Building Owner Suggestions to Stimulate the CBD

 

 

Numberlierccm

 

Community Picnic Downtown 3 33.3
Sidewalk Sales 4 44.4
Other 2 22.2
N/A 19

Total 28 100.0

 

The merchants’ survey also asked business merchants to give ideas on how
activity could be stimulated in the CBD. The following are the business merchants

responses (Table 21).

 

61

TABLE 21. Merchants’ Suggestions to Stimulate the CBD.

 

 

Numberlimm

 

Community Picnic 4 26.7
Sidewalk Sales 9 60.0
Other Events 2 13.3
N/A 3

Total Businesses 25 100.0

 

Suggestions were given to the respondents to determine what community events
they felt would draw consumers to the CBD to shop. Of the survey respondents, 26.7
percent believed that a community picnic would be beneficial, 60 percent would like to
see community or DDA sponsored sidewalk sales and 13.3 percent suggested that more
long-term actions be taken by the DDA to reroute people back into the downtown area.
One business merchant believed that Eaton County attributed to the demise of the CBD
when the county office was moved. In addition, one particular merchant felt that activities
must sustain long-term health of the business community such as rerouting highway
traffic off of Cochran Avenue, creating better parking for shoppers, and cleaning up the
area. The same merchant also felt that Eaton County did not help the community by

moving county offices out of the city.

 

CHAPTER VI

CONCLUSIONS AND IMPLICATIONS FOR FURTHER RESEARCH

The purpose of the study was to examine the economic issues associated with the
development and operation of superstores on the fringe of small rural communities. The
superstores addressed in this study have been operating on the “fringes” of Charlotte for
over ten years. Ultimately, during this ten year period both Kmart and Wal-Mart may
have been a factor in the closing of many stores in Charlotte’s Central Business District
(CBD). However, the results of this case study reveal that the CBD is still a functioning
economic component to the City of Charlotte.

Conclusions

It was clear from the examination of property assessments during the 1988-95
period that the value for building space in the CBD did not decrease. Twelve out of
fifteen CBD building owners made improvements to their buildings during the 1988-95
period which ultimately increased the value of the buildings. As mentioned earlier, the
improvements may have been the building owners’ reaction to the development of Wal-
Mart. It can be concluded that Wal-Mart is not associated with a decrease in property
assessments for CBD buildings on Cochran Avenue. However, it is important to note that

property assessments for CBD buildings did not increase by a large percentage, therefore

62

63

indicating there was not a large market demand to purchase buildings on Cochran
Avenue. During this period the market demand was probably shifted away from the CBD
area and concentrated near the new I-69 interchange.

The results from the tests of hypothesis two indicate that superstores lead to the
instability of many merchants categorized as competitors. As mentioned in Chapter five,
buildings in Charlotte’s CBD that catered to retail stores transferred title more times than
any other type of business during the 1988-95 period. Therefore, it can be concluded that
the instability of competitive merchants in the CBD were associated with superstore
development. In regards to rent fluctuations, the building owners survey concluded that
the majority of respondents believed rent prices stayed constant during the 1985-95
period. It can be concluded from the survey that rent fluctuations are not associated with
superstore development.

The results from the third hypothesis reveal that a majority of CBD merchants,
considered to be direct competitors of the superstores, made changes to merchandise and
prices to meet the demands of a new market. The results fi'om these tests are important
because they helped to measure a level of fear among business merchants. If the number
of merchants that are direct competitors is high than there is a problem because a large
number of stores may be forced to close. In the same respect there would also be a high
level of fear. The structure of the business center is a function of the actual level of fear.

