AE-04019
ANALYSIS OF RETAIL TRENDS AND TAXABLE SALES FOR
VIAN, OKLAHOMA AND SEQUOYAH COUNTY
Suzette Barta, Extension Assistant, OSU, Stillwater
(405) 744-6186
Susan Trzebiatowski, Student Assistant, OSU, Stillwater
(405) 744-6186
James Yates, Ext. Ed. Agric./4-H and CED, OSU, Sallisaw
(918) 775-4838
Jack Frye, Area Community Development Specialist, OSU, Ada
(580) 332-4100
Mike D. Woods, Extension Economist, OSU, Stillwater
(405) 744-9837
OKLAHOMA COOPERATIVE EXTENSION SERVICE
OKLAHOMA STATE UNIVERSITY
April 2004
Analysis Of Retail Trends And Taxable Sales For
Vian, Oklahoma And Sequoyah County
Suzette BartaSusan TrzebiatowskiMike Woods
Extension AssistantStudent AssistantExtension Economist
Room 527, Ag. HallRoom 527, Ag. HallRoom 514, Ag. Hall
Oklahoma State UniversityOklahoma State UniversityOklahoma State University
Stillwater, OK 74078-6026Stillwater, OK 74078-6026Stillwater, OK 74078-6026
James YatesJack Frye
Ext. Ed., Agric./4-H & CEDArea Ext. Comm. Dev. Specialist
120 E. Chickasaw PO Box 1378
Sallisaw, OK 74955-4655Ada, OK 74821-1378
ABSTRACT
The goal of this paper is to provide an analysis of taxable sales for Vian and Sequoyah County. Basic data is used to provide estimates of trade area capture and pull factors. Reported sales tax data is also used to analyze trends in the county and area.
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ANALYSIS OF RETAIL TRENDS AND TAXABLE SALES FOR
VIAN, OKLAHOMA AND SEQUOYAH COUNTY
INTRODUCTION
Oklahoma communities have been concerned with all aspects of economic development for the past several years. Creating new jobs and additional income is of concern to rural communities and urban areas alike. Often, retailing is viewed as a "service" sector dependent on the "basic" sectors such as oil, manufacturing, and agriculture. Export sectors produce goods and services sold outside the local or regional economy. Service sectors tend to circulate existing local dollars rather than attracting "new" outside dollars. The retail sector is important, though, as retail activity reflects the general health of a local economy. Retail sales also produce sales tax dollars that support municipal service provision. Many local communities are promoting a "shop at home" campaign to keep local retail dollars in the community. It will not be possible to stop all out-of-town spending or sales leakage for a local economy. Opportunities for improvement do frequently exist, however. Key areas can be identified for improvement. Analysis of retail trends can identify emerging trade centers. The following taxable sales analysis has been provided as a service to local leaders of Vian, OK. The specific objectives of the study are:
1.Utilize reported sales tax data to analyze trends in the county and area,
- Provide estimates of trade area capture and market attraction, and
- Provide estimates of market attraction, broken out by SIC code.
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METHODOLOGY AND DATA SOURCES
A trade area analysis model frequently used is "trade area capture." Trade area capture is calculated by dividing the city's retail sales by state per capita retail sales. The figure is adjusted by income differences between the state and relevant local area. The specific equation utilized is:
Where:
TACc=Trade Area Capture by city,
RSc=Retail Sales by city,
RSs=Retail Sales for the state,
Ps=State Population,
PCIc=Per Capita Income by county, and
PCIs=Per Capita Income for the state.
Trade area capture figures incorporate both income and expenditure factors, which may be influencing retail trade trends. An underlying assumption of the trade area capture estimate is that local tastes and preferences are similar to that of the state as a whole. If a trade area capture estimate is larger than city population then two explanations are possible: 1) the city is attracting customers outside its boundaries or 2) residents of the city are spending more than the state average.
Trade area capture figures can be utilized to estimate the amount of sales going to outside consumers. To do this a pull factor, which is a measure of an economy's retail sales gap, is derived using trade area capture figures and city population:
Where:
PFc=City Pull Factor, and
Pc=City Population.
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A pull factor of 1.0 means the city is drawing all its customers from within its boundaries but none from the outside. A pull factor of 1.50 means the city is drawing non-local customers equal to 50 percent of the city population. A pull factor of less than one means the city is not capturing the shoppers within its boundaries or they are spending relatively less than the state average. This is considered leakage of retail sales or a retail sales gap. Additional discussion of trade area capture and pull factors can be found in the references cited in this report (Barta and Woods; Harris; Stone and McConnon; Hustedde, Shatter, and Pulver). The Oklahoma Cooperative Extension Service has been conducting pull factor/gap analysis and sales tax analysis since 1991 (Woods, 1991).
