2007-07-06 TSUPERSTORES - Laserfiche WebLink

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superstore. You would end up with a large department, retail department store that had a grocery store in it; but you would probably have to cut down the number of individual types of units that, different types of items that you had on the floor. WATANABE:May I make a comment to that. I think the Director probably summarized it best when he said we shouldnt use planning rules to legislate economics, you know, and therefore I was hoping that we could find something that was based more around traffic as opposed to what type of store or what type of items we would try to legislate. And based on that and the information he provided, it seems obvious that supermarkets and probably the amount of items that are for sale are trip generators. And based on that I think then youre still focusing in on the amount of traffic that is generated by a particular store, whether it be a Wal-Mart or whatever. And I think if we stick to that then were being true to what were empowered to do. I really dont think were here to legislate the type of stores. LEE:Onthatparticularpoint,Mr.Chairman,IwouldbringtheCommissioners attention to Exhibit 6 of our written testimony which, Im sorry Exhibit 5 of our written testimony which is an article entitled Trip Generation Characteristics of Free-Standing Discount Superstores. WATANABE:Okay, thank you. Are there any further questions for this? Yes, Mr. Rho. RHO:Im not sure which one Im looking at because they look exactly the same, but I think its mentioned in both. It basically starts on page 4 of 10. Its the last bullet; and then it runs to the next page, page 5 of 10. And it ends with, is now part of a growing number of dead Wal-Marts littering cities. Can you elaborate on that. LEE:Well, I mean, you know, we are simply paraphrasing the conclusion that this particular author came to in studying the impact that Wal-Mart had on particular communities that it opened a superstore in. But I think the point there is that because the sheer size of a Wal-Mart superstore, or any superstore for that matter, and its ability to take advantage of economies of scale and other cost-saving measures that exists when you do business in that magnitude, theyre able to offer prices far below what smaller competitors can achieve. You know, its not uncommon for wholesalers or manufacturers to give volume discounts based on how much you order. The more you order, the cheaper you can buy it for. Therefore, the cheaper you can sell it to your customers and still make a profit. Big Box retailers, superstores operate on extremely thin margins. I mean its no secret that Costco derives a significant percentage of its profits from its membership fees. When businesses are able to maintain those low prices and stay in business, they inevitably will drive out a business, their weaker competitors. And I think that is the phenomenon that occurred here in this study. I think this study is actually attached in full as Exhibit 4 to our written testimony. But the danger is that once the competitors no longer exists, then what will the superstores do? Well, these are profit-driven organizations. This is a publicly-traded company. Publicly-traded companies sole master is the stock value that Wall Street will assign to their shares. And what drives the stock price is their return on their invested capital. And so the more profits they can generate the higher the returns. And thats why ultimately its believed that the perceived cost savings that the consumer will enjoy through a superstore really doesnt exist. 11 EXHIBIT B