According to the Standard Industrial classification Code (table 1) 17 of the 28
survey respondents are considered to be direct competitors of Wal-Mart. Only seven

respondents considered to be direct competitors of Wal-Mart felt that their businesses

64

were negatively affected by the operation and development of Wal-Mart. As mentioned in
Chapter five, five merchants changed product lines and services in 1985, a possible
response to Kmart. In 1990, six merchants changed product lines, services and product
prices, a possible response to Wal-Mart. Finally, in 1995 four merchants changed product
lines and services, possible changes made to meet new market demands. The results of
the merchants’ surveys indicate that business decisions of CBD merchants were
associated with the superstore development. It can be concluded that some business
merchants felt Wal-Mart was taking away business from the CBD, but the majority of
survey respondents did not concur. Many survey respondents indicated that they changed
merchandise and specialized to avoid being a direct competitor of Wal-Mart. Therefore, it
can be concluded that the majority of CBD merchants felt that their merchandise targeted
a different market group. It can also be concluded that many merchants made the
necessary changes to their hours of operation, the number of hired staff, and their
merchandise to avoid being direct competitors of the superstores. This hypothesis is not
supported because the majority of merchants located in Charlotte’s CBD are not directly
competing with Wal-Mart.
Implications for Further Research

It must be noted that there was difficulty collecting accurate data in the Charlotte
Tax Assessor’s office. Information on property assessments during the 1988-1995 period
was written on individual notecards and the actual square footage assessed was not
expressed clearly on each card. In addition, the city updated its system in 1995 to a

computer program. It was difficult for the researcher to maintain a strong comparison

65

between each assessment because the computer system utilized a different methodology
in presenting the data The notecards lacked much of the information presented in the
computer analysis of each property. Furthermore, many building owners made changes in
the property which offset declines in the assessed property values. The tax assessor’s
cards did not clearly state the degree of improvements made, therefore, it was difficult to
account for individual actions of CBD building owners.

In the same respect, it was diffith to associate changes in property assessments

 

with Wal-Mart. There are other places in the same region of Charlotte that may be pulling L
shoppers away fiom the CBD. For example, the Lansing Mall, Meijer Thrifty Acres,
Target, and another Kmart are located in Delta Township, a twenty mile distance from
Charlotte’s CBD. In addition, the area surrounding Charlotte has increased in population
over the past ten years thereby, increasing the general market area. It can be argued that
not all the sales fiom Kmart represent those taken from Charlotte’s CBD. These sales
may have been taken fi'om somewhere else.

Finally, it can be concluded that changes in Charlotte’s CBD may be associated
with Wal-Mart, but are not directly a result of Wal-Mart. The results of the CBD
merchant’s and building owner’s survey, presented in this study, were used to examine
the level of fear held by CBD merchants and building owners regarding the development
and operation of Wal-Mart. These results are not intended to convey a direct cause and

effect relationship between the CBD and Wal-Mart.

66

Businesses and Community Groups Functioning Together

This study also examined the two major business organizations that exist in
Charlotte, the Charlotte Downtown Development Authority (DDA) and the Charlotte
Chamber of Commerce and the level of participation by CBD merchants and building
owners in these organizations. During the course of this study, some CBD merchants
expressed that the DDA and the Chamber do not coordinate efforts and are not working
toward the good of the area. These accusations may be entirely true, but it is only due to
the nature of each organizations’ mission statements. The DDA was formed in 1988 by
an act of legislation.'7 DDA finances come from the taxes collected from the growth in
property assessments for buildings located within the DDA’s boundaries. Thus, DDA
focus is only on the CBD. The Chamber on the other hand has a much broader vision.
The Chamber’s membership includes over 600 businesses from the entire Charlotte area.
According to the Chamber, the area includes Charlotte and the surrounding townships.
With this fact in mind, it is no surprise that both Wal-Mart and K-Mart are members of
the Charlotte Chamber of Commerce.

According to the Chamber, it provides “the best and least expensive way to invest
in Charlotte’s future, and in turn, your own.”18 However, the mission does not necessarily
mean preserving the downtown. CBD preservation comes from Visioning and planning
the future for the CBD through participation of the CBD merchants and building owners.

Their involvement in the DDA can keep money and efforts focused on creating economic

 

’7 Downtown Development Authority, Public Act 197 of 1975.
'8 Mission Statement of the Charlotte Chamber of Commerce

67

prosperity for the CBD. Although many business merchants were not pleased with the
Chamber’s lack of involvement in the CBD, strong participation on the merchants behalf
may change the Chambers initiatives.
Marketing the Image of Charlotte: Ideas for Future Research

Marketing Cochran Avenue is key to stimulating economic activity in the CBD.
Collaboration between the public and private sectors of the community can help people
create a mental image of values, priorities, preferences, and dreams for the downtown
development. From this point the community can build a plan for future development.

