I just heard a presentation from Michael Shuman (founder of Business Alliance for Local Living Economies) on the value proposition of supporting local business. My first job was in a locally owned toy store in the small town in Massachusetts where I grew up. While it makes intuitive sense to me to try to keep my money in my neighborhood, city, and state, I’ve never actually seen any data on why it’s actually “better.”
According to Shuman, research shows that if you spend a dollar at a local store, on average about 45cents stays in the community. If I spend a dollar at a big box store, only about 13cents stays in the community. Why? Local businesses use other local services, like accountants, lawyers, contractors, etc. They put their advertising money in local radio, newspapers and magazines. Makes sense that more money stays in the nabe, right?
But, thinking and doing = not the same, obviously, so I thought I’d check my own spending and see where it actually shakes out. Conveniently, I use a money tracking website called LearnVest to plan my finances and watch my budget, so it was relatively easy to go back and add up all the local dollars I spent and weigh it against my total budget. For simplicity’s sake, I just looked at my expenditures in the month of April. Here’s how it shook out:
Now, to be fair, my rent is to a local realtor and that’s a big chunk of my income. If you pull the whole expenditure out of the equation, then I only spend 61% of my money locally.
A note on methodology: What do I mean by “local” anyway? Obviously, any one-location store that is not owned by a national parent company counts. Big box chains are not local. Comcast is not local. It gets a little tricky with franchises, because many individual locations are owned locally, but answer to a national management structure. I do not count these as local for my purposes, because their expenses are usually handled by headquarters and consequently don’t get poured back into the neighborhood.
When I traveled and bought items outside of my city, I counted that as local if I was supporting the local economies of my destination. I.e. the bodega on the corner = local; the Hyatt, Hudson News, and CVS do not.
A few observations:
- About half of what I donate is to local organizations, and about half to national ones. Huh. That surprised me.
- 84% of my “entertainment” budget is local, between independent bookstores and theaters. Only the AMC franchise seems to do me in.
- 96% of my (ridiculously high. Oof.) restaurant budget was at local restaurants. I live in a foodie town, so that makes me happy. Why would I eat at chain restaurants when I could eat at any of the 10,000 local restaurants in Chicago? TGI Friday’s always tastes like TGI Friday’s….
- Clothes is the toughest category to do locally, because the boutiques in my area are much more expensive than what I’m prepared to pay for a t-shirt. My jeans are from the Gap, my tank tops are from Target. I could find a shop that locally sources denim, but that seems extreme. My compromise here is that I buy about half of my clothes from a secondhand shop, and I donate all my unused clothes back to Goodwill.
- Second to clothes, housewares and home stuff is almost exclusively bought from big box stores like Target, Home Depot, Walgreens, and Bed, Bath and Beyond. While I’m happy to pay slightly more for a book at a bookstore I like, lightbulbs don’t carry any sentimental value and so I’m hardpressed to go out of my way to find a local hardware store. Oh wait, there’s one across the street…
So what next? Where can I improve?
- Go to the local hardware store. Only head to Home Depot if my guy doesn’t have what I need.
- Groceries were one of my tougher categories. It’s farmer’s market season. That means I can start buying produce, bread, and cheese locally instead of at a chain grocery store.
- I buy a lot of wine, so I might as well get that at local liquor stores too.
Small changes, right? They say that if everyone shifted 10% of their budget locally, it would be massive, nation-wide community improvement. I think I can handle that.
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