One of the Leadership Madison groups has released results and recommendations from its fall 2010 Buy Local survey—well, sort of. We get the press-filtered version from LAIC hired writer Emmeline Elliott, but when I check the Leadership Madison webpage, I can't find any links to the original data.
The Leadership Madison group conducted this survey last fall. They got 295 responses, 220 of them online (you're welcome!). One stunning result: 58% of respondents said they make the majority of their purchases in Sioux Falls. Only 37 % said they make a majority of their purchases here in Madison.
Group member David Anderson comes to this conclusion: "There is very much a willingness and desire to shop locally [true!]. The consumers just need to be educated on what's available here in town [false!]."
Oh my. That second line sounds like the perennial mindset of Madison's leaders: We're right! People just don't know how right we are! That mindset says the status quo is great and that we just need to put up more signs and banners celebrating the status quo. And indeed, one of the innovations developed by the Leadership Madison group is a "Buy Local" sticker that local shop owners can place in their windows.
Reality check: you're a business owner on Main Street. You put a sticker in your window. Who's going to see it? Unless it's a really big sticker, probably only people who are already walking into your store and giving you the chance to make the sale. Who's not going to see it? The people you're targeting, the folks taking off on Highway 34 and not even driving by your window. Unless you're planning to go out in the middle of the night and slap these stickers on shoppers' cars (with coupons attached?), the sticker project is nothing but window dressing.
Permit me to hazard the radical suggestion that Madison's consumers are already plenty educated. They're working hard for low wages in Madison, or they're spending two hours a day on the road seeking better pay in Brookings or Sioux Falls. They're looking out for every opportunity to get value for their dollars. And a majority of them are finding more value for their dollar elsewhere.
Let's be capitalists for a moment. The solution isn't "education" (a.k.a. advertising). It's competition.
Want to do real education? Buy every local business owner a copy of Michael Porter's Competitive Advantage. Porter says there are two basic ways to compete: lead on cost or differentiate your product or service. Porter apparently didn't make Leadership Madison's reading list, since none of the recommendations in Elliott's report address these two basic strategies:
- "If a specific item is not in stock, Anderson suggested asking local vendors to order that item." Not differentiating or lowering cost, since I can do that myself at home via Amazon.com and have UPS deliver to my door rather than having to trouble a local middleman and make another trip to the store.
- Create an online presence: not differentiating, still playing catch-up.
- Stay open later: not helping cost (paying workers for more hours), not differentiating (just as easy to stop at Sioux Falls store on way home).
- Price-match guarantees: still not leading on cost, and probably not sustainable, since it inherently costs more to truck smaller quantities the extra fifty miles from the Sioux Falls transport hub to little old Madison.
Who is competing in Madison?
Sunshine Foods started out the list of top ten local businesses frequented most often by area consumers, followed by Lewis Drug, Pamida, the collection of dollar stores, Dairy Queen, Campbell's Supply, El Vaquero, Stan's, Pizza Ranch and Sportsman's Steakhouse and McDonald's tying for tenth [Emmeline Elliott, "Buy Local Survey Results Show Need for Education," Madison Daily Leader, 2011.04.08].
Now of course the only grocery store in town will make the top of the list: everybody needs milk and beans every week. The more instructive examples come from the restaurant roster, one of the few markets in which there is real local competition.
This survey says Dairy Queen gets the most local business. DQ isn't a cost leader; we spend about as much there on a family meal as we would at other fast-food places, and the McDonald's dollar menu puts a plain burger or chicken sandwich in my tummy for less than comparable products at DQ. But Madison's DQ wins on differentiation in products (Blizzards, ice cream cakes), service (DeLon Mork has sustained a distinct shop culture unmatched by anyone else in the local food market), and community engagement.
The number two restaurant in Madison is even more instructive: El Vaquero. Rigoberto Aguirre set up shop in an old café on the edge of the creek, a building the Second Street Diner abandoned in favor of new construction down the road in the glittering (and taxpayer-subsidized) Schaefer Plaza. Aguirre sought differentiation with a huge Mexican menu. He installed furniture that looks like nothing else in Madison. His waitresses (and sometimes Rigoberto himself) carry out fiery plates of sizzling fajitas, a taste and sound no other local diner offers (please, don't even think of comparing Rigoberto's food to the product at Taco John's). El Vaquero wins on differentiation and pushes for cost leadership: you can sit your friends down for Mexican entrees at El Vaquero for about the price you'd pay for run-of-the-mill burgers and fries at Madison's other sit-down restaurants.
