In the United States, community stores are again gaining a foothold in small to medium-sized communities that don’t want chain department stores such as Wal-Mart Stores Inc. and Target Corp. to dominate commerce and drive smaller family-owned shops out of business.
“Consumer-owned stores, which began to proliferate in the 1960s, now number nearly 300 [in the U.S.] and have annual sales of about $1 billion,” the Institute for Local Self-Reliance said in a statement on its Web site.
Although most community stores ask residents of the community to become stockholders, they may also borrow funds from entities such as the Community Development Financial Institution, a United States Small Business Administration (SBA) guaranteed lender.
The same phenomenon is spreading to the U.K., where the Village CORE Program was extended for another three years to 2012. The program matches up to 40,000 pounds (US$66,000) in investor contributions toward establishing community-owned stores.
CORE is a partnership with the Plunkett Foundation, the Esmée Fairbairn Foundation and Co-operative and Community Finance. The Plunkett Foundation is a U.K. research firm that supports rural self-help and co-operatives. All three foundations fund charitable activities.
According to its Web site, CORE’s mission aims at “improving rural livelihoods through co-operative and social enterprise; providing solutions that enrich community life, and support rural communities through change.”
Communities Helping Themselves
Saranac Lake, N.Y., is getting closer to having its own community-owned department store. More than 400 people throughout New York state have bought shares in the project at $100 per share. The goal is to raise $500,000, and to date over 70 percent of the shares have been sold.
The offer was opened in 2007 and ends December 2009. Only N.Y. residents may purchase shares.
“It makes sense to step back and try to become as self-sufficient as we once were,” said N.Y. resident Natalie Leduc on the Saranac Lake Community Store Web site. “I do believe that if we all invested in a community store, our three little towns could ‘make a go’ of our own Tri-Lakes Mercantile.”
“I say, ‘hats off’ to the group who had the dream that this could happen. They have worked long and hard, and the proof is that the project is so close to its goal,” she continued.
In 2005, Duckwall-Alco Stores Inc., a regional retailer that owns 186 general stores in mostly rural communities, announced that it would close 20 underperforming stores, reasoning that the 10 percent return on investments was no longer sustainable.
The Duckwall store in Clark, S.D., was one of the stores that closed, leaving the town’s entire population without a single place to shop. There was no longer a store that provided locals with daily necessities and the nearest store was more than a 45-minute drive away.
It took four years, but the residents of Clark, S.D., are now the proud owners of a new community-owned store named Clark Hometown Variety Store. It opened its doors earlier this year.
Each resident may hold only 3 percent of the outstanding shares and each share is valued at $500, according the 2008 Clark Chamber of Commerce minutes, published on the town’s Web site.
Launching Community-Owned Stores
“Community-owned stores are designed by residents to meet specific local shopping needs,” the Institute for Local Self-Reliance explained on its blog called bigboxtoolkit. “Most of those that have opened thus far are downtown department stores that sell affordable clothing, shoes, and housewares.”
Most of the time, stock may not be owned by an out-of-towner. However, at times, an individual who is a legal resident within the state may hold stock, but that is rare.
“This ensures that the business remains locally and democratically controlled,” according to the report “How to Launch a Community-owned Store,” published by the Institute for Self-Reliance.
With local shareholders, store management has the comfort of knowing that the stakeholders—the local residents—have a real stake in the well-being of the enterprise. Local shareholders meet periodically to discuss and vote on matters pertaining to the operation of the business.
That’s a huge departure from most “big box” retailers, where faraway headquarters make the purchasing and business decisions with little local differentiation.
Community-owned stores also support other local businesses and products. The store could carry locally made and produced goods and crafts, instead of importing such items from China or Vietnam.
Generally, the board of directors at a community-owned store consists of local business leaders who already have some business experience. A store manager oversees day-to-day operations and makes hiring decisions.
But sometimes the employees are volunteers from the town.
Community-owned stores are similar to cooperatives. “By law, the activities of co-ops must be fairly closely tied to meeting the needs of their member-owners, whereas community corporations may have somewhat broader missions,” according to the Institute for Self-Reliance.
In cooperatives, all members hold equal ownership, while in a community-owned store, investors may buy up to a set limit of stock.
Prepare Just Like a Regular Business
A community-owned store is established and run like a regular retail business. The Institute for Self-Reliance advises starting out with a mission statement, bringing together local residents and business and community leaders, studying existing community-owned stores, and performing a market study.
Next comes developing a business plan, setting up a board of directors, completing all required state incorporation applications, writing the bylaws, and preparing a prospectus for the sale of stock. Follow-on tasks include submitting the prospectus to the state for authorization, promoting the stock, and lastly, setting up the store, making purchases, and beginning operation.
“As with any business, hard work, informed decision making, and careful attention to details is key to the success of community-owned stores. Communities should go into these ventures with hopes high, but with their homework done,” the Institute for Local Self-Reliance says.
