The Benefits of Doing Business Locally
Edit of editorial published in Boulder newspapers
Each year brings more national chains displacing locally-owned businesses
throughout the country. We see clones replace unique establishments. People
across the country are losing sense of community in their town, and consider this
trend a symptom, but could it be a cause as well? Also, what are the impacts of
this trend on our economic well-being?
It seems obvious that we do business where we perceive we receive the best
value for our time and money. Perceptions, however, are not always accurate
when we are lacking some of the essential information for fully informed decisions.
We see and hear the omnipresent ads of corporate chains everyday, but are
collectively under-informed about the many important values independent
businesses provide us individually and as a community. We have begun the
Boulder Independent Business Alliance to address this problem. BIBA is devoted
to creating a thriving local economy based on the independent businesses that
support our community in many ways. Our goal is to provide the community with
essential information about the impacts of where we put our dollars, and then trust
people to choose what's best for themselves. We believe that as fully informed
consumers, we will more often choose to patronize local businesses because it
benefits our community, and ourselves.
Some economists would call the chain encroachment a natural trend. Tough for
the family who owns the small business, but it doesn't really affect the economy.
Overall sales may even go up a little when a chain drives out a small independent,
so what's the problem? The disappearance of local businesses leaves a social
and economic void that is palpable and real — even when it is unmeasured. The
quality of life of a community changes in ways that macroeconomics is slow to
measure, or ignores completely. Let's look at some of the issues BIBA addresses.
1. Building A Strong Local Economy
The giant chains often win a town’s consent to build new stores with promises
of growth and tax revenues. But when communities such as St Albans, VT & New
Paltz, NY performed thorough analyses, they concluded proposed new “big box”
retailers would create economic costs exceeding benefits, (loss of existing jobs
and increased infrastructure demands being the top two) and wisely rejected them
on those grounds. They are among more than 90 communities around the country
to have such foresight in recent years. Their scrutiny inevitably shows that most
income of new chains comes directly from established businesses. For example,
an extensive study of new Wal-Marts by Iowa State University found 84% of sales
simply shifted dollars away from existing local merchants.
It's time to consider the real costs to a community that loses its local business
base. Independent local businesses employs a wide array of supporting services.
They hire architects, designers, cabinet shops, sign makers and contractors for
construction. Opportunities grow for local accountants, insurance brokers,
computer consultants, attorneys, advertising agencies and others to help run it.
Local retailers and distributors also carry a higher percentage of locally-made
goods than the chains, creating more jobs for local producers. In contrast, a new
chain store typically puts in place a clone of other units, eliminates the need for
local planning, and uses a minimum of local goods and services. In a
company-owned store, the profits are promptly exported to corporate
headquarters. These factors lead local independent merchants create a multiplier
effect in the local economy up to five times that of a chain outlet (the multiplier
difference in non-retail businesses is generally lower, but no less important). As we
examine “leakage” of dollars from Boulder, we need to remember that the one-time
sales tax revenue is only one part of the economic picture.
Small manufacturers are also affected since they rely on local retailers to give
their new products a chance. Local retailers are more free to take chances with the
goods of a new manufacturer, or a product that is not part of a national sales plan.
Therefore, small manufacturers and a wide variety of service industries have a
clear stake in the nationwide health of local retailers.
In the larger picture, sales of the 500 largest corporations grew 700% in the past
20 years, yet those corporations are now net disemployers, firing more people than
they hire despite record profits. That our economy is still in decent health is
testimony to the employment generated by small business during this time. We
need to recognize the impact of our dollars and support institutions that benefit our
common interests.
2. Ensuring Choice and Diversity
Retailers sift through competing goods and services to find those that appeal to
their customers. Even though a single local shop may have a smaller selection
than a big chain outlet, a multiplicity of independent retailers creates great
diversity. For example, when 3,000 or so national independent booksellers or
music shops buy for their local customers' tastes, the cumulative effect is demand
for a wide variety of ideas and music. This makes accessible controversial books
or music from new artists with the expectation that there will be a market
somewhere within a variety of stores. As fewer giant corporations dominate both
production and sales, our options - determined by a powerful few – will be
drastically reduced. Our freedom of choice is imperiled when a few buyers from
national chains choose what reaches consumers. This may be only mildly
disturbing for most consumer goods, but truly frightening when you consider the
impact on our choice of news sources, books, music and other modes of
expression.
3. Maintaining Community Character
When asked to name our favorite restaurant, cafe, or shop, we almost always
cite a unique local business (look at the results in any “Best of Boulder” polls as
proof). We embrace the idea of distinctive businesses with local character, but
often forget their survival depends on our patronage. It is easy for us to get so
consumed by efficiency that we forget how much of our lives we spend eating out,
shopping, and doing other business. We owe it to ourselves to consider the quality
of our experience, and ask if we benefit when we choose a community-based
business.
Local owners with much of their life savings invested in their businesses have a
natural interest in the long-term health of the community. Community-based
businesses are essential to charitable endeavors, frequently serving on local
boards, and supporting a variety of causes. Yes, there are some corporate chains
that give back to towns in which they do business, but anyone who raises funds for
local non-profits will tell you that independents are their base of support. Not all
local businesses are models to follow, and corporate chains are not inherently bad,
but the overall impacts are clear: local businesses play a vital role in our community
that corporate chains rarely do, while chains often even undermine community
interests.
Recurring Problems
The loss of local businesses hasn't just resulted from free market economics; it's
had plenty of help. Favoritism from large manufacturers toward corporate chains
such as "promotional allowances" (free advertising), takes different forms, most of
them illegal under anti-trust laws. Enforcement of these laws, created to protect
consumers and communities, is an important step in solving these problems.
Local officials nationwide often fall for the seductions and political appeal of luring
new national chains. They often look at promises of jobs and tax revenues, but fail
to consider the greater losses that occur when the local business base is
undermined. Here in Boulder County, we have numerous examples of tax and
regulatory breaks worth millions used to lure out-of state corporations. Why should
these businesses enjoy favors that our community-based businesses do not? Let's
make future decisions based on full-cost accounting, and create a level (or better)
playing field for local businesses with our policies; the chains already have enough
laws rigged in their favor nationally.
Hope For The Future
For long-term progress, a conceptual change is also necessary. We must
quantify the real needs of local communities in understandable terms, so that the
work of local business people can be valued for its essential role as part of what
holds a community together. Each time we spend a dollar, we must consider the
full value of our choices, and that each dollar is a vote for the future direction of our
community. The votes we cast with our dollars every day influence our community
every bit as much as those on elections days.
Jeff Milchen, B.I.B.A. director
