Chain Reaction

The commercial landscape of Vermont is looking more and more like the rest of the country, as local retailers continue to adjust to their surroundings

by Jim Kelty

With the opening of the Marketplace in 1981, Burlington's Church Street became a pedestrian shopping mall. A backward glance at the east side of Church Street between Bank and College compares today's perspective with the view in 1978.

Thirty years ago when Merchants Bank president Joe Boutin was beginning his career, he worked in downtown Burlington where most of the state's major banks were located within a stone's throw of each other, and all were locally owned. A lot has changed since then.

Today, only two of Vermont's top five banks have local ownership. The other three are controlled by big financial institutions in other parts of the country, and more takeovers are likely in the next few years as banking megamergers push the United States closer to the sort of national banking systems that exist abroad.

In Vermont interstate banking was resisted for a long time, but it finally arrived in the late '80s, accompanied by a great deal of public skepticism. "When the Bank of Boston bought the Bank of Vermont, there was a big outcry that interstate banking was going to strip us of our community banks and that there wouldn't be any community reinvestment," recalls Boutin. "That has tapered off. I haven't heard it of late to any great extent. I think people are just so shell-shocked by so many things becoming national in scope, from their insurance company to their bank to their pharmacy to their grocery store."

Only two of the top five Banks in Vermont Merchants and Chittenden have local ownership. Joe Boutin is president of Merchants Bank.

The economic and commercial landscape of Vermont has undergone a dramatic transition since the days when almost all businesses were locally owned, Boutin points out. "When I started my career, all of the stores on Church Street, with the exception of Kresge's and Woolworth's, were locally owned," he says. "There were four or five men's clothing stores on Church Street aloneNate's, Magrams, Hayes & Carney, Shepard & Hamelle. Now you have one. Downtown has changed dramatically from a retail and commercial mainstream owned by local people to a mini-mall for national chains and local restaurants."

Boutin sees good and bad in the transition. "The bad is that the retail stores don't have the character they did in the past," he says. "But the national ownership has brought more efficiency, so there's a good side of it. If they're well-managed chains, it's providing a good service to the people who are here."

From a banking perspective, however, opportunities for commercial relationships have diminished. "We used to lend money to all those businesses on Church Street," says Boutin. "Now very few of them have local banking relationships. They're just a subsidiary or a branch of a company that's owned and financed by one of the big banks out-of-state. So we've lost opportunities to reinvest money and make money on loans to those businesses."

The debate over local vs. national stores and corporations has been a hot topic in Vermont in recent years. Many towns have fought to preserve their local flavor and discourage the immigration of national names.

Wendy Wilton, area specialist for the Vermont Small Business Development Center, says,"Big boxes may be a concern that gets people emotional, but there are all those other global competitors now coming on pretty strong as well." The arrival of Wal-Mart in Rutland was less controversial than in other Vermont sites. In fact, Wilton says the chain store was the key to the rejuvenation of a decaying downtown.

In Montpelier residents blocked a plan to open a McDonald's, saying the store would bring traffic problems and harm the town's character. In St. Albans a proposal to build a Wal-Mart outside of town met with local opposition and was ultimately blocked by Act 250 over concerns about leapfrog development and the potential long-term ramifications of a suburban big-box retail outlet.

In Chittenden County, a citizens group lost its fight to keep Wal-Mart from building in Williston. The controversial store opened four years ago at Taft Corners, home of several other big-box chains such as Home Depot, Bed Bath & Beyond, Circuit City and Toys 'R' Us.

In Rutland the arrival of Wal-Mart was less controversial. In fact the chain store was the key to the rejuvenation of a decaying downtown. "Wal-Mart has been an advantage to the the mom-and-pop-type shops, the independent retailers, in downtown Rutland," says Wendy Wilton, a counselor for the Vermont Small Business Development Center. "Instead of competing with a big box in some suburban location, they're benefiting from the foot traffic that Wal-Mart draws to the downtown area."

Wilton notes that the Rutland store is not a traditional Wal-Mart but a scaled-down version. "Ten or 12 years ago Rutland had a crumbling downtown, so the city put together a revitalization plan," she says. "Wal-Mart and Price Chopper were the two big retailers brought in to anchor the downtown plaza. Not every independent retailer survived the transition. There were some business owners that really didn't make it. But I think a lot of those businesses were going to go by the wayside whether or not there was a Wal-Mart. Many of the businesses did survive. The successful ones are those that were able to differentiate themselves from Wal-Mart and make use of the new traffic created."

