Buying Underwear, Along With the Whole Store
By AMY CORTESE
SARANAC LAKE, N.Y.
THE residents of Saranac Lake, a picturesque town in the Adirondacks, are a hardy lot — they have to be to withstand winter temperatures that can drop to 30 below zero. But since the local Ames department store went out of business in 2002 — a victim of its corporate parent’s bankruptcy — residents have had to drive to Plattsburgh, 50 miles away, to buy basics like underwear or bed linens. And that was simply too much.
So when Wal-Mart Stores came knocking, some here welcomed it. Others felt that the company’s plan to build a 120,000-square-foot supercenter would overwhelm their village, with its year-round population of 5,000, and put local merchants out of business.
It’s a situation familiar to many communities these days. But rather than accept their fate, residents of Saranac Lake did something unusual: they decided to raise capital to open their own department store. Shares in the store, priced at $100 each, were marketed to local residents as a way to “take control of our future and help our community,” said Melinda Little, a Saranac Lake resident who has been involved in the effort from the start. “The idea was, this is an investment in the community as well as the store.”
It took nearly five years — the recession added to the challenge — but the organizers reached their $500,000 goal last spring. By then, some 600 people had chipped in an average of $800 each. And so, on Oct. 29, as an early winter storm threatened the region, the Saranac Lake Community Store opened its doors to the public for the first time. By 9:30 in the morning, the store, in a former restaurant space on Main Street opposite the Hotel Saranac, was packed with shoppers, well-wishers and the curious.
The 4,000-square-foot space was not completely renovated — a home goods section will be ready for the grand opening on Nov. 19 — but shoppers seemed pleased with the mix of apparel, bedding and craft supplies for sale.
“Ooh, that’s nice,” said Pat Brown, as she held up a slim black skirt (price: $29.99). She and her husband, Bob, a former professor of sociology at a local community college, live in town in an early 1900s home furnished with deer heads and other mementos from Bob’s hunting trips. The couple — who were voted king and queen of the village’s annual Winter Carnival in 1999 — bought $2,000 worth of shares in the store early on, and later bought a few more during a fund-raising drive.
“It’s been a long process for all of us. We’re very proud to have it finally become a reality,” Ms. Brown said. Her husband, a vigorous-looking man who had a neatly trimmed white beard and was wearing a cowboy hat, added, “This is a small town trying to help itself.”
Think of it as the retail equivalent of the Green Bay Packers — a department store owned by its customers that will not pick up and leave when a better opportunity comes along or a corporate parent takes on too much debt.
Community-owned stores are fairly common in Britain, and not unfamiliar in the American West, where remote towns with dwindling populations find it hard to attract or keep businesses. But such stores are almost unknown on the densely populated East Coast. The Saranac Lake Community Store is the first in New York State, its organizers say, and communities in states from Maine to Vermont are watching it closely.
Indeed, community ownership seems to resonate in these days of protest and unrest, when frustration with Wall Street, corporate America and a system seemingly rigged against the little guy is running high. But rather than simply grouse, some people are creating alternatives.
“It drives me crazy when people criticize how our system works, but they don’t actually go out and try anything,” says Ed Pitts, a lawyer from Syracuse who along with his wife, Meredith Leonard, is a frequent visitor to the area and has invested in the store. “This is more authentic capitalism.”
SARANAC LAKE is known more for its natural beauty and clean air than for experimenting with new forms of commerce. Nine miles from the Olympic town of Lake Placid, it is surrounded by lakes and mountains. In the past, it drew summer residents including Albert Einstein and Theodore Roosevelt, as well as tuberculosis patients who came to the village to take “the cure” of fresh air. Today, many of the village’s onetime “cure cottages” are filled with tourists who come in the summer months to hike, canoe and unwind, swelling the population threefold.
Come winter, though, the town’s Main Street quiets down and local residents reclaim places like the Blue Moon Café, which dishes up food and gossip. So when the local Ames store closed, few major retailers were interested in taking its place, despite the town’s efforts to woo them.
Wal-Mart was the exception. But its interest in building a supercenter larger than two football fields sharply divided villagers. Signs for and against Wal-Mart sprouted on front yards. At heated town meetings, people would shout: “You can’t buy underwear in Saranac Lake!”