City pull factors and trade area capture figures are calculated for fiscal years 1980 through 2003. Data used were sales tax returns as reported by the Oklahoma Tax Commission. These figures do not include all retail sales (only taxable sales) in an area but provide a proxy. Population data were obtained from the Oklahoma State Data Center and were consistent with figures from the1980, 1990, and 2000 Census. Income figures were taken from Bureau of Economic Analysis estimates for counties. Similar income data for cities were not available so county income was used as a proxy.
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TAXABLE SALES ANALYSIS
Sales tax returns as reported by the Oklahoma Tax Commission for Vian are listed in Table 1 for the fiscal years 1980 to 2003. Sales tax returns are important to a city because they reflect the general health of a local economy and also represent significant revenue for the city budget. In FY 2003, Vian collected over $247,000 in sales tax at a tax rate of 4.00%. Figure 1 plots estimated taxable sales for the same time period in both actual dollars and inflation-adjusted dollars. Sales are estimated from the sales tax returns and the sales tax rate that is reported. The Consumer Price Index is used to adjust for inflation. When taxable sales have been adjusted for inflation, Figure 1 shows that “real” sales have been on a downward trend since about 1998.
Table 2 lists trade area capture figures for Vian from 1980 to 2003. The trade area capture for Vian was at a maximum of 1,674 occurring in 1980. This means that in 1980 Vian “captured” the retail sales of 1,674 persons. The 2003 trade area capture equals 903. Figure 2 presents a graphic of these same trade area capture figures. Trade area for Vian has generally been on a downward trend since 1980, but the decline has been more pronounced since 1998.
Table 3 lists pull factors for Vian for the years 1980 to 2003. The pull factor for Vian ranges from 0.666 to1.100. Recently, these pull factors have tended to be about 0.666. The interpretation is that Vian is not capturing the sales from all the persons within the city's boundaries, and is not attracting additional, non-local shoppers to the economy. In fact, the number of total shoppers is equal to about 66.6% the population of Vian. This does not necessarily mean that non-local shoppers never shop in Vian. What it does imply is that any of this kind of activity is more than offset by out of town shopping by Vian’s own population. This is referred to as outshopping or retail leakage.
Table 3 also shows the pull factors for other cities and towns in Sequoyah County with a reported sales tax. Both Gore and Sallisaw report pull factors in the range from 1.5 to 2.0. Gore is a very small town (population 883) and so probably is not the trade center for the county. Trade center status probably belongs to the county seat, Sallisaw, with a pull factor of 1.939 in 2003. Third in line is Roland, also with pull factors greater than 1.0. Moffett’s pull factors have been on the rise in recent years and currently sit at 0.832. Muldrow and Vian have had similar pull factors over the last decade. Currently, Muldrow’s pull factor is 0.780. Marble City and Gans both posted pull factors less than 0.20 for 2003.
Figure 4 shows pull factors for 460+ cities that have sales tax return information available. The pull factors are presented as a group average by city size. The highest pull factors fall in the size categories 5,001 to 10,000 and 10,001 to 25,000 and 25,001 to 50,000 in population. The smallest pull factors fall in the range for cities less than 1,000 in population. Figure 5 plots Vian’s pull factor compared to other cities with population 1,000-5,000. Over the last two decades, Vian has generally posted pull factors that are above the average for other cities of similar size. This trend has recently changed, and Vian fell below the average starting in 2000.
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Table 1Tax Returns, Vian, Oklahoma, FY 1980-2003
Year / Collections / Tax Rate
1980 / $47,737.83 / 1.00%
1981 / $51,155.95 / 1.00%
1982(11) / $50,776.24 / 1.00%
1982(1) / $8,363.14 / 2.00%
1983 / $108,473.58 / 2.00%
1984 / $122,437.21 / 2.00%
1985 / $126,246.76 / 2.00%
1986 / $126,932.75 / 2.00%
1987 / $131,512.38 / 2.00%
1988 / $127,702.36 / 2.00%
1989 / $129,154.12 / 2.00%
1990 / $123,202.72 / 2.00%
1991(3) / $32,545.51 / 2.00%
1991(9) / $127,910.86 / 3.00%
1992 / $197,065.02 / 3.00%
1993 / $190,937.34 / 3.00%
1994 / $202,776.39 / 3.00%
1995 / $209,362.88 / 3.00%
1996 / $222,930.45 / 3.00%
1997 / $226,663.57 / 3.00%
1998 / $230,053.79 / 3.00%
1999(11) / $211,926.05 / 3.00%
1999(1) / $25,831.93 / 4.00%
2000 / $300,221.01 / 4.00%
2001 / $285,754.81 / 4.00%
2002 / $276,245.44 / 4.00%
2003 / $247,349.00 / 4.00%
(*) Denotes number of months of the fiscal year that sales tax was collected at the tax rate shown.
