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National survey of small businesses shows strong results from ‘buy local’ movements

Articles, Studies and Research  

The Institute for Local Self-Reliance in partnership with the Advocates for Independent Business recently announced the results of their 2015 survey, which showed that independent businesses saw strong sales growth in 2014 as more consumers embraced the “buy local” movement and ditched big companies in favor of supporting local retailers and small-scale producers.   Respondents – which included Portland Buy Local members -reported brisk sales in 2014, with revenue growing 8.1% on average in 2014, up from 5.3% the previous year.

The survey results suggest that the strength of the independent sector is owed partly to an improving economy and partly to the spread of the “buy local” movement.  Businesses located in cities with active Local First campaigns reported sales growth of 9.3%, compared to 4.9% for those elsewhere.  They cited a wide range of direct benefits from these campaigns, with half saying the initiatives had generated new customers and 45% saying they had resulted in more awareness and support among city officials.

“More people are seeking out independent businesses, which we know from academic research is great news for job creation, income growth, and the well-being of communities,” said Stacy Mitchell, senior researcher at ILSR. “Now we need policymakers to step up and create a level playing field to allow locally owned businesses to really thrive.”

Among independent retailers, which comprised about half the sample, revenue increased 5.1% in 2014, versus 2.3% in 2013. Holiday sales at local stores grew too, by an average of 4.8%, beating the performance of many national chains and coming in well ahead of the 0.9% decline in December retail sales reported by the U.S. Department of Commerce.

Despite these gains, independent businesses reported that they still face a decidedly uneven playing field. Nearly three-quarters of the local retailers surveyed said that the fact that many online retailers are not required to collect sales tax had negatively impacted their sales, with 39% describing the level of impact as significant. “As a local business owner with a brick-and-mortar location, we are automatically at a 8.1 percent price disparity because we are required to collect local sales tax,” commented a business owner in Arizona. With Congress failing to pass an e-fairness bill last year, the survey found that a large majority of independent retailers are now backing state legislation to level the playing field.

The survey also found that difficulty accessing credit continues to be a major barrier for new and growing small businesses. Of those who sought a loan in the last two years, 30% said they had been unable to obtain one. Businesses owned by people of color and women fared even worse. Over 44% of minority-owned businesses seeking financing and 35% of those owned by women failed to secure a lender. The survey findings echo federal data that show that bank lending for big businesses is well above its pre-recession peak, while small business lending remains depressed.

Large companies exercising their market power to win better pricing and terms was cited as another key issue, with more than half of independent retailers rating it as a very or extremely significant challenge. Nearly two-thirds of all respondents said they believed government should more vigorously enforce antitrust laws against dominant firms, while only 9 percent opposed increased enforcement.

Several national business groups offered reactions to the survey’s findings:

“This report adds to the evidence that communities and states will enjoy greater success in creating good jobs and increasing net revenues by nurturing community-based entrepreneurs, rather than vying to lure companies from afar,” said Jeff Milchen, co-founder of the American Independent Business Alliance.

“‘Local First’ has changed our cultural narrative, as this report shows,” said Michelle Long, executive director of BALLE (the Business Alliance for Local Living Economies). “But Local First is more than just a catchy slogan. It has reminded us that our purchases impact other human beings.  That there is the possibility of a relationship and real care in our exchanges. If policymakers are serious about fostering an economy that works for more people, they can’t forget that ‘middle class economics’ starts on Main Street with local independent business.”

“Independent businesses are the backbone of communities, and the strong sales growth these businesses see will have a ripple effect, benefitting their communities by keeping the spending local,” said Bill Brunelle of Independent We Stand.

Download the full report from the ILSR site.


New Study: Buying Locally Pays Big Dividends for Maine’s Economy

In the Media, News, News & Events, Studies and Research  

For immediate release

(PORTLAND, Me.) A new study produced by the Maine Center for Economic Policy (MECEP) has found that, on a dollar-for-dollar basis, the local economic impact of independently owned businesses in Portland is significantly greater than that of national chains.  MECEP found that every $100 spent at locally owned businesses contributes an additional $58 to the local economy.  By comparison, $100 spent at a representative national chain store in Portland yields just $33 in local economic impact.