In the end, Wal-Mart decided not to pursue the store; a spokesman said that “no single factor” contributed to the decision. But the tensions the debate stirred up only made the lack of shopping options more glaring.
That’s when a group of residents exploring retail alternatives heard about the Powell Mercantile, a community-owned store in Powell, Wyo., that was born of a similar dilemma. The Merc, as it is known, was established in 2002 after the town’s only department store, part of a chain called Stage, shut down.
“There was a great concern that Main Street would fail if we didn’t have a store to replace the Stage,” said Sharon Earhart, who was director of the Powell chamber of commerce at the time. Ms. Earhart and a few other residents raised more than $400,000 from local residents in three months by selling $500 shares, and opened the Merc.
The Merc prospered from the start, with fashion brands sharing space with rancher-appropriate Wranglers. When space in an adjacent storefront opened up, it expanded to 14,000 square feet. Now coming up on its 10th anniversary, the Merc does about $600,000 in annual sales and has turned a profit most years, even paying investors a $75 per share dividend in one particularly good year.
Powell’s Main Street is now thriving, with a wide range of retail outlets. The store “created a very positive domino effect,” Ms. Earhart said, to the extent that it can be hard to find parking space.
When she came to speak at a town hall meeting in Saranac Lake in 2006, nearly 200 people showed up. Following the Powell model, the Saranac Lake organizers put together a business plan and assembled a volunteer board of directors made up of local professionals.
The board then approached a local lawyer, Charles Noth, who created a prospectus and filed it with New York State authorities. By limiting the offering to residents of New York, in what is called an intrastate offering, the organizers were able to avoid more complex and costly federal securities regulations. (The Powell Merc also raised money through an intrastate offering.)
“I had done a lot of investment proposals but nothing quite like this,” said Mr. Noth, whose family has roots in the area and had recently moved here full time. “The idea of a community store is pretty unique.” He became an investor, as did his brother, the actor Chris Noth (best known for his role as Mr. Big in “Sex and the City”).
“We didn’t want it to be a cooperative or nonprofit,” explained Alan Brown, a former banker and the board’s treasurer (and no relation to Pat and Bob Brown). “We wanted it to be just another business on Main Street.”
It was also important that it be widely owned, so the shares were priced at $100 and the amount any one person could buy was capped at $10,000. Shares can be bought and sold or willed to future generations. The store’s projected near-term annual revenues of $350,000 to $400,000 will most likely be eaten up by operating expenses, said Melinda Little, the store’s interim board president, but in the future, investors could receive dividends.
Getting the first $80,000 was easy, but the board found it hard to keep people’s interest and raise new funds, especially as the recession hit. Board members organized fund-raisers to keep the project in front of people. One year, the board had a float in the Winter Carnival, featuring a clothesline with underwear hanging on it. The share offering will close in December.
Many residents, and even board members, were skeptical that the store would ever open. “We had our dark hours,” said Mr. Brown, the treasurer.
THOSE have been dispelled, for now. The first day, the store rang up $7,000 in receipts. Not surprisingly, underwear was a big seller.
“This is cool,” said Diane Kelting, who was waiting in line to buy a gray poly-rayon cardigan ($36.99) and a “hard to find” bra. “I have two young daughters and I can bring them in here now rather than shopping online,” added Ms. Kelting, who is not an investor in the store.
Heidi Kretser, who also attended the opening and is an investor, said online shopping had drawbacks. “Nowadays you don’t even know if the reviews are genuine. If I can actually see it and feel it and talk to someone about it, it just makes for a nicer shopping experience.”
For Ms. Kretser, a coordinator with the Wildlife Conservation Society who grew up in the area, the store is about more than convenience: “I’ve always loved the idea of thriving hamlets throughout the Adirondacks, and part of that is healthy downtowns.” Like other residents, she would sometimes drive the 50 miles to shop at the big box stores in Plattsburgh, “which could be Anywhere, America.”
Big boxes may offer a wide variety, she said, as her daughter Leena selected some pink yarn and buttons and her son Owen ran over clutching a knit animal hat. But “the size is not compatible with communities like ours,” she said. “And money does not stay local.”
