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ARCHIVED  October 1, 1996

Northern Colorado posts retail trade deficit

Everyone in our economy has contact with the retail industry. Each of us, almost every day, visits local gasoline stations, grocery stores, home-improvement centers and the stores in the numerous malls in Larimer and Weld counties.The retail industry in the two-county region generated $5.5 billion of net retail sales in 1995, about $3.5 billion of that in Larimer County.
Growth in retail sales has been significant since 1991. The effect of the Rocky Mountain Factory Stores in Loveland is clearly visible in the 1993-94 growth rates of both counties. Larimer County posted an 18.84 percent growth rate, while Weld County slowed to a 14.4 percent growth rate from 15.38 percent the previous period.
But what portion of our economy depends on this sector? How many people does the retail industry employ, and how much income does it generate for local government via sales taxes? Do we export or import retail sales services?
There are seven types of establishments that sell goods for off-site consumption: building materials & garden supplies, general merchandise, food stores, automotive dealers and service stations, apparel and accessory stores, furniture and home-furnishing stores, and miscellaneous retail (i.e. drug stores and liquor stores).
These seven sectors account for about two-thirds of total retail sales. The remaining one-third is establishments that do not sell products for off-site end-use consumption, such as personal and business services, and are not covered in this article.
Net sales in these sectors are divided into two parts in the impact model that we use to evaluate their effect on our economy. The first part represents the value of the sales service, i.e., obtaining and stocking the product and selling it to the buyer. This is thought of as a markup over the price paid to the wholesale distributor.
This “margin” varies by product (the range is 15 percent to 30 percent) and is an activity of the local economy. The second part of net sales is the value of the product acquired by retail stores for resale to buyers. Only about $140 million of products purchased for resale were produced locally in 1991, 5 percent of net retail sales in that year.
What costs are covered by the markup (margin)? The largest is the wages and salaries paid to employees, i.e., stockers, sales people, accountants, etc.
Retail trade industries are very labor-intensive, generating from 69 jobs per million dollars of sales in the miscellaneous retail sector to 25 jobs per million dollars for automotive dealers.
Local economic activity associated with the retail trade sectors incorporates only the impact of the markup. When we evaluate these effects in our impact model, we find that about 37,000 jobs in the Larimer-Weld economy depend on the retail sector, 21 percent of total employment (two out of every 10 jobs). This does not include the employment effect of any locally produced goods.
In 1991, these retail sales generated about $100 million in tax revenues for local governments. About 4,100 jobs in government depend on these tax revenues.
Exports and imports by the retail trade sector are important because they indicate how much retail sales are made to outsiders and lost to residents going outside to shop.
The most recent numbers we have on this balance are from 1991, and the outlet mall has certainly improved this balance. In 1991, the retail trade sector exported $206 million, i.e., outsiders coming into Larimer and Weld counties to buy, and imported $330 million, i.e., residents going outside the two-county region to buy. Like the United States as a whole, we had a retail trade deficit.
To reduce the deficit, two possibilities come to mind: Expand exports and get more people to come here and shop, or develop import substitution and keep residents shopping locally.
Because the surrounding population is small, export expansion does not seem as promising as keeping people here. It makes sense to survey residents and find out what it would take to keep them shopping in Larimer and Weld counties.
John Green is a professor of economics at the University of Northern Colorado in Greeley. Eric Siverts is president of the Fort Collins-based Siverts & Associates.
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Everyone in our economy has contact with the retail industry. Each of us, almost every day, visits local gasoline stations, grocery stores, home-improvement centers and the stores in the numerous malls in Larimer and Weld counties.The retail industry in the two-county region generated $5.5 billion of net retail sales in 1995, about $3.5 billion of that in Larimer County.
Growth in retail sales has been significant since 1991. The effect of the Rocky Mountain Factory Stores in Loveland is clearly visible in the 1993-94 growth rates of both counties. Larimer County posted an 18.84 percent growth rate,…

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