In the greater Burlington area, many locally owned retail businesses continue to thrive despite the influx of the national chains at Taft Corners, the Essex Outlet Fair, the Church Street Marketplace and elsewhere. Hill's True Value Hardware, at the Ethan Allen Shopping Center in Burlington, has been in business since 1957. According to manager George Halnon, the store noticed a blip on its radar screen when Home Depot opened at Taft Corners a few years ago. "We felt a little impact when they first opened and people went up to try them out," says Halnon, an employee of the store for 29 years. "But now we're back and even better than before. We're an old-fashioned hardware store. I think the difference in service, the personal service we provide, is a big factor."

"We're an old-fashioned hardware store," says George Halnon, manager of Hill's True Value Hardware in Burlington. "I think the difference in service, the personal service we provide, is a big factor."

Downtown Burlington has seen the arrival of chains such as Eddie Bauer, Ann Taylor, Urban Outfitters, The Body Shop, Borders, Brooks Pharmacy and, more recently, Filene's and Old Navy. "It's only been in the last five years that national retailers have begun to see Burlington as a viable market," says Ron Redmond, executive director of the Church Street Marketplace. "What has happened here is typical of what's been happening across the country. Not that it's good or bad; it's just kind of interesting. What's on the Marketplace today really are more specialty stores. We are a place for what we call recreational shopping. It's a place where people can experience fun and have a good time, whereas 30 or 40 years ago there were major hardware stores downtown. It was a much different feel. Downtowns have changed in terms of what people can afford to put there."

The downtown areas of American cities are being revitalized, but not necessarily from a retail perspective, says Ed Moore, executive director of the Burlington Business Association. "In Burlington, with the university and the institutions on the hill, with Lake Champlain as the western boundary and the character and the charm and the historic buildings and the theater and the restaurants these are the things that are the vibrancy of the downtown," Moore says. "And retail just complements that."

Moore and Redmond agree that the current mix of national and local establishments downtown benefits everyone. The relatively recent openings of Filene's and Old Navy have increased pedestrian traffic dramatically, they report. "The second Saturday that Old Navy was open," says Redmond, "they had 6,500 customers."

Moore and Redmond also agree that too many chains will spoil the broth. "Locally owned businesses tend to characterize a downtown, and there is a concern that if there's an improper balance with too many nationals, then the downtown will begin to lose its identity," Moore says. "It's an emotional issue. But right now the balance is OK."

"It's only been in the last five years that national retailers have begun to see Burlington as a viable market," says Ron Redmond, executive director of the Church Street Marketplace. "What has happened here is typical of what's been happening across the country."

Currently the Marketplace has 58 retail stores and 21 eating establishments. Forty of the retail stores and all but two of the eateries are locally owned. "We have an interesting mix of nationals and locals," says Redmond. "The nationals have the large footprints. The locals have the small footprints." (Nationals consume about 60 percent of the total square footage on the Marketplace.)

"Maybe people are coming down for Filene's or Old Navy, but they stick around and shop and eat in other places, so it really helps everybody," Redmond says. "And I think for the most part everybody gets that all of the merchants and restaurateurs understand the benefit of having a lot of different, diverse businesses."

Jack Fontaine, owner of the Rusty Scuffer, opened his restaurant on Church Street 28 years ago. "As far as the chain stores go, I really think they're good for Burlington, because obviously they're doing well," says Fontaine. "They're bringing people downtown. Filene's spends a lot of money on advertising you hear them on the radio, see them on TV, in the newspapers. So I think Filene's brings a lot of business down. But we still have to go out and promote ourselves, advertise ourselves, to get people here at the restaurant. I don't count on the Marketplace. If we want to be busy, we have to promote the restaurant, even after 28 years."

Fontaine says his business continues to get better every year but not as a result of the changing face of the Marketplace. "Our business has always been strong," he says. "I don't think the nationals have had any impact one way or the other on our business."

Elizabeth Orr, owner of downtown's Everyday Bookshop, says the arrival of Barnes & Noble and Borders had a tremendous impact on her business. "It's just impossible for me to compete with the big stores, price-wise, volume-wise, and for many other reasons," she says. "They offer discounts I can't offer. For instance, the last Harry Potter book which was selling for $24.95, was on sale everywhereon the Internet, at the big bookstores, plus Costco for $13.95. That was less than I paid for it."

