by Scott Baumler
Extension Specialist, Economics
Iowa State University
When was the last time you voted with your feet? It probably has been more recently than you think. When you travel to other towns to go shopping, you are, in a sense, voting with your feet.
In a political election, you express your preference for a candidate with your vote. When it comes to market choices, you express some of your tastes and preferences by choosing where to shop.
Economists track these trade patterns, but it can be diffieult to keep tabs on where people's feet actually take them. Instead, economists watch the flow of funds. What you choose to spend your money on and where you choose to spend it reveals your market preferences.
One of the statistics commonly used in community trade analysis is called a "pull factor." A pull factor is a measure of trade area size. It is calculated by dividing the per capita retail sales for a particular locale by the per capita sales for the state. Pull factors can be calculated for total sales and, when the data is available, for several merchandise categories.
For example, say that your town's retail sales in fiscal year 1993 were $16,900 per person. Per eapita retail sales for Iowa were $8,453 in 1993, so the pull factor would be about 2.0 ($16,900 divided by $8,453) The interpretation is that the town is selling to 200 percent of the town population in full-time customer equivalents.
Pull factors are good measures of sales activity because they reflect changes in population, inflation and the state economy. Ken Stone, an extension economist at Iowa State University, has developed these statistics for communities throughout Iowa. Following are average pull factors for several population categories. They are for total retail sales in Iowa towns, fiscal year 1993:
1,000 to l,500 people 0.68
1,501 to 2,000 people 0.74
2,001 to 2,499 people 1.03
2,500 to 2,999 people 1.06
3,000 to 3,999 people 1.06
4,000 to 4,999 people 1.16
5,000 to 6,499 people 1.27
6,500 to 7,999 people 1.17
9,000 to 19,999 people 1.34
For instance, an average town in Iowa with a population of 1,800 people sells to about 74 percent of the town population in full-time customer equivalents. In other words, the equivalent of 1 ,332 consumers are being served on a full-time basis by local retailers. This indicates that some retail dollars are leaving the community. This "leakage" is an amount of money equal to the average retail spending of 468 residents.
It is evident from the pull factors above that larger communities tend to have more "pulling power." Many customers gravitate to larger population centers where there may be more shopping opportunities, greater selection or lower prices. Indeed, it is not unusual for consumers to go outside their hometowns to meet some of their market needs.
Though these statistics may sound depressing for small-town merchants, the numbers are not unusual nor are they reason to abandon economic development efforts. Remember, these are averages. There are many examples of small towns with high pull factors. This may be due to outstanding local service, community spirit or unique products.
There are a few other caveats: don't depend on a single statistic to gauge all business conditions, look at the numbers in historical reference, and make comparisons among similarly-sized towns. If you would like to find out more, you can do a little research at your library, or you can contact your chamber of commerce or economic development organization. You can also get in touch with your ISU Extension county office or ISU community specialist. And if you are interested in economic development, you don't have to shuffle your feet very far. The most vital ingredients are things you can find locally: leadership. commitment and cooperation.
Contacts:
Terry L. Besser, ISU
Extension Sociology, (515) 294-6508
Del Marks, ISU Extension
Communication Systems, (515) 294-9807