An image of the downtown can create a place that stands apart from the superstore
fringe development. A downtown theme and/or unique image can make the community
more than just a shopping destination. The following ideas to were developed by the
researcher after attending a series of meeting held by Charlotte’s DDA. These ideas were
generated to help create an image or plan for downtown development:

0 Define the downtown: example DDA boundaries.

0 Compile a business inventory. Collect data on merchandise, services, store

concepts, prices, and markets targeted.

- Specialize the area’s market.

0 Make a realistic assessment of the customer services now offered.

0 Examine CBD parking and traffic patterns.

In conclusion, rural communities will continue to face the decisions that concern
growth, people will continue to need places to live, eat, shop, and recreate and

entrepreneurs will utilize land to build and offer people these services. Business

68

merchants can maintain control of their business community by encouraging community
participation in both the DDA and the Chamber of Commerce. Both groups that are
ultimately making the decisions on public policies, development projects, marketing
efforts, and physical improvements. It is important for all voices in the CBD community

to be voiced to create a harmonious working and thriving CBD.

BIBLIOGRAPHY

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69

 

70

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71

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APPENDICES

APPENDIX A

72

Building Owner Survey
11. Building owners. This section deals with issues that are associated with owners of buildings located
within Charlotte’s Central Business District. This area includes all buildings on Cochran Avenues between
Lawrence Street, and Shepherd Street, and any buildings with storefronts located one block off Cochran
between Lawrence Street and Shepherd Street.

CENTRAL BUSINESS DISTRICT
Q1. Do you own any buildings within Charlotte’s central business district?

1. yes
2. no

If no, please go to Q5.

Q2. How many buildings do you own that are located within the CBD?

 

Q3. What year did you purchase the building(s) you own in Charlotte’s CBD?

 

 

 

Building 1 Building 2 Building 3
Building 4 Building 5 Building 6
Building 7 Building 8 Building 9
Building 10

Q4. What rent did you charge per square foot? B=building

B l 82 BB B4 BS B6 B7 B8 B9 BIO
1985

1988
1991
1994
1996

_—__—_———————

Is this your best recollection, or information from your tax records (please specify).

73

INTERSTATE 69 AREA
Q5. Do you own any buildings near the Interstate 69 interchange in Charlotte?

1. yes
2. no

Q6. If yes, how many buildings do you own?

 

Q7. ls demand higher for space in your building near the Interstate 69 interchange?

1985 1990 1996
1. yes 1. yes 1. yes
2. no 2. no 2. no

Q8. What rent did you charge per square foot? B= Building
B] BZ B3 B4 BS B6 B7 B8 B9
1985

1988

1991

1994

l 996

Is this your best recollections, or information from your tax records (please specify)?

Q9. Since the opening of Wal-Mart in 1990 has rental rates/Sq. Foot?

1 . increased
2. decreased
3. stayed the same

Q10. Since the opening of Wal-Mart in 1990, have you

4. sold buildings in the CBD

5. acquired new buildings CBD
and/or

6. sold buildings near l-69

7. acquired buildings near [-69

Q1 1. What type of stores are currently located in your building?

1. restaurant/bar

2. food store

3. pharmacy, drug store
4. fumiture, appliance

BIO

74

retail (clothing, sports)

floral, gifts

banking, insurance

travel agency

. . legal, accounting, professional services
10. other (specify)
Q12. Are you a member of the DDA?

©¢N99

1. yes
2. no
3. N/A

Q13. Are you a member of the Charlotte Chamber of Commerce?

1. yes
2. no
3. N/A

Q14. Are you a member of any other community organization in Charlotte?

1. yes
2. no
3. N/A

If yes, please specify name of the organization

 

Q15. What activities would you support to make the downtown area more attractive for consumers? Please
pick more than one. Be creative!

