THE SHILS REPORT MEASURING THE ECONOMIC AND SOCIOLOGICAL IMPACT OF THE MEGA- RETAIL DISCOUNT CHAINS ON SMALL ENTERPRISE IN URBAN, SUBURBAN AND February 7, 1997 RURAL COMMUNITIES Study Director Edward B. Shils, Ph.D., J.D., LL.M. George W. Taylor Emeritus Professor of Entrepreneurial Studies Director Emeritus Wharton Entrepreneurial Center ‘The Wharton School University of Pennsylvania Associate Director Melinda A. Schorr, B.A., M.B.A. Research Associate Melanie Goedeker. B.A., B.S. in Economics© 1997 by Edward B. Shils, Ph.D., J.D.. LL.M. All rights reserved Printed in the United States of AmeriEDWARD B. SHILS, J.D., LL.M., Ph.D. ‘Fidelity Bullding -Suite 2030 - 123 S. Broad Street, Philadelphia, PA 191091020 (215) 731-9082 + Fax 215) 731-0084 George W. Taylor Ementus Professor Avomey at Law ‘of kxwreprencusal Stade ‘tember “The whatnon Schoo! Pennsylvania coe Feral Bars Lnersty of PennsyWvania PREFACE tn 1973, as Chairman of the Department of Management at the Wharton School. | envisaged a teaching program in Entrepreneurship and a research center to stimulate interest both in internal corporate entrepreneurship and the creation of small businesses. The Center was the first of its kind in the world Ultimately the Wharton Entrepreneurial Center became known as the Sol C. Snider Entrepreneurial Center, and the writer, who retired in 1986, holds the title of Director-Emeritus. My experiences at Wharton with small enterprise and my work with several trade associations. consisting of small enterprises, gave Me a special zest to study the impact of mega-retail discount chains on small enterprises. With the problems besetting cities and the rise of retai! chains, and later the mega-retail discount chains, bad times have fallen on the traditional retailer. Will this affect the social stability of the neighborhood? As the residents begin to shop along the highways, little by little the neighborhood stores are closing, Similarly, have the small towns in the United States been adversely affected as the giant mega-retail discount chains moved into the Midwest, the West, the Northeast aiid the South, or have they affected communities positively? Today. the rivalry of these giants fas negatively impacted traditional retailing Why are the downtown “Main Streets.” which were the dynamic centers of the small cities and towns. dying and portraying a ghetto-like appearaave? Moreover. are Redevelopment Agencies (RDAs) within cities ameliorating the problen of blighted downtowns or are RDAYS. in fact, exacerbating the situation by providing corporate welfare giants to the mega-retail discount chain rather than to the small struggling retailers? | feel confident this study will help answer some of these provocative questions. Furthermore, not only is “Main Street” America becoming a ghetto but evidence shows additionally that traditional retail malls and strip centers ia the cities, suburbs and rural areas have also begun to decline ‘when @ mega-retail discount chain with 40.000 square feet moves out because a “big-box” competitor with over 150,000 square feet opens @ half a mile away Soon the traffic density is reduced and possibly one of every three stores goes out of business, leaving the mall to appear to be boarded up. graffiti laden, and replete with vacancies and discouraged survivors. As the mega-retail discount chains have grown in power, they have been able to buy in miassive quantities directly from manufacturers. In fact regional wholesalers that traditionally sold ¢o small retailers are disappearing as they are bypassed by massive direct purchases from manufacturers and in some cases from national wholesalers. The price available to the meya-retail discount chain are certainly denied even to small retailers who somehow struggle to remain in business.