Shopping shifts to bulk
GYPSUM – Sales tax revenues are up in Gypsum. That’s not exactly a surprise – Costco, the first big-box store downvalley, opened in October.Over in neighboring Eagle, sales tax revenues are also on the rise, although not as dramatically. Meanwhile, no business have closed their doors because of customers lost to Costco. When Costco opened in October , Gypsum’s sales tax receipts jumped nearly 70 percent compared to October of 2005. That trend continued in November with an 83 percent increase; and then in December with a 144 percent jump. Those figures are on target with what the town expected to see when the big box opened.In Eagle, sales tax receipts during the same period increased 10 percent – more than the 7 percent growth estimate in the town budget.”Costco’s opening has had some impact on grocery sales in Eagle, although it has not been a dramatic impact. We still had good quarterly numbers,” says Town Manager Willy Powell. “It’s still a little too early to see Costco’s overall effect on Eagle.”
To some downvalley residents, Costco means shopping closer to home. “You couldn’t buy many of the items carried by Costco in the area before,” says Gypsum Town Manager Jeff Shroll.
From furniture to clothing to pots and pans, he notes that local residents can now spend their money much closer to home. “That’s sales tax money we never would have seen before,” Shroll said. “The customers are very excited we are in town. They don’t have to drive to Denver to do their shopping,” says Ken Wadsworth, Costco store manager. “The convenience of being able to shop here is being very well received.”Just how well is a guarded secret. Citing company policy, Wadsworth declined to share sales numbers or statistics about where the customers are coming from.All he offers is a noncommittal “I’m pleased,” when asked about business figures. But locals who shop at the site talk about seeing unfamiliar faces in the aisles and converging at the check out lane with folks from other parts of the state.”I hear when visiting teams play at Eagle Valley, people want to know what time the game will be over because they want to get in a Costco run,” says Shroll. “And when you aren’t in there for three weeks, its like an all news store because of the way they change things.”A five-minute trip to the store on a busy Saturday afternoon reveals that shoppers are loading up on everything from crab legs to breakfast cereals to pricey electronics.”A couple months ago, I went in to purchase some stuff for the rec center. I thought I had spent a whole lot of money ($4,900) but I got deflated at the checkout because the guy behind me bought an entire pallet of DVD players for a hotel in Vail,” Shroll says.
Costco is definitely packing a marketing wallop, but other local retailers aren’t conceding defeat.”We are very accustomed to competing with Costco. They have a very different format than we do,” says Trail Daugherty, spokesman for City Market. “Most often in a marketplace, most communities are able to support both types of formats.”While noting that new competition does tend to initially hurt existing businesses, Daugherty says City Market intends to stay competitive.”We also believe competition makes each player in the market a little bit better, because you have to be,” he says.Columbine Market in Gypsum recently completed a reorganization that involved bringing more organic and specialty items to the shelves.Performance Automotive’s Jeff Sterkel says his business was initially pinched by Costco.”Right at the beginning, fuel sales dropped considerably. But the majority of that has come back – I would say 90 percent of it,” Sterkel says. “If we made it this far, I think we’ll be just fine.”At Eagle Ranch Wine and Spirits, employees also say the big-box opening has eaten into sales. But it also revealed a cadre of local patrons who elected to keep their business with the neighborhood shop.Peter Struve of Mac’s Liquor in Gypsum says his business has definitely been stung by Costco. January and February were particularly slow at the shop; but business is slowly creeping back upward.”It’s been very painful,” Struve says. “But it’s not like we are going away. We are surviving this battle. Our focus is on consistent customer rapport, knowing our products and having a large variety of just about everything on hand.”Shroll believes the valley’s retail needs are comprehensive enough to include the big box and smaller, locally-owned retailers.”I think shoppers have realized its fairly difficult to do your whole life’s shopping at a large store like Costco,” he says. “I think there was dip for some businesses, but the dip is coming back up.”The months ahead will tell if that dip is deathly deep for smaller retailers.”If we made it this far, I think we’ll be just fine,” Sterkel says.
The opening of Costco has created a substantial sales tax revenue increase in Gypsum, but most of that money is already earmarked.Also, Eagle and Gypsum agreed to a sales tax revenue sharing agreement prior to the arrival of Costco. The two communities agreed to share revenue generated at big-box stores. The theory is that retail development in one town has impacts in the neighboring town, whether it be loss of sales tax revenues or increased traffic.The agreed upon split is 60/40. The town the store is located in takes the larger share.The cost share agreement, however, comes into play after the sales tax rebate Gypsum negotiated with Costco. Under terms of that agreement, for the first three years the town rebates 38 percent of the sales tax generated by Costco, not to exceed $4.2 million. If that amount of money is not rebated in the first few years, the rebate continues for a fourth and fifth year, at a lower percentage.Some sales tax revenues are already dedicated to budgeted items, such as the Gypsum Recreation Center debt, the town hall debt, law enforcement costs and parks and recreation. Of the original $100 used in this example, $83 is spoken for prior to the application of the revenue sharing agreement with Eagle.