Community picnic held in the downtown area
Community bike/running race through downtown area
Sidewalk sales

Other events that interest

you

99°F.“

 

 

 

Q16. Where do you live?

1. Charlotte City limits

2. Charlotte School District

3. Outside of Charlotte, but in Baton County
4. Outside of Baton County

When you complete this survey, please place it in the enclosed white envelope and seal the envelope. A
volunteer will be in your store on May 30, I 997 to pick up the survey.

Thank you for your time and effort. Please use the other side of the survey to fill in additional comments.

 

APPENDIX B

75

Business Owner Survey
I. For this survey, we are including the whole area shown in the map of Charlotte’s Central Business
District (CBD). The area includes storefronts on Cochran Avenue between, Lawrence Street and Shepherd
Street, and storefronts located within one block of Cochran Avenue between Lawrence Street and Shepherd
Street.

Q]. Which of these best describes your business?

restaurant, bar
food store
pharmacy, drug store

fumiture, appliance

retail (clothing, sports, shoes)

floral, gifts

banking, insurance, real estate

travel agency

legal, accounting, professional service
0. other (specify)

“95”.“???pr

 

Q2. When did you open your business?

Please give month/year

 

Q3. How long have you been at this location?

 

Q4. Was your prior location in Charlotte’s Central Business District?

1. yes
2. no
3. N/A

Q5. Could you tell me how many people you employed in the business during the following periods?
(Please indicate the number employed at the peak of your business season.)

 

 

1985 1994
1988 1996
1991

Q6. Did you change your business hours at all during the 1985-1996 period?

1 . yes
2. no

If yes, what were the changes you made to your business
hours?

 

 

 

76

Why did you make changes to your business hours?

 

 

Q7. What year did you change the business hours?

 

Why did you change your business hours that year?

 

 

Q8. Does the Charlotte Chamber of Commerce effect your business hours?

1 . yes
2. no
3. N/A

This next question is separated into three different parts. Please answer when applicable to your business.
Q8. What was the range of your total annual revenue from sales and services in:

1985?

 

1990?

1996?

Q9. Do you rent your business space?

1. yes
2. no

Q10. What do you pay for rent/Square Foot?

 

Q11. Do you own the building your store is in?
1. yes

2. no

This study is interested in how you and your business responded to the opening of Wal-Mart in 1991.

Q12. Did the opening of Wal-Mart affect your business?

fl
0

yes
2. no
3. N/A

77

Q13. If yes, were the overall effects of Wal-Mart
a. Negative

b. Positive
c. N/A

Q14. If you answered yes to Q10, can you identify ways the opening of Wal-Mart affected your business?

 

 

Q15. How did you respond to the opening of Wal-Mart? (Please answer when applicable.)
In 1985 you:

I. changed product line/services
2. changed product prices/services
3. other (specify)

 

in 1990:
I. changed product line/services

2. changed product prices/services
3. other (specify)

 

in 1996:

I. changed product line/services
2. changed product prices/services

3. other (specify)

Q16. In response to the opening of Wal-Mart, did you change your advertising strategy?

I . yes
2. no
3. N/A

How did you change your strategy?

 

 

Q17. Are you a member of the DDA?

1. yes
2. no
3. N/A

Q18. Are you a member of the Charlotte Chamber of Commerce?

78

1 . yes
2. no
3. N/A

Q19. Are you a member of any other community organization in Charlotte?

1 . yes
2. no
3. N/A

If yes, please specify name of the organization

 

Q20. What activities would you support to make the downtown area more attractive for consumers? Please
pick more than one. Be creative!

1. Community picnic held in the downtown area

2. Community bike/running race through the downtown area
3. Sidewalk sales

4. Other events that interest you

 

 

Q21. Where do you live?

Charlotte City limits

Charlotte School District

Outside of Charlotte, but in Baton County
Outside of Baton County

PPN?‘

When you complete this survey, please place it in the enclosed white envelope and seal the envelope. A
volunteer will be in your store on (Date) to pick up the survey.

Thank you for your time and eflort. Please use the other side of the survey to fill in additional comments.