Comparisons

If our local communities are going to continue to thrive economically, it is imperative that we change our buying philosophies. It isn’t always about the “deal”.  The added economic benefit of purchasing from small locally owned businesses is truly phenomenal.

Several studies have quantified it. One was conducted in Chicago's Andersonville neighborhood by the firm Civic Economics. The study analyzed ten locally owned restaurants, retail stores, and service providers and compared them with ten national chains competing in the same categories. The study found that spending $100 at one of the neighborhood's independent businesses created $68 in additional local economic activity, while spending $100 at a chain produced only $43 worth of local impact. The difference was due to four factors:

  • Local Payroll— locally owned businesses spent a larger share of their revenue on local labor (29 vs. 23 percent), because they carried out all management functions on-site, rather than at corporate headquarters.
  • Procurement— local retailers spent more than twice as much buying goods and services from other local businesses. They banked locally; hired local accountants, attorneys, designers, and other professionals; advertised in local media; and sourced inventory from local firms.
  • Profits—the small business owners live in the area, a larger portion of the local retailers’ profits stayed within the local economy.
  • Charitable giving— local retailers donated more on average to local charities and community organizations than the chains did.

Added dollars circulating in the local economy translate into a larger number and wider variety of available jobs. The implications of the local premium for how cities approach economic development are significant. Not only do big-box stores eliminate more retail jobs than they create (see the Institute for local Self-Reliance fact-sheet, Impact of Big- Box Stores on Existing Jobs), but they reduce local economic activity and job creation in other sectors. Conversely, expanding local businesses generates substantially greater economic benefits. Please read the reports below for a true understanding of why it is imperative to support the small local businesses.