The Mighty Market
Five billion dollars. And change.
A number like that makes an impression, which is just what it’s supposed to do.
The High Point Market Authority was looking to make a splash last month when it reported the results of an economic impact study by Duke University’s Center on Globalization, Governance & Competitiveness.
“I only wish I had had this last year,” Republican state Rep. John Faircloth of High Point said.
He attended the presentation of the study on the opening day of the fall furniture market Oct. 19 and promised to use the report to argue for continued state support for the twice-yearly business event.
New Gov. Pat McCrory’s proposed 2013-14 state budget initially cut in half the funding provided to help pay for market services, mostly transportation. The move energized market officials, industry leaders and Guilford County politicians, who successfully fought off the decrease. The High Point Market Authority was granted $1.85 million in the final state budget.
“We’re pretty satisfied” with that, the authority’s board chairman, Doug Bassett, said, “and we think we have a commitment to continue at about that level.”
There’s a strong case for it. “The market contributes over $5.39 billion in economic output to the overall regional economy, which includes $1.51 billion of labor income,” the Duke study’s executive summary says. “To put this figure in perspective, the total output of $5.39 billion is approximately equivalent to 1.3 percent of the total gross state product of North Carolina.”
The researchers, led by Lukas Brun of Duke and Bill Lester of UNC-Chapel Hill, measured direct, indirect and induced effects of market-generated economic activity within a 75-mile radius of downtown High Point. They counted money spent by market visitors, the Market Authority and vendors; showroom rents paid to local building owners; and furniture sales generated at the market.
Triad residents who notice market-related activity every April and October easily understand much of the event’s value.
Annual attendance tops 150,000 — a number that Brun and Lester insist is solid. Visitors stay in hotels, eat in restaurants, purchase personal items and spend money in various other ways.
Caterers, florists and a slew of service providers, from musicians to bus drivers, earn extra money.
Significantly, armies of designers and craftsmen set up thousands of showrooms before each market, painting walls, laying carpets, installing lighting and arranging everything to display furniture and accessories in the most attractive ways possible.
High Point also has been successful in leveraging the market to attract more furniture industry “intellectual capital” to locate in the city. An example is Stanley Furniture Co., which this year moved its headquarters from Stanleytown, Va., to downtown High Point.
But the last category — furniture sales generated — is the largest by far and accounts for the greatest difference from previous economic impact studies conducted by UNCG in 2004 and High Point University in 2007, which produced figures of less than $1.5 billion.
“Beyond attracting a large number of visitors from outside the state, the market serves a critical function for the broader furnishings industry and is a key node in the overall furniture industry’s value chain,” the report’s executive summary says.
Bassett, who is also president of Vaughan-Bassett Furniture Co. in Galax, Va. — which is less than 75 miles from High Point — explained in an interview how that economic impact chain works.
From market to factory
Vaughan-Bassett counts about 700 employees and $90 million in annual sales, Bassett said. It makes wooden bedroom furniture and, at last month’s market, introduced product lines from two new divisions — media centers and occasional tables.
The company has about 3,000 customers in the United States and Canada. These are retail operators who buy furniture from manufacturers and sell it in their stores to consumers.
About 1,000 of these customers send representatives to one or both High Point markets each year. Those market contacts produce about 85 percent of Vaughan-Bassett’s sales.
“The High Point market was critical in launching these two new divisions,” Bassett said.
Why? Because furniture is tactile. Retailers could order furniture from a catalogue or website, and many do if they can’t or choose not to attend the market. But retailers are reluctant to place large orders unless they can touch the product — sit in chairs, lie on beds, open drawers, judge how sturdy and well-made it is. Furniture also looks different close-up, in person — think of wood grain — and often carries a distinctive aroma — cedar wood or leather upholstery.
Vaughan-Bassett works hard to encourage customers to attend markets and visit its showroom, especially when it’s presenting new lines. This fall, the effort included personal phone calls to customers beginning the week after Labor Day from company Chairman John Bassett III, Doug Bassett’s father and a new inductee into the American Furniture Hall of Fame.
When customers see the product in the showroom, “20 to 30 percent will write an order on the spot,” Doug Bassett said. Many others will wait, then call in orders anytime from late October to December.
Those orders put Vaughan-Bassett’s plants to work. Because all of that manufacturing occurs and wages are paid within 75 miles of High Point, Brun and Lester count that as economic activity accruing from the market.
Less than 20 percent of all the furniture sold at or because of the market is made within that radius; the rest isn’t counted in the study. But that nearly 20 percent carries a calculated output value of $4.2 billion, the researchers said. It means 26,131 jobs. These numbers include the direct impact — such as Vaughan-Bassett’s sales and payroll for 700 jobs — as well as indirect and induced impacts derived through a multiplier effect universally applied in such studies. The multiplier makes sense. How many other businesses in Galax derive benefits from Vaughan-Bassett’s sales?
Unfortunately, as the study notes, “Guilford County only accounts for a relatively small share of manufacturing within the overall study region.” In fact, Brun and Lester did not break out the economic impact for any particular county. Maybe that’s a project for local economists.
Brun and Lester did come up with numbers for local, state and federal tax revenues. Within Guilford County, including property taxes, sales taxes and others, the take comes to more than $25 million.
Guilford County Tax Department information shows that properties listed under the names Market Square, Showplace and International Home Furnishings Center, which all belong to International Market Centers, are billed for nearly $3 million in county and High Point property taxes in 2013.
The market generates $198 million in federal taxes and $123 million in state taxes. The latter figure represents a 66-to-1 return on the state’s annual investment of less than $2 million in market funding, state Rep. Faircloth noted. It makes his job easier when asking colleagues to continue that support.
The state funding only began about a decade ago when a competing furniture market was established in Las Vegas. This raised a serious danger that set off alarms.
“The reason Las Vegas was able to threaten High Point in the first place was because we were not running a very good market,” Bassett said.
Hotels and restaurants raised prices. Transportation was a problem. There was no entertainment. Because the market was made up of dozens of different showroom buildings, all more or less in competition with each other and some requiring separate passes to enter, visitors didn’t always find a receptive business environment or convenient market experience.
The High Point Market Authority was formed to overcome those problems. Now there’s a central organization to provide market services, including free transportation for visitors from airports, hotels and around market. The authority helps make reservations for lodging, sponsors entertainment events — The Beach Boys performed Oct. 20 — registers all visitors, issues universal passes and, well, markets the market.
In 2011, the market changed dramatically when an investor group purchased the Las Vegas properties and the largest High Point showroom complexes, ensuring an end to direct competition and strengthening the High Point Market’s viability.
But that’s no reason for complacency, Bassett warns. Exhibitors and buyers can still choose to attend the Las Vegas markets in January and August rather than the High Point shows. Furthermore, there are smaller regional, independent markets as well as large emerging shows in Asia and Europe that can draw some of the High Point Market’s thousands of international visitors, who represent about 10 percent of total attendance.
The $5.39 billion of economic impact creates a powerful reason for state and local governments to continue support for the High Point trade show.
It also puts up a huge target. Just as Las Vegas interests were willing to invest hundreds of millions of dollars to grab some of that business from High Point, others anywhere in the world also could be tempted.
Five billion dollars is a prize many cities would love to take, and one this region can’t afford to lose.