Modeling of a flagship store

Hi Urban Economist. In reading your suggested approach for modeling the economic impact of a Flagship store, while that is one approach you could use but it may not be the best approach. It would help us in providing a better response to your Forum Post, if you could tell us something about the average compensation for the 200 retail workers and average compensation for the 150 admin/management workers. We suspect that the later employment group will have compensation values that will be much higher than the former group of retail workers. Differences in compensation levels will likely impact their spending and ultimately the overall impact of the store in the study region. We apologize for the delayed response but feel with the additional information on compensation levels of the two groups, we can better help you in setting up your analysis.

Thanks. That is one of the challenges. I do not have data on wages (the client doesn't feel comfortable releasing it. Given the lack of information, would the best approach be to ignore the admin/management employees and record this as a change in retail (i.e., 200 retail jobs generating $500 million in sales)?

Hi Urban Economist. As we stated in an earlier Post, additional information on compensation levels of the two groups would be most helpful because of differences in how you model the two employment groups. Having said that, one approach as you mentioned with some modification, would be to create two Activities and two Events for Sector 322. For Activity one and Event one you would use the values of $500,000,000 and 200 employees. Activity two and Event two would include the 150 administrative and management employees in a scenario. Sequentially, the process might follow these steps. Steps: 1. Create your IMPLAN model and build through multipliers. 2. Set the default year in user preferences to the year the store will be operational (2015 for example) by navigating to File > User Preferences > Analysis (tab) > and select "2015", then hit the "OK" button. This is just making sure that the Event Year setting matches the Dollar Year for View setting. 3. Create the impact scenario: __Setup Activities > New Activity > (Activity Type) Industry Change....name it “Flagship Retail Employees” and hit the "Save" button. __In the events window: __Choose "Sector" 322 __ Set "Industry Sales" to $500,000,000 (note event year should be 2015 as a result of the user preferences). When you do this, the model will prompt you with a message saying that you have selected a retail trade sector and other information, you should click “OK” to select Gross Retail Sales for the new store. When you select this option, the model will appropriately apply retail margins and your impact results will only show the margined value. The model will then populate the Event fields with employment, employee compensation, and proprietor income estimates. Since you know what the employee level (200) at the store will be, you should overwrite the model estimate of employment with the value of 200 in the field. Also since you know that this is a corporation, we recommend that you should zero out the Proprietor income field and add to the employee compensation value. These actions will sets the event to "custom" and causes red exclamation points to appear. This is what you want. 4. Next, create your second Activity (“Management and Administrative”) and Event for Sector 322 and enter the employment (150) for Management and Administrative in the employment field. Again, the model will populate all remaining fields in the Event. You should zero out the proprietor income and add to the employee compensation value since we know that this is a corporation. 4. Run the analysis: Name the Scenario "Management and Administrative" and choose activity " Management and Administrative." 5. To run a combined impact of both Events, create a third Scenario named “Flagship Store Combo” and select the Activities “Flagship Retail Employees” and “Flagship Management and Administrative” to include in the analysis and run. Now, you have the combined impact of the $500 million in annual sales and 200 retail employees and the impact of 150 management and administrative employees. Again, these results will differ as you get more specific information about the employees and salaries who will be working in the retail store and management and administrative areas. 5. Be sure the dollar year for view is 2015. Please let us know if we can be of further help to you.

Thanks so much for the very detailed answer. I just have a couple questions about the methodology you propose: 1) Actually, this is not by a corporation (it's owned by a family) so I will not zero out the proprietor income and add to the employee compensation value. 2) I am confused why in step 4 the even is recorded as Sector 322 eventhough we know employment is a different category: Admin and management of the chain as opposed to retail operation. 3) isn't this a little bit of double counting since part of the $500 million in sales actually going to be paying for the salaries of the 150 admin and management employees? Thanks again.

Hi Urban Economist. Thanks for clarifying about the owner of this store. I would agree with everything you say in statement #1. In reference to statement #2, the Output of $500 million a year in sales helps to support the salaries of the 200 retail workers and the 150 management and administrative workers for a total labor force of 500 people. So, you would not be double-counting by including the 150 top level positions in your analysis.

Good morning, It's been a while since this post, but if possible, I would like to clarify why I am concerned about double counting with the methodology you propose. When I do step 4 of your proposed methodology and enter 150 employees for sector 322, the industry sales will be automatically calculated as approximately $17 million. so this will increase the direct impacts by an additional $17 million. However, in step 3 we already claimed entered the full $500 million as the industry sales associated with the 200 retail employees. Should I then reduce the $500 million in step 3 to avoid double counting? Also, why should the event in step 4 be in sector 322 if we know these jobs are admin/management (yes they are related to the operations of the store, but they are more corporate-type jobs, such as accounting, marketing, etc. as opposed to retail sales) Thanks for your help e

Hi Urban Economist, We apologize that it has taken us a little while to get back to you. Great questions! IMPLAN is an editable system, so if you have the $500MM of sales in total supporting your 350 employees you will want to make a modification to the Industry Sales so that you have a total of $500MM there are two ways you can about this. [ol] [li]You can keep the general Activity and Event setup as you have it now, but on the second Event, you will set the Industry Sales value to $0.01. This will result in an impact that just looks at compensation for the second Activity and Event, and allows you to leave the Industry Sales the same for the first Event.[/li] [li]You can reduce the value of the first Event and then force the Employment number to match what you know it to be and then let the second Event populate naturally (e.g. Event 1 Industry Sales = $483MM; Event 2 Industry Sales = $17MM[/li] [/ol] In regards to your second question, it is ultimately up to you how you want to model those jobs. The Sector selection is based on all the necessary inputs required to create the operation, so the retail spending pattern for the Sector will be purchasing administrative supplies and materials. Unless you have circumstance where you feel that this particular store has an unusually high administrative spending budget or these 150 employees are functioning out of different office whose purpose is solely administrative, we would typically recommend including all the Employment under the primary operations, since this spending pattern is cumulative of all the operational needs. It may be helpful too to look at the spending pattern for Sector 322, which you can do through the Explore> Social Accounts> Balance Sheet (Tab), and select View By: Industry Balance Sheet and the Commodity Demand tab. You will note that much of the expenditures are what would be considered to be administrative costs, since the spending pattern for a retail store is comprised solely of its actual operational expenditures and does not include the items sold by the store itself. As a final thought, if you use method 1 above, you can actual put the Employment Compensation in any Sector, since the Industry Sales value is what triggers Indirect spending and Industry Sales in that Event is basically nullified (although it cannot be zero)in the second Event. Hopefully this helps! Please let us know if you have any additional questions.