Wednesday, March 12, 2008

Think Local First

50 % of this country’s GDP is generated by small businesses. By small business I mean your local retailer, restauranteur, plumber, electrician, graphic designer, architect et al make a significant contribution to our countries economy. You might say where the small business goes, so goes the country.

Now I have no truck with the big box stores, such as Wal-Mart, Costco, Home Depot, Ikea and the like. I believe they provide a useful service to the consumer. Particularly in the case of stores like Wal-Mart where folks from lower income levels have access to goods and services they wouldn’t otherwise be able to afford.

So this isn’t a slam against them. What I’m trying to point out to you Dear Reader is your impact on the economy where you live when you decide to purchase goods and services. You may not realize this but when you purchase that latte from Starbucks or those jeans from the Gap at the local mall, most of the revenue from that purchase is leaving the local economy. Sure, when you purchase from these establishments they can continue to pay their employees who in turn spend their money locally, however most of the revenue is returned to the parent organization to cover overhead and contribute to the corporate bottom line. Furthermore, many of these companies make the decision (wisely) to incorporate in tax friendly states (Nevada or New Hampshire) or in the case of trans-national companies incorporate in countries with little or no tax laws such as Bermuda. I know because I used to work for one. So not only is most of the money you spent leaving your neighborhood, the state and the country lose in taxes the company would otherwise pay on their profits.

Surveys have shown conclusively that when you purchase from locally owned businesses more money is fed back to the local economy. A 2002 case study in Austin Texas showed that for every $100 in consumer spending at a national bookstore in Austin the local economic impact was only $13. The same amount spent at locally based bookstores yielded $45, or more than three times the local economic impact. (Civic Economics, “Austin Unchained” October 2003).

A 2003 case study of Midcoast Maine covering several lines of goods and services validated these findings. In Maine eight locally owned businesses were surveyed. The survey found that the businesses spent 44.6 percent of their revenue with the surrounding two counties. Another 8.7 percent was spent elsewhere in the state of Maine. The four largest components of this local spending were: wages and benefits paid to local employees; goods and services purchased from other local businesses; profits that accrued to local owners and taxes paid to local and state government… The study estimated that a big box retailer returns just 14.1 percent of its revenue to the local economy, mostly in the form of payroll. The rest leaves the state, flowing to out-of-state suppliers and back to corporate headquarters. (The Economic Impact of Locally Business vs. Chains: A Case Study in Midcoast Maine – New Rules Project, September 2003).

In this case study in Andersonville – a hamlet outside of Chicago Illinois – they found that for every $100 spent in a locally owned business, $68 dollars remained in the Chicago area.

So what is a locally owned business? The Business Alliance for Local Living Economies recommends you ask these five questions:

1. Is the business privately held (not publicly traded)?
2. Do the business owners, totaling greater than 50% of the business ownership, live in your local region?
3. Is the business registered in your state, with no corporate or national headquarters outside your region?
4. Can the business make independent decisions regarding the name and look of the business, as well as all business purchasing, practices and distribution?
5. Does the business pay all its own rent, marketing expenses, and other expenses (without assistance from a corporate headquarters)?

If the answer to all these questions is in the affirmative, then that business is locally owned.

You’ve probably figured out by now that I’m not entirely altruistic here. We want you to shop at Che Bella and Nido whenever you’re in the need of the best in florals or that perfect gift. But if you can’t make to Little Italy, please consider using someone local, I know he or she will appreciate it, we certainly do. Consider it giving a little somethin’ somethin’ back to the community.


fineflowers said...

I really enjoyed this article I had no idea! So no more Amazon for me – I usually buy from my bookstore but from time to time from Amazon. I buy almost everything else from local people.

Anonymous said...

A+ for style and content, and as you already know I agree with you 100%. I hope that your readers not only read by practice what is being preached. Regretfully we are in a time when purchase decisions both locally and nationally are made with little consideration of the ultimate economic impact. We are now seeing in the headlines where the Air Force thru the Pentagon has elected to spend some 20 billion dollars on new aircraft that will for the most part be made and assembled in France where the company receives a large array of tax breaks and government subsidies which then places them in a grossly unfair advantage when competing against a domestic company like Boeing. We’ve seen it in San Diego when they use Architect and Contractors who are located outside our area for multimillion dollar projects.

Regretfully we have created a culture when as citizens we have personal needs (medical, protection, financial) we expect to get help from someone in the local community but when we have “wants” we will without a second though send our support/dollars all over the world with little though for the local community.

I think what surprises me most is that the old neighborhood families and business owners who have profited handsomely in greatly inflated property values and increased customer traffic do little to support the retail businesses that have ultimately paid the price with capital risk and relentless hours of hard work. The local restaurant owners never stop and think that the local retailers refer them thousands of customers in a year, I know that is true for us. Where is the reciprocity?

And the greatest disappointment remains the lack of support by most members of the LIA Board who profess such dedication and commitment to the “neighborhood”. I honestly can only remember a very few times when one of them came in for a birthday or holiday gift or for an item for their home.

I hope you have not wasted your time and in the mean time I am grateful for the tourist and others who are willing to drive down to Little Italy and patient enough to find a parking spot.