Sales tax or not, retail giant sets up shop
There aren’t many shopping receipts from Portland stores in Clark County households these days, and with recent developments there will likely be even less.
For the last 20 years, Clark County consumers have mounted retail expeditions across the bridge, making big purchases in the tax-free zone of Portland, putting their money "over there." That’s changing, and the big boys in retail are taking notice, opening stores in Vancouver, confident the shoppers will come. Best Buy is the most recent "big box" retailer to open doors here, and Mayor Royce Pollard considers it a compliment.
"When a company comes here despite the sales tax difference, it shows a lot of faith in the area," he said.
The faith that Pollard speaks of is a thing the big retailers develop only after careful examination of a market, so it is indeed an indicator of a better retail climate when a large ship like Best Buy pulls into the harbor. City of Vancouver Business Development Manager Gerald Baugh said big retailers operate under strict formulas when deciding to set up shop in a community, counting, among other things, the number of rooftops and the average household income in the area.
"It’s a good measure and a good sign," Baugh said of the store opening.
Baugh said another factor in keeping shoppers here is the growth itself. Most consumers consider a commute of more than 40 minutes inconvenient, and as a result stop placing too much value on the sales tax break, trading it for convenience.
"At some point in time, the amount of (sales tax) savings versus time spent becomes unbalanced," he said, "and people begin opting to shop in their own backyard."
As an added bonus, stores like Best Buy also make the areas in which they operate destinations, as they are considered regional rather than local draws. Also, the big stores tend to attract others. Home Depot, for example, is shadowed by Lowe’s wherever the home improvement retailer opens a new store.
"It wouldn’t surprise me if Circuit City takes a look at the Best Buy site and considers moving in there," Baugh said.
Vancouver businessman Ralph Stevens said the effect is not unlike boys competing for the attention of a girl at a dance.
"And then what happens is the girl gets prettier as more stores move in and that creates more jobs and more spending," he said.
At the Best Buy grand opening Sept. 8, Pollard echoed the sentiment as he welcomed the store with a humorous and telling remark.
"We welcome you to Vancouver and Clark County," he said. "You will be successful and you will pay your taxes."
While city officials see the store as a shot in the arm for retail spending, others, like the Columbia River Economic Development Council, see the store as a giant cork that will help slow a leak. CREDC has studied what it calls the retail sales tax leakage factor. The leak today flows at a rate of 22.6 percent. The leakage peaked in 2000, when it stood at 30.1 percent. Effectively, it has meant that Clark County consumers spend less money here than residents of counties in the rest of the state.
"In 2004, the average retail shopper in Washington spent $8,049," said CREDC Research Analyst Josh Lehner. "In Clark County, individuals spent $5,385 that year."
The $1,572 per person difference represents the leak – generated through shopper migration to Portland – that CREDC would like to shore up. A CREDC report of Clark County Taxable Retail Sales from 1995 to 2004 shows a steady downward trend in the leakage factor, from the 30.1 percent to 29.2 percent in 2001; 27 percent in 2002; and 25.1 percent in 2003. The leakages in the furniture and electronics markets have consistently been the highest, hovering between 55 and 60 percent. The council combines these two markets in the report, and indicated in 2004 a 58 percent leakage in the category. This, says Lehner, will certainly change with the advent of Best Buy.
"One of the biggest problems was that retailers just weren’t investing in the community," Lehner said. "Now, they’re realizing the vast market we have here, and the leakage factor will continue to trend down as more capture mechanisms come here."