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Table 2
Trade Area Capture, Vian, Oklahoma,1980-2003
Year / Trade Area Capture / Population
1980 / 1,674 / 1,521
1981 / 1,516 / 1,600
1982 / 1,624 / 1,650
1983 / 1,489 / 1,650
1984 / 1,564 / 1,650
1985 / 1,575 / 1,700
1986 / 1,592 / 1,700
1987 / 1,634 / 1,750
1988 / 1,518 / 1,700
1989 / 1,501 / 1,700
1990 / 1,398 / 1,415
1991 / 1,286 / 1,407
1992 / 1,364 / 1,413
1993 / 1,270 / 1,413
1994 / 1,244 / 1,407
1995 / 1,229 / 1,416
1996 / 1,270 / 1,420
1997 / 1,277 / 1,415
1998 / 1,282 / 1,413
1999 / 1,211 / 1,404
2000 / 1,109 / 1,362
2001 / 1,039 / 1,357
2002* / 1,013 / 1,356
2003* / 903 / 1,356
* Based on 2001 BEA income data.
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Table 3
Pull Factors for Cities and Towns in Sequoyah County
1980-2003
Gans / Gore / Marble City / Moffett / Muldrow / Roland / Sallisaw / Vian1980 / --- / 3.061 / 0.290 / --- / 0.909 / 1.037 / 1.852 / 1.100
1981 / --- / 2.740 / 0.488 / 0.264 / 0.827 / 1.068 / 1.696 / 0.947
1982 / --- / 2.974 / 0.284 / 0.648 / 0.863 / 1.149 / 1.882 / 0.984
1983 / --- / 3.071 / 0.340 / 0.710 / 0.893 / 1.083 / 1.792 / 0.903
1984 / 0.147 / 2.647 / 0.374 / 0.482 / 0.774 / 1.169 / 1.846 / 0.948
1985 / 0.268 / 2.729 / 0.349 / 0.566 / 0.848 / 1.257 / 2.008 / 0.927
1986 / 0.155 / 2.549 / 0.325 / 0.553 / 0.824 / 1.282 / 1.949 / 0.937
1987 / 0.138 / 2.466 / 0.378 / 0.521 / 0.832 / 1.302 / 1.973 / 0.934
1988 / 0.202 / 2.206 / 0.333 / 0.551 / 0.861 / 1.231 / 1.929 / 0.893
1989 / 0.193 / 2.344 / 0.346 / 0.487 / 0.820 / 1.270 / 1.930 / 0.883
1990 / 0.298 / 1.854 / 0.403 / 0.521 / 0.814 / 0.966 / 2.115 / 0.988
1991 / 0.276 / 1.801 / 0.363 / 0.468 / 0.828 / 0.901 / 2.115 / 0.914
1992 / 0.149 / 1.741 / 0.295 / 0.561 / 0.758 / 0.901 / 1.947 / 0.965
1993 / 0.282 / 1.659 / 0.272 / 0.487 / 0.753 / 0.935 / 2.008 / 0.898
1994 / 0.464 / 1.694 / 0.271 / 0.516 / 0.710 / 0.946 / 1.916 / 0.884
1995 / 0.177 / 1.574 / 0.284 / 0.569 / 0.719 / 1.017 / 1.888 / 0.868
1996 / 0.278 / 1.596 / 0.392 / 0.632 / 0.880 / 1.153 / 1.846 / 0.894
1997 / 0.294 / 1.640 / 0.446 / 0.641 / 0.979 / 1.200 / 1.809 / 0.902
1998 / 0.460 / 1.582 / 0.369 / 0.716 / 0.964 / 1.184 / 1.832 / 0.907
1999 / 0.326 / 1.550 / 0.332 / 0.641 / 0.888 / 1.197 / 1.813 / 0.862
2000 / 0.170 / 1.594 / 0.359 / 0.753 / 0.816 / 1.299 / 1.729 / 0.814
2001 / 0.252 / 1.662 / 0.570 / 0.801 / 0.937 / 1.149 / 1.798 / 0.766
2002 / 0.257 / 1.651 / 0.265 / 0.845 / 0.858 / 1.204 / 1.983 / 0.747
2003 / 0.194 / 1.611 / 0.189 / 0.832 / 0.780 / 1.135 / 1.939 / 0.666
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SALES GAP ANALYSIS FOR VIAN, OK
For purposes of this study, a sales gap analysis refers to a pull factor study that has been analyzed by SIC code for the 8 retail sectors. Sales gap coefficients may be interpreted in exactly the same manner as are pull factors. See Table 4 for Vian’s sales gap analysis. Table 5 provides a detailed description of the 8 retail SIC categories.