Elizabeth Orr, owner of Burlington's Everyday Bookshop, says the arrival of Barnes & Noble and Borders had a tremendous impact on her business. "It's just impossible for me to compete with the big stores, price-wise, volume-wise, and for many other reasons."

Orr, whose shop was on Church Street for 27 years, moved to College Street in 1997 when the rent in her former building got too high. Since then the amount of daily traffic in her store has dropped by at least 50 percent. "Fortunately I have a sort of built-in clientele that have been very patient with me, and they've kept me going," says Orr. "I think also a good many younger people are beginning to think that perhaps they should be helping smaller companies. They're beginning to not appreciate what the big stores have done to the small, independent people, because I've certainly seen an increase in a lot of younger generation customers."

Chassman & Bem, an independent bookstore on Church Street for many years, went out of business in 1998 with the arrival of Borders. "It was hard enough to compete with Barnes & Noble. There's just not that much business in the town," says Randy Chudnow, the former owner. "Barnes & Noble had 35,000 square feet. Borders comes in with 20,000 square feet. Fifty-five thousand square feet for 120,000 people doesn't make sense. It's just not in the numbers, not even close."

Chudnow, who spent 10 years as chief financial officer for Jordache Enterprises in New York before moving to Vermont, left Burlington about a year ago for a job as CFO at Duty Free Mexico, a distribution company in San Antonio, Texas. Though he enjoyed his time in the Burlington area, he did not care for the changes he witnessed during his six years on Church Street.

"It became the same as going to any mall," he says. "It lost all its uniqueness. Chassman & Bem when I bought it was a unique store, and there were other unique stores around. But the stores, one by one, started changing over to the national chains, and it changed the whole makeup of the street."

"One study has shown that for every $100 that you spend at a big national chain, only $5 stays in the community. For every $100 you spend at a locally owned retail business, $35 stays in the community. Seven times as much money stays in the community and revolves around the community." Paul Bruhn

Chudnow thinks many of the chains will hang around for a while and then jump ship. "The big guys are not going to stay there, because the volume is not there for them," he says. "They will eventually see that, and then Church Street is going to have empty stores. Old Navy will do well, because you've got colleges there, and it's cheap clothing for the kids. But I'm sure you'll see chains moving left and right. I don't think they can make it. I don't think Filene's will ever make it."

Many of the chains on Church Street's top block moved into empty store fronts, notes Tim Halvorson, chairman of the Church Street Marketplace Commission.

Tim Halvorson, owner of Halvorson's Upstreet Cafe, a mainstay on Church Street's top block since the late '70s, says some of the assumptions about national chains are misguided.

"People often make the mistake of saying, 'Well, if there's a national there, it's eating up space that some local ownership can't get into,'" says Halvorson, who is chairman of the Church Street Marketplace Commission. "I just don't think there's a whole lot of people waiting for space to open up on Church Street so they can get into the hardware business or they can all of the sudden get into the clothing business or the shoe business. There just aren't that many people doing it on their own any more. If you want to see what a street would be like without national chains, go to some town on the other side of the lake in the eastern part of New York state where the downtown's got a couple of boarded-up department stores and a couple of liquor stores or something."

Halvorson points out that most of the chains on Church Street's top block such as Eddie Bauer and Ann Taylor moved into empty store fronts.

"The whole national boutique retail thing is something that's kind of new anyway," says Halvorson. "It sort of bubbled up out of the malls of southern California. Most of the ones we have here started out as catalog companies. Banana Republic was one of the first ones to sort of test the water here. I don't think Burlington looks that great demographically as far as a population source, but I think the ones that come here show real good numbers, and that's what brings a lot of the other nationals in. People complain that the nationals don't advertise locally as much, which is true. But it's hard to argue with the drawing power that a Banana Republic has, regardless of whether or not they run an ad in the Free Press."

Nan Patrick, owner of Nan Patrick Crafts & Clothes, fondly recalls the atmosphere of downtown Burlington in 1977, the year she opened her business. "When you have an entire downtown where almost every single business has the owner on the premises," she says, "the community has a completely different feel."


Nan Patrick, who has operated a self-named women's clothing store downtown for 23 years, says the influx of national chains forced her to redesign her business, which is still in the recovery phase.

"First I freaked out, thought I was going to go out of business, you know, all that horrible stuff," Patrick recalls. "Then I took a trip to California, looked at every store in the world, talked to everybody I could talk to, really got out of my own space so I could see what other stores were doing and what was happening and then thought about what I wanted to do differently. So there were things I changed about displays, about the way I price things, the way I merchandise things. Now I put things on sale quicker. I actually ran coupons this year. I had never done that. I thought that was the tackiest thing in the world. It turned out to be very successful."