I don't think El Vaquero is doing anything on Leadership Madison's recommendation list. I can't find a website or Facebook page for the restaurant. I don't see a lot of ads for them. That doesn't mean such efforts wouldn't help (and if Rigoberto goes there, look out, DeLon!).
But Rigoberto Aguirre just bangs away at differentiation and cost... and wins clear competitive advantage in the Madison market. After just a few years, El Vaquero makes Madison's top-ten business list. Second Street Diner doesn't. Neither does Nicky's, a much longer-standing restaurant that probably advertises more and gets more press by hosting club meetings and other events.
El Vaquero and Dairy Queen show that the solution to Madison's business needs is not consumer education. It's competition. Differentiate your product. Lead on cost. And hustle, hustle, hustle.
Bonus Business Observations:
- Speaking of competition, the Leadership Madison survey asked "What type of new business/service/product would you most like to see in Madison?" Interestingly, the press report does not discuss the results of this question. Does the Chamber not want to talk about bringing in new competition? Perhaps the Chamber just couldn't bear to confirm the Madville Times survey finding that a plurality of us want a second grocery store.
- Elliott writes, "Group member Amy Townsend said the LAIC will be in charge of further action on the campaign." Translation: there will be no further action (see also Main Street and More).
Excellent advice and article. Does this same advice apply to the Madison school board?
Thank you, Senator! And that's a good question. How would you apply this advice to a school board/district? If you're talking about how Madison Central can reverse its negative net open enrollment, Porter's advice may not apply perfectly, since our local "customers" (parents and students) pay the same in taxes whether they enroll in Madison or send their kids out to Rutland, Chester, etc. K-12 schools don't compete with each other on price (although Madison already has one of the lowest per-student spending amounts in the state). We would need to compete on differentiation: more AP classes, more extracurriculars, opportunities kids can't find elsewhere. We can also differentiate by quality, trying to hire the best teachers and offer the best, most rigorous education.
When Leadership Madison says people need to be educated as to what's available, it leans in the direction of advertising and promotion. Madison is one of those easy advertising markets with one local radio station and one daily newspaper. Each business has to ask themselves what they are spending in traditional marketing/advertising for the age 35+ demographic, but also figure out ways to reach the techno-generation of age 35 and younger, who don't subscribe to a newspaper or listen to traditional radio and get much of their information online. Your individual promotional budget is directly related to your bottom line sales. If sales are slower than you'd like, promote your profit centers.
Food in Madison proves the books point that businesses must differentiate themselves by price or product to win and thus provide value to the buyers. You are right DQ in Madison has found a way thru differentiation to provide value to the buyers. Wal-Mart has found a way thru low price also to provide a value. We agree.
Cory, it has also been my experience that the buyer gets less when there is limited or no completion in the market
Let’s look at a few markets that the buyers are unable to reward the sellers who deliver value.
Imagine if Second Street diner received a payment from the government of $10 per diner. Dairy Queen would be unable to continue to deliver their product at the same level and the buyer would suffer.
Education in South Dakota: Not all sellers are allowed to compete on a level playing field. For example, if I want to send my child to O’Gorman it cost about $4,000. It I want to send my child to Lincoln High School it cost zero. Washington HS can compete against Lincoln, but O’Gorman is handicapped.
This is a distorted market. Distorted markets produce less and cost more.
Another factor perhaps not the leading one is that shopping is all about the destination. What kind of experience, service, fun things to do or see? If most people admit to themselves, it costs money in terms of time, gas, and car expense to travel out of town. In many cases the expense is greater than the savings-so there must be another reason? Again the experience. My short list would include another grocery outlet with a focus on local food---Carper farm produce, ????? beef, pork, and poultry, etc. New movie theatre(if they build it we need to attend),roller skating rink within walking, biking distance for kids. With that said, I as a farmer is so thankful for the great service here in the Lake County area. We have two great machinery dealers, 2 vet clinics several outlets for bulk fuel and tires, great vehicle service centers, and the list goes on. We are very fortunate in that regard. Most areas don't have that kind of help.
