Shopping Locally: The Resurgence in Locally Owned Independent Business

Across the country communities are looking for ways to stimulate the local economy and reinvigorate business. Many of these communities have adopted Shop Local campaigns. These initiatives go by different names. Sometimes they’re called Shop Local, Buy Local, Stay Local or Local First. Regardless of the name the concept is the same. By encouraging residents to shop and spend their money in locally owned businesses more of the money spent recirculates into the local economy.

The added economic benefit of local stores has been dubbed the “local premium.” 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—The 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—The 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—Because their owners live in the area, a larger portion of the local retailers’ profits stayed within the local economy.
Charitable giving—The local retailers donated more on average to local charities.

Several national organizations have formed in support of local, independently owned businesses. One such organization is the Institute for Local Self-Reliance, a national nonprofit organization founded in 1974 to advance sustainable, equitable, and community-centered economic development through research and educational activities and technical assistance.

The ILSR has developed an informational sheet named “How to Start a Buy Local Campaign“. Included are some early success stories and a getting started guide for a “Buy Local” campaign. The information sheet suggests that the most effective “Buy Local” campaigns are organized by a business alliance of interested independent business owners.

Another national group, the American Independent Business Alliance is a national 501c3 non-profit organization helping communities launch and successfully operate an Independent Business Alliance® (IBA), “buy independent, buy local” campaigns, and other efforts to support community enterprise.

AIMBA has a number of resources available on their website including articles, case studies, and outlines for forming an Independent Business Alliance. One such article, The Benefits of Doing Business Locally, spells out some of the benefits of shopping locally owned versus chain stores.

In support of locally owned independent businesses The Rancho Cordova Post has recently launched an online virtual marketplace at ShopRanchoCordova.com. The new online service provides a free business profile for every local business, the opportunity to create printable coupons, sell gift certificates and even setup a virtual store and sell their products or services with a shopping cart through the online marketplace.

Locals can easily find local businesses to shop, look up store hours and map store locations. Site visitors can even review businesses and create favorites lists in addition to buying local gift certificates and printing coupons. As more business owners claim their free business profiles the Shop Local website will become even more useful.