Patrick says her biggest competitor is Filene's, which opened its doors in November 1999. "They pretty much demolished Christmas season for me that year," she says. "But things settled down, once everybody got used to having a new store around. It was like sand settling in."

Though she feels that many of the nationals do not give enough back to the community, she says adapting to the competition is an inevitable part of the business. "Decades really bring a lot of changes," says Patrick. "You can blame it on the national chains, but if it's not them, it's the Internet or something else. No matter what, something's going to happen to your business. You really can't depend on past performance."

Nonetheless she laments the loss of flavor and sense of community that existed downtown when nearly every business had a local owner. "I really think it's too bad that the nationals have made it more difficult to be an independently owned store on Church Street now because rents are so high," Patrick says. "It's almost like a Disneyland version of a really cute town, instead of a really cute town. I mean, would you rather go to Epcot and visit Franceland or actually go to France?

"There's a certain kind of American that will go abroad and eat at McDonald's, but most us who are going to go somewhere don't want to do that," she continues. "If a tourist comes to downtown Burlington, they've got to think this is a neat place, but I think it's a lot more interesting to walk into a Nan Patrick than a national that you see in every commercial center everywhere."

This year more chains will arrive downtown and elsewhere in Chittenden County with the renovation of Burlington Town Center, formerly Burlington Square Mall, and the opening of Maple Tree Place at Taft Corners.

"If you want to see what a street would be like without national chains, go to some town on the other side of the lake." — Tim Halvorson

Thomas Visser, professor of historic preservation at the University of Vermont, says the trend toward national chains is much like other retail trends of the 20th century. "When we look historically at how businesses come and go in this country, we can see there has been a long pattern of consolidation, of increasing efficiency based on scale of operation which, from a consumer point of view, hopefully provides goods at a lower cost," says Visser. "But that process also can squeeze out much smaller businesses that are not as economically efficient. For example, in the early to mid-20th century there was the shift from small stores, meat markets and bakeries to the supermarket."

"You always have to constantly be looking at new services to provide and just keep an eye on what they're doing," says Bill Forsyth of his big-box competition. "In order to survive you've got to be watching them all the time and adjusting."

One of the down sides of the chain store trend is the decreasing level of reinvestment in the community, says Paul Bruhn, executive director of the Preservation Trust of Vermont, an organization that supports the development of locally owned businesses. If a consumer spends money at a national chain, a certain amount of it will be used to cover employee wages, but the profits leave, Bruhn points out. "One study has shown that for every $100 that you spend at a big national chain, only $5 stays in the community," he says. "For every $100 you spend at a locally owned retail business, $35 stays in the community. Seven times as much money stays in the community and revolves around the community. That has a significant economic impact."

Of course when local businesses such as Lake Champlain Chocolates, Vermont Teddy Bear and Ben & Jerry's grow and prosper and become national players, the reverse occurs, notes Visser. "In other words, Vermonters are able to benefit from ice cream sales in New Mexico," Visser says. "So there's always a balance here, and it's a concern when the balance gets tipped so far in one direction that some of the basic elements of economic sustainability are effectively destroyed. That's something we have to watch very carefully. Do we want to be a state that is completely dependent upon outside interests and outside businesses? Or do we want to have a certain amount of local control over our economic destiny?"

Bill Forsyth, the owner of PhotoGarden, operates film processing and camera shops in three Burlington-area locations including downtown and Taft Corners. Forsyth says competition between nationals and locals is a complex dynamic.

"When Wal-Mart and Home Depot opened in Taft Corners, our business out there actually grew," he says. "Whatever small amount we might have lost to lower pricing we gained back through the increase in automobile traffic. We also started offering photo restoration and copy services and things like that which a big outlet can't do. They really can only do it cheap but not offer the depth of consultation and services that we do. So we went in the direction that I guess you're supposed to go in. But the pressure is sort of relentless. You always have to constantly be looking at new services to provide and continuing to keep the quality up and just keep an eye on what they're doing. In order to survive you've got to be watching them all the time and adjusting.

"National chains are the trend of the future, and it has a lot to do with who we are as a society and the choices we make," Forsyth adds. "It's like any large sociological change. It's fraught with anxiety, and not always pleasant while it's happening."

Originally published in February 2001 Business People-Vermont