Oh my. Senator Novstrup, I had hoped we wouldn't be going down that rhetorical road. Your point might have more validity if education were merely a business. An education system funded entirely by individual parents paying thousands of dollars in tuition would only worsen the inequality in educational outcomes and income that our property-tax-based system already produces to a larger extent than most other industrialized nations. The state constitution does not call for a free-market based private school system. It obliges us as a community to provide free schooling for all children who need it. What you call an unwelcome market distortion our state constitution deems a moral obligation for the maintenance of democracy.
Charlie, excellent point about the desire for experience as part of the value equation. You list a number of good experiences Madison could develop and pile on top of our retail to make our county a destination. Just curious: you give a good list of the ag-related goods and services available to your industry; might the farm retail sector do more business proportionately here at home than the typical shopper?
When my bride and I learned that Madison had a real Mexican restaurant we couldn't resist trying it out. El Vaquero is a local gem with great decor, great food and great prices it's worth a stop for anyone traveling on SD34.
In order to differentiate a second grocery store could have a great produce section carrying a variety of stuff not carried at Sunshine, maybe carry ethnic spices and ingredients, or have a meat counter with locally grown meats and a variety of locally made sausages. Differentiate on price by selling stuff in bulk. Sugar is sugar.
Cory, You misinterpreted by post. I am not in favor of an educational system funded by individual parents. As you mentioned the Constitution places a duty to provide for education to the taxpayers of the state. Common sense also tells us we need educated citizens to maintain our prosperity and happiness. Once again we agree.
I was agreeing with the books theory that sellers need to produce the best value or the independent buyer will buy the product elsewhere. This is the beauty of the free enterprise. If you are satisfied as a buyer getting less than the best value (value is not price) then restrict the competition. That is what we have done in education. Open enrollment is a great step forward in allowing the schools to produce a great product at a fair price. The next step for quality education is to allow all schools to compete for the taxpayer’s money.
If Bill Gates wanted to build a world class school in Madison but demanded a private public partnership would you support the concept? So Bill Gates donates $50 million dollars to build a high tech, high quality school but would only do so if the taxpayer of SD continued to pay their $4,500 in per student allocation. Mr. Gates would then add to per student allocation if he deemed it helpful for quality education. Would you support this?
For those of you unfamiliar with it, South Dakota's constitution, Article 8, Section 1, reads as follows:
The stability of a republican form of government depending on the morality and intelligence of the people, it shall be the duty of the Legislature to establish and maintain a general and uniform system of public schools wherein tuition shall be without charge, and equally open to all; and to adopt all suitable means to secure to the people the advantages and opportunities of education.
If Mr. Gates's demand for a public-private partnership hindered the ability of the taxpayers to provide money for the maintenance of the "general and uniform system of public schools" demanded by our constitution, no, I would not. The public school belongs to us. We guarantee it remains free and open to everyone. The odd hypothetical you propose opens the door to make our system even less uniform, as districts then start competing for angel donors, and the districts with fewer connections, less marketing savvy, or just less luck end up left behind.
Free enterprise is wonderful for many things. It is not wonderful for education, and it is unlikely to provide educational services of equal quality for all South Dakotans (even if we cleared the public system out of the way, who could make a profit opening a private school in Howard, or Eureka, or Edgemont?). Your point seems to be somewhat like saying it's unfair to have city police departments operating on taxpayer dollars and leaving private security firms at a disadvantage. Should we level that playing field as well by giving citizens cop vouchers and letting them either pay their local police department, call Rent-a-Cop, or buy a pistol? Do you think such a cop-voucher system would provide better public protection than the current public police forces in South Dakota?
I am curious, Senator: are you advocating a straight voucher system? Hand the current per-student allocation to parents, let them spend it where they wish? And if you pass that plan next year, how long will it take for private schools to rush in to every one of our 150+ school districts and provide sufficient competition to make the plan worthwhile?
Al is a good guy and I enjoy him. He should work on his consensus building skills though.
Personally I think other than Al Novstrup and Dennert Brown County has some of the least qualified legislators in the state when it comes to areas of population. Not because they are bad people but because they lack skill to do much for their area of the state. (Fiekert has potential and is a good guy)
Joe Barnett, Lars Herseth etc were extremely influential politicians in their day. I'd like to see Aberdeen and Brown County get back to the great ones. I'm of the belief they haven't had good representation since Sutton left.
