by Scott Baumler
Extension Economics Specialist
Iowa State University Extension to Communities
This is the time of year when we reflect on the past, look to the future and contemplate change. When it comes to the business sector, some changes are bright and boisterous, such as the opening of a new mall. Other changes are fairly subtle.
For example, have you noticed how many craft, hobby, game and toy stores we have in Iowa these days? The tally has been growing quietly, but consistently, over the years ~ from 350 in 1976 to 3,844 in 1994. These are not the kind of high-revenue firms we hear about in the national news; it's a bit more subdued.
You could call it the dishwater effect. If you stick your hand in a sink of hot water, you'll immediately pull it back out because of the high temperature. However, if you start with lukewarm water and heat it up slowly, you can end up at a high temperature without really noticing it because the change has been gradual.
In a similar manner, the ranks of craft and hobby stores have grown. Sales for the industry as a whole in Iowa have increased a whopping 333 percent in inflation-adjusted terms over the last 18 years. However, real sales per store have waned. Adjusted for the effects of inflation, sales per firm have thinned more than 60 percent. This seems to indicate a certain degree of market saturation, which sheds light on another creeping change: more small businesses are used to supplement household income or are viewed as investments rather than mainstay occupations. Add to this the fact that franchisers are looking at craft stores as a new venue and the "dishwater" not only changes temperature but also takes on a different hue.
The grocery industry is also experiencing subtle but significant changes. Iowa has roughly 40 percent fewer grocery stores than it did in 1976, but inflation-adjusted sales per store have increased more than 60 percent. This is a sign of consolidation. Per person, Iowans spent about $1,277 in grocery stores in 1994, compared to $1,282 in 1993. This slight, unexpected decline may he an early sign of the effects of competition and shifting consumer habits. For example, discount stores are competing with grocers in lines such as paper products, pet food, health and beauty aids, and snack foods. Also, many people are eating out more often, so restaurant owners are capturing dollars that used to go to grocers for food to be prepared at home.
Automobile rental and storage, and building maintenance are two other industries that have changed considerably over the years. For both business classifications, growth in the number of firms and sales per firm has been robust. Auto rental and storage is now a $55 million industry in Iowa, and building maintenance firms generated nearly $80 million in revenue in 1994.
In looking to the future of retailing, it's important to reiterate the kaleidoscopic nature of the industry. In fact, economic forecasts tend to make weather forecasts look good by comparison. One of the troubles with identifying sizzling business opportunities is that many of the cutting edge industries do not show up in standard government statistics or are thrown into vague classifications like "Miscellaneous Personal Services." In-home health care and fitness training are two vigorous businesses that can show up in this category.
Trade journals and business magazines cite the successes of homebased businesses, such as micro breweries and catering services, as examples of fresh approaches to small business. Tea rooms, digital photography, aromatics, computer support, ethnic foods, environmental consulting, and home decorating are other ventures we're hearing more about but for which we still have little information. Innovators do not fit into a traditional mold, so they set the standard as the industry grows.
Traditional businesses add new products and services as well. For example, a hardware store might sell independent living aids for the elderly, such as replacement door handles that are easier to open than standard door knobs. Not only will they sell the product but might offer to install it as well.
Overall, the state has nearly 96,000 retail businesses working to meet the wants and needs of more than 2.8 million residents. Per capita retail spending is approximately $8,790, and the retail sector is constantly responding to the dynamics of the market to allocate those dollars. We're all part of this dynamic.
Whether change comes about through evolution or revolution, it's bound to come. So the term "entrepreneur" applies to all of us, as consumers, producers and community members. Perhaps, then, the watchword for 1996 should be "adaptability."
Contacts:
Terry L. Besser, ISU
Extension Sociology, (515) 294-6508
Del Marks, ISU Extension
Communication Systems, (515) 294-9807
