It turns out that consumer complaint was right.
According to an economic analysis prepared by Civic Economics, a Chicago consulting group, the unmet demand for clothing, electronics, appliances and other general merchandise is huge — $9.1 million. Only in the category of sporting goods, hobby, book and music stores do Homer stores come close to meeting the demand, with an unmet demand of $373,000. The total demand for general merchandise is $19.6 million.
Cunningham said with a demand like that, the impact of Fred Meyer on general merchandise might not be so bad.
“If your place needs the sales and you’re running a deficit like that, it won’t hurt your overall sales,” he said.
It’s a different story for grocery sales, though. The supply for groceries, beverages and health and personal care products is already being met. Of a demand of almost $29.932 million, the supply is $29.910 million, for an unmet demand of just $21,824.
“The market for groceries in Homer will clearly be tightly competitive in the coming years, with an additional 50,000 gross square feet of groceries introduced to this market,” Cunningham wrote.
While new competition, larger selection and lower prices might be attractive to consumers, there’s a downside, Cunningham also notes. Fred Meyer could divert sales of between $16 million and $18 million from other stores.
“(It) makes it unlikely all of the other main competitors will survive in the long run,” he wrote.
Civic Economics prepared its report last August as part of Fred Meyer’s conditional use permit application. Under city of Homer zoning codes for large retail stores, Fred Meyer was required to do an economic analysis of its new store’s impact. Cunningham used economic data provided by ESRI, a geographical information systems company.
Cunningham also looked at the effect of Fred Meyer on the local premium, or that amount of money that stays in a community from retail sales. In Homer, chain grocery stores — Safeway and Save ‘U’ More — are now 84 percent of sales, while Kachemak Wholesale is 16 percent. Sales diverted from Fred Meyer to Safeway and Save ‘U’ More would still be from one chain to another. Civic Economics looked at Fred Meyer’s effect on Kachemak Wholesale and the local premium. For 2005 numbers, it calculated a medium scenario of $2.7 million in grocery sales diverted, with a local premium lost of about $464,000.
For general merchandise, diverted sales would be about $675,000 lost, with a local premium of about $115,000. Together, $3.5 million would be diverted from local stores, with a local premium lost of $579,000.
Civic Economics also did a market basket study, where it compared the prices of a shopping list for 24 items like steak, milk, eggs, coffee, tennis balls, a coffee maker and a charcoal grill. Comparing Safeway and Fred Meyer prices, it found that in general Homer Safeway prices are higher and Soldotna Fred Meyer prices are lower. However, some Safeway prices are competitive, with Safeway having the best local prices for 10 items. The Homer market in general is competitive, Cunningham noted.
“For savvy local shoppers, Homer offers good value close to home,” he wrote.
Michael Armstrong can be reached at michael.armstrong@homernews.com.
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