Elaine Elliot doesn't show up too much
David Novstrup might aswell not show up since he is so quiet
Hundstad is interesting
So I'm willing to give the other 3 a pass because at least Al advocates something and Dennert is respected and Fiekert is new and respected.
The Aberdeen area deserves better. Look at what District 23 is doing this session with Hoffman, Brown and Cronin!!!!!!! Now that is power.
SF and Rapid are very strong but that is because they are so populated.
A straight voucher system would not be unconstitutional. The state would still be providing the same money for education, but the parents would have the option of how they wished it to be spent. It isn't such a problem in SD, but for inner city kids and failing school systems, it could save countless kids by enabling them to get a good education (think DC and how the vouchers were giving a few kids hope until Obama got rid of that program, while of course sending his own daughters to a private school).
And when I read the above quote from our constitution, it only mentions education. It doesn't mention all the added responsibilities that have been thrust upon the school system that actually belong with the parents, church, and community to provide.
Cory,
When it comes to local spending by ag producers, I believe they are very loyal to local suppliers. They get good reliable service. Farmers don't have time to be running extra miles to be chasing an item they need. It would be wasting dollars to save a few pennies-poor management in my estimation. I try not to shop the big box stores-Campbell Supply, Pro-Build, and other places in the madison area fit the bill. I will not step inside a Wal-Mart. I have been known to sit in the car out in the parking lot rather than adventure in. Places like that are a cancer on rural America.
My only problem with "buy local" is what I'm being offered. The first ten years I lived here I shopped local with a vengeance, willingly paying higher prices in order to support my local stores. And then one day I finally got tired of (1) "Nah, we're not going to get that for you - you're the only one who wants it" (this was exotic foods like feta cheese, folks); (2) skyrocketing prices that made a trip to Sioux Falls worth it; (3) fewer and fewer things being offered that I need or want. When the only place to buy shoes or underwear is Pamida, and there is no place to buy thread, I'm going to Sioux Falls, and while I'm there, I might as well stop at Hy-Vee. I think when the original Ben Franklin's and J. C. Penny's closed, it gutted downtown. You want people to shop here? Then practice the free-market capitalism that's always being preached, and let in more stores so that there is some more stuff to buy. But from what I've seen over the last 20 years, the dirty little secret is that our business community is afraid of competition, because they don't want to lose their stranglehold over the Madison consumer. I've heard people say that at least the rising gas prices will keep people in Madison - no, they won't. We'll car pool, or send people down with lists and cash.
Charlie-
Big box or mom and pop stores are the same. They are middlemen that get goods from producers to consumers. The only thing that mom and pop stores could add would be some level of knowledge service. However, with the rise of the internet, you get better and faster advice by simply looking online. Technology has removed the only competitive advantage mom and pop stores had going for them. Artificially supporting them by "shopping local" is a pointless endeavor.
And, we shouldn't really miss their loss. These people don't produce anything. They simply tax the transfer of goods from the producers to the consumers.
Tony,
Disagree with everything you have said. Losing a local vendor is a major loss. Besides Mom and Pop as you call them don't use strong arm tactics on their suppliers like Wal-Mart. If when, how, and where always support your local supplier. As a farmer that is important. Miles and time spent chasing after items is not worth it. My operation demands that you be on the go when the going gets going.
I still buy from a small lumber store if at all possible. The wood is so much better than most other places.
Look what Blockbuster did to the small video store a decade or two ago and now look what Netflix, Redbox and iTunes are doing to Blockbuster...
"The times they are a changin'"
I suspect too many Madison business people assume they can charge more for less because they are local. The attitude here in Winner by too many businessmen is "You can't drive that far to just save $X dollars." Which is too often followed by comments and looks that suggest, "Do you really want us to take your GD money?"
Towns can draw a circle around themselves 1/2 way between them and other market centers. If the same products are available, the part of the population past they half way mark is going to go elsewhere if price is significantly better and service and knowledge is equivalent.
That said, any businessman or store worker who tries harder deserves our support. They also need to be aware that search engines can give a really quick idea if a local business is charging far too much. That is a threat and I suspect also part of the motive behind the ill-conceived intrusive nternet sales tax.