And profit? “If we end up with a profit that’s another perk, but we’re in it for the community,” Ms. Kretser said. The Saranac Lake Community Store and others like it reflect a growing shift among some communities to lessen their dependence on global businesses and invest their resources in homegrown enterprises that contribute to the welfare of the community. These efforts flow from studies showing that, dollar for dollar, locally owned companies contribute more to local economies than corporate chains. That is because more money stays local rather than leaking out to a distant headquarters.
In a recent analysis of nearly 3,000 rural and urban areas across the United States, a pair of Pennsylvania State University economists found that the areas with more small, locally owned businesses (with fewer than 100 employees) had greater per capita income growth over the period from 2000 to 2007, while the presence of larger, nonlocal firms depressed economic growth.
“There is definitely a trend towards community-rooted alternatives,” said Stacy Mitchell, a senior researcher at the Institute for Local Self Reliance, a nonprofit research and educational organization. Citing the Occupy Wall Street protests and Move Your Money campaigns, she said, “More people are interested in taking the economy back.”
Cooperatives — nonprofit businesses like food stores and credit unions owned by and run on behalf of their members — are one common manifestation of the trend. In a co-op, each member gets one vote, and excess revenue not reinvested in the business is distributed among members either as rebates or, in the case of credit unions, lower fees and better interest rates. In the United States, a University of Wisconsin study estimated, there are more than 29,000 co-ops generating $654 billion in revenue, and the number is growing.
Community-owned stores are not as well known and are structured as profit-making corporations, but the aim is the same: to keep ownership and control in the community, and to share the prosperity.
The Saranac Lake Community Store is a C corporation, the typical big business form, but the resemblance ends there. If and when there are profits that are not plowed back into the store, they will be distributed to investors — many of whom are also the store’s customers. The store’s three employees are paid a modest salary, but one that is above average for the area, and receive health benefits and paid sick days. “That was very important to us,” said Ms. Little, the board president.
THE store’s planners sought advice from residents and merchants to determine what was most needed — an effort that continues. Under the title “product offering suggestions,” on a notebook placed near the store’s checkout counter, shoppers had scrawled “larger hats and gloves,” “watchbands” and “women’s flannel-lined jeans.”
The planners also tried to avoid competing directly against local merchants, who mainly line half a dozen blocks along Main Street and Broadway. For example, the store offers a limited shoe line, since there are shoe stores in town, and sticks to brands like Minnetonka moccasins, once made in nearby Malone and not carried elsewhere in town. The strategy appears to have won over local merchants. The Coakley Ace hardware down the street offered the store discounted paint and supplies, while the nearby Rice Furniture provided carpet at cost.
“I’m of the belief that if you have more offerings in the community, more people will view it as a place to shop,” said Pete Wilson, owner of Major Plowshares, an Army-Navy store in town. “It’s giving people more reason to stay downtown, and that should benefit other retailers.” He bought a share, along with one for each of his two daughters.
But community stores are not for everyone. Even with the backing of a local bank and economic development corporation, organizers of a proposed community store in Greenfield, Mass., returned $60,000 to investors this year after concluding that it would be difficult to raise the remaining money needed.
And there is no denying the challenges of competing with mega-retailers whose scale and clout give them enormous cost advantages. Craig Waters, Saranac Lake Community Store’s general manager, has had to be creative, stocking American-made products as much as possible and paying reduced prices for merchandise that has not sold at brand-name stores. Mr. Waters, who lives in Lake Placid, also relies on longstanding connections with suppliers. He worked for decades as a buyer and manager for May Department Stores, which merged with Federated Department Stores, now Macy’s Inc., in 2005.
The prices appeared reasonable. Brightly colored rubber rain boots for children were $16.99; women’s all-cotton sleep pants and tank top (in a moose print) were $19.99 and $12.99. A waffle-knit, fleece-lined men’s hoodie was $59.99.
The Saranac Lake store is off to a strong start, although the trick will be to keep people coming back after the holiday season — and the novelty — have worn off. “We had a lot of people saying it wouldn’t work — and it might not,” said Mr. Wilson, the owner of Major Plowshares. But its existence could set an example for other disenfranchised communities and perhaps prompt shoppers and residents to think about where their dollars go.
“Most people are coming in to pick up some thread or clothing. They’re not coming in to get a political lesson,” said Mr. Pitts, the Syracuse lawyer. “But it’s nice to have a place that you can point to as an alternative.”
Published by New York Times, 11/13/11