For Vian’s Building and Gardening Materials, the number of shoppers has decreased from a high of 840 in FY 1998 to 509 in FY 2003. (See top half of Table 4.) Vian's population is about 1,300; thus, in 2003, this sector of the Vian economy was capturing a total number of shoppers that was equal to about 37.4% of the town’s population. (See bottom half of Table 4.)
The category of General Merchandise tends to be dominated by Wal-Mart. Wal-Mart reports all its sales under this category (even though it sells clothing, grocery items, etc. as well). In general, towns that do not have a Wal-Mart will post sales gap coefficients that are less than 1.0 for this category. Vian is no exception to this rule. Vian does not have a Wal-Mart, and their gap coefficient in this category was just 0.075 in FY 2003. The closest Wal-Mart is about 9 miles away in Sallisaw.
Grocery stores in Vian had a gap coefficient of 1.204 in 2003. Consumers tend to appreciate the convenience of shopping for groceries close to home. In addition, most residents outside of the city limits will travel into the local grocery store to shop; consequently, it is common to find that even very small towns post high gap coefficients (over 1.0) for this sector. Vian is no exception, although this value has dropped significantly over the last few years.
SIC category 55 is difficult to interpret because motor vehicle and gasoline sales are exempt from municipal sales tax in Oklahoma. Most of the sales tax collection reported under this category appears to stem from auto parts stores and other retail sales from gas stations. For instance, most gas stations sell snack items, tires, some auto parts, oil, anti-freeze, etc. Sales tax collections for Vian in this category indicate that these types of businesses attracted about 7% of the residents of Vian.
Apparel sales are reported under SIC 56. It is very difficult for small to medium sized towns to post high sales coefficients in the category of apparel. Many small towns have nearly zero sales in this category, and it is common to see sales gap coefficients that are less than 0.10 in these towns. Cities with large malls tend to be the most successful at capturing the market. Vian is no exception capturing just 8 shoppers in FY 2003 for a gap coefficient of 0.006.
SIC 57 reports Furniture and Home Furnishings. Also included are appliance and electronics stores, drapery and floor covering stores, and music stores. This category is often viewed from the perspective that most furniture purchases are made in either Tulsa or Oklahoma City. Oklahoma City, for example, has a large cluster of retail furniture stores centralized in one geographic area. Even so, Vian’s pull factor in this category is an unusually strong 1.072 in FY 2003. According to original sales tax data, this appears to be due to a household appliance store in the city.
Eating and Drinking Places, SIC 58, is one of the most straightforward retail sectors. It contains restaurants and bars. Restaurants and bars in Vian captured 194 customers in FY 2003. Currently, restaurants in Vian tend to attract a number of shoppers that is equal to about 14.3% of the town’s population. This value is down from recent years.
SIC 59, or Miscellaneous Retail, contains a host of retail activity, including pharmacies, florists, liquor stores, and antique stores. These are often the downtown or Main Street merchants. Vian's pull factor in this category was 0.285 for 2003. Note the unusually high number for 2002 in this category. A check of the original sales tax data indicates that some unusual activity did occur in SIC 59 in FY 2002. Sales tax collections in that category totaled $119,763 compared to just $10,522 for 2003. The source of the large collections for 2003 appears to be SIC 5999, Miscellaneous Retail NEC (not elsewhere classified), which contains such establishments as cosmetic stores, hearing aid and artificial limb stores, pet and pet supply stores, art dealers, telephone and typewriter stores, and others. This SIC code collected $113,686 in 2002 but just $2,042 in 2003.
