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The Challenges of a Dynamic Retail Market in Kansas

The Challenges of a Dynamic Retail Market in Kansas. Presented By David L. Darling CD Economist And Sandhyarani Patlolla Department of Agricultural Economics Kansas State University Manhattan, Kansas. Community Functions and Assets. Economic Functions. Consumption activity

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The Challenges of a Dynamic Retail Market in Kansas

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  1. The Challenges of a Dynamic Retail Market in Kansas Presented By David L. Darling CD Economist And Sandhyarani Patlolla Department of Agricultural Economics Kansas State University Manhattan, Kansas

  2. Community Functions and Assets

  3. Economic Functions • Consumption activity • Production activity • Investment activity

  4. Sources of Income Communities and functional economic units (regions) rely on three sources of income. 1. Earned Income from the export of products and from the income of commuters. 2. Captured Income from transfer payments, property income, and inheritances. 3. Made Income from the income multiplier effect.

  5. Made Income • In order for the income multiplier to be substantial i.e., 2.00 or greater. • Retail communities must hold on to local trade i.e., minimize leakage, and pull in trade from outside. • This results in pull factor greater than 1.00.

  6. Formula of Income Multiplier (IM) • IM = 1 / (1- (PCL * PSY)) • PCL: The proportion of new, after tax household income, that is spend locally. This can range from 0.3 to 0.90 in Kansas communities. • PSY: The proportion of household income spent locally which remains in the area’s economy to support other households. This usually ranges from 0.25 to 0.65 for non-metropolitan communities.

  7. Counties with high Pull Factors • Johnson: 1.55 (TAC =717,040) • Pottawatomie: 1.44 (TAC = 26,280) • Saline: 1.37 (TAC = 72,618) • Ellis: 1.32 (TAC = 35,517) • Shawnee: 1.20 (TAC = 198,917) • Sedgwick: 1.20 (TAC = 540,860) • Source: The FY 2002 K-State Report #210

  8. Cities of the First Class

  9. Cities of the First Class (cont’d…)

  10. Average % Market Share by Region In Kansas

  11. % Market Share Regional Growth Rate

  12. Model for County Retail Strength • County Retail Strength = f(CB,BP,RE) • Where • CB stands for the customer base served • BP stands for buying the power of the customer base • RE stands for the retail environment

  13. Pull Factor Regression Analyses • Dependent variable: Pull Factor. • Method: Least Squares. • Included observations: 93.

  14. Variable Names, Predicted Values and Description

  15. Pull Factor Regression Analyses (contd…)

  16. Pull Factor Regression Analyses (contd…)

  17. Economic Development Strategies and Resources

  18. Thomas County Example:

  19. Thomas County Retail History

  20. Firm Marketing Choices • Expand market share with the current product line. • Enter a new market with the current product line. • Develop a new product for the current market. • Develop new product and sell in a new market.

  21. Further Research Needed • If retail sales are a derived demand, what do retail sales measure? • Who are the stakeholders in a successful retail community? • Should local governments subsidize it? • Should economic developers spend their time and efforts assisting retail businesses?

  22. Policy Issues • Should retail sales be taxed? • If so, how should we tax Internet and catalogue sales? • Should government subsidize small retail operations the way it subsidizes farm businesses? Why? Why not?

  23. For more information go to: www.agecon.ksu.edu/ddarling

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