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Table 4
Retail Sales Gap Analysis by Standard Industrial
Classification (SIC) Code, Vian: Fiscal 1998-2003
TRADE AREA CAPTURE / FY 1998 / FY 1999 / FY 2000 / FY 2001 / FY 2002 / FY 2003Building, Gardening & Merchandise (52) / 840 / 525 / 643 / 425 / 429 / 509
General Merchandise (53) / 40 / 49 / 38 / 54 / 88 / 102
Food Stores (54) / 2,950 / 2,428 / 2,825 / 2,514 / 2,357 / 1,637
Automobile Dealers & Gas Stations (55) / 807 / 653 / 560 / 442 / 280 / 98
Apparel & Accessory Stores (56) / 10 / 22 / 21 / 4 / 9 / 8
Furniture & Home Furnishings (57) / 1,801 / 1,321 / 1,828 / 1,582 / 1,573 / 1,458
Eating & Drinking Places (58) / 494 / 407 / 364 / 309 / 480 / 194
Miscellaneous Retail (59) / 382 / 244 / 299 / 308 / 4,417 / 388
SALES GAP COEFFICIENT * / FY 1998 / FY 1999 / FY 2000 / FY 2001 / FY 2002 / FY 2003
Building, Gardening & Merchandise (52) / 0.594 / 0.374 / 0.472 / 0.313 / 0.315 / 0.374
General Merchandise (53) / 0.028 / 0.035 / 0.028 / 0.039 / 0.065 / 0.075
Food Stores (54) / 2.088 / 1.730 / 2.074 / 1.849 / 1.733 / 1.204
Automobile Dealers & Gas Stations (55) / 0.571 / 0.465 / 0.411 / 0.325 / 0.206 / 0.072
Apparel & Accessory Stores (56) / 0.007 / 0.016 / 0.016 / 0.003 / 0.007 / 0.006
Furniture & Home Furnishings (57) / 1.275 / 0.941 / 1.342 / 1.164 / 1.157 / 1.072
Eating & Drinking Places (58) / 0.350 / 0.290 / 0.268 / 0.227 / 0.353 / 0.143
Miscellaneous Retail (59) / 0.270 / 0.174 / 0.220 / 0.227 / 3.248 / 0.285
* For purposes of this paper, when analyzed by SIC code, the pull factor is referred to as the sales gap coefficient
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TABLE 5
TYPES OF BUSINESSES
DESCRIBED BY THE RETAIL SIC CODES
52 Building Materials58 Eating and Drinking Places
Lumber yards including home centers
Paint and wallpaper stores
Glass stores59 Miscellaneous Retail
Hardware storesDrug and proprietary stores
Retail NurseriesLiquor Stores
Lawn and garden supply storesUsed merchandise stores including antique
Mobile Home dealersstores and pawn shops
Sporting goods stores
53 General Merchandise StoresBook stores
Variety storesStationary stores
Department storesJewelry stores
Warehouse clubsHobby, toy, and game shops
General combination merchandise storesCamera and photographic supplies stores
Gifts, novelties and souvenirs
54 Food StoresLuggage and leather goods stores
Grocery stores (Supermarkets)Sewing, needlework, and piece goods stores
Convenience stores both with and without gasolineCatalog and mail order sales (includes e-
Meat and fish markets commerce stores)
Fruit and vegetable marketsVending machine operators and direct selling
Candy, nut and confectionery storesestablishments
Dairy storesFuel oil dealers
Retail BakeriesBottled gas dealers
Florists
55 Automotive Dealers and Gasoline Service StationsTobacco Stores
Motor vehicle dealers (new and used)Newsstands
Tire storesOptical goods stores
Auto supply storesCosmetic stores
Gasoline stationsPet and pet supply stores
Boat dealersHearing aid and artificial limb stores
RV dealersArt dealers
Motorcycle dealersTelephone and typewriter stores
56 Apparel and Accessory Stores
Men and boys apparel
Women’s apparel and accessories
Children and infant’s wear
Family apparel
Shoe stores
Custom tailor and seamstresses
57 Furniture and Home Furnishings Stores
Furniture stores
Floor covering stores
Drapery, curtains and upholstery stores
Pottery and crafts made and sold on site
Household appliance stores
Radio and TV and consumer electronics stores
Computer and computer software stores
Record and prerecorded tapes stores
Musical instruments stores
.
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BUSINESS DEVELOPMENT STRATEGIES
Retail trade trends reflect the overall health of a local economy. All out shopping or sales leakage cannot be stopped. Often, larger economic trends (State-National-Global) overwhelm retail opportunities. There are programs and actions that can assist retail trade activities, however.
Concerned leaders and business persons can focus on business development by forming a business assistance committee to begin implementing some of the assistance activities or working with the existing chamber of commerce. The following activities were in part of a retail trade improvement program. These activities can improve the climate for business and show the community's commitment to support local business.