“Jobs are the most pressing issue on everyone’s mind.  Because locally owned businesses keep their profits in the community and are more likely to purchase goods and services from local sources, consumer spending at these businesses has a multiplier effect that increases local economic activity and creates jobs,” said Garrett Martin, Executive Director of MECEP and co-author of the study.

The study finds that changes in consumer spending choices can add up to sizeable economic benefits for the region. Based on 2007 retail sales figures, shifting just 10% of consumer spending in Cumberland County from national chains to locally owned businesses would result in an additional $127 million in economic activity, supporting 874 new jobs and generating over $35 million in wages.

MECEP relied on financial data provided by 28 independent businesses in Portland and information obtained from corporate filings for a representative national chain (Dollar Tree) to model local economic impact. Previous studies of the economic impacts of local businesses in other locales have produced similar findings.

The study was commissioned by the Portland Independent Business & Community Alliance (PIBCA), the nonprofit organization behind Portland’s “Buy Local” campaign.  “Until now, we have had to rely on studies from other states to make the case that choosing locally owned, independent businesses generates significant benefits for our region’s economy.  This study provides compelling data that is specific to Greater Portland,” said Susan Tran, president of PIBCA.

“Not only is Portmanteau a locally owned business, but we make our products right here in the shop,” said Nancy Lawrence, proprietor of the Portland clothing and accessories store. “We provide a lot of added value to the local economy, because so much of the cost of our goods goes to the wages of the artisans, who in turn spend their money in the community.  That’s not the case with national chains, where it’s hard to find anything made in America, much less locally.”

“When a customer gets a movie at Videoport, the majority of what they spend goes directly into the local economy through our payroll, rent, utilities, and local taxes. When they get a movie online, all of what they spend could leave the state,” said Videoport owner Bill Duggan.

“Our success for over 77 years has been built on the strength of supporting and being supported by other local businesses, as well as individuals in our community.   Relationships are built, friends are created and our community flourishes,” said Tom Skelton, president of Maine Hardware.

About MECEP — The Maine Center for Economic Policy was established in 1994 with the mission to promote a sustainable and equitable economy through analyzing and proposing solutions for Maine’s economic and fiscal challenges.

About PIBCA — The Portland Independent Business and Community Alliance, which runs the Portland Buy Local campaign, is a five-year-old nonprofit organization with a membership of over 370 local, independent businesses.


Thinking Outside the Box: A Report on Independent Merchants and the Local Economy

Studies and Research  

by Civic Economics, September 2009

This study examined financial data from 15 locally owned businesses in New Orleans and compared their impact on the local economy to that of an average SuperTarget store. The study found that only 16% of the money spent at a SuperTarget stays in the local economy. In contrast, the local retailers returned more than 32% of their revenue to the local economy.

The primary difference was that the local stores purchase many goods and services from other local businesses, while Target does not. The study concludes that even modest shifts in spending patterns can make a big difference to the local economy. If residents and visitors were to shift 10% of their spending from chains to local businesses, it would generate an additional $235 million a year in local economic activity, creating many new opportunities and jobs.

Likewise, a 10% shift in the opposite direction – less spending at local stores and more at chains – would lead to an economic contraction of the same magnitude. Another noteworthy finding of the study is that locally owned businesses require far less land to produce an equivalent amount of economic activity. The study found that a four-block stretch of Magazine Street, a traditional business district, provides 179,000 square feet of retail space, hosts about 100 individual businesses, and generates $105 million in sales, with $34 million remaining in the local economy.

In contrast, a 179,000-square-foot SuperTarget generates $50 million in annual sales, with just $8 million remaining in the local economy, and requires an additional 300,000 square feet of space for its parking lot. See our New Rules article for more background on this study.

Download the study [pdf]

Local Works: Examining the Impact of Local Business on the West Michigan Economy

Studies and Research  

by Civic Economics, September 2008

This study concludes that if residents of Grand Rapids and surrounding Kent County, Michigan, were to redirect 10 percent of their total spending from chains to locally owned businesses, the result would be $140 million in new economic activity for the region, including 1,600 new jobs and $53 million in additional payroll. The study calculates the market share of independent businesses in four categories: pharmacy (41%), grocery (52%), restaurants (50%), and banks (6%).

It analyzes how much of the money spent at these businesses stays in the area compared to national chains. Local restaurants, for example, return more than 56% of their revenue to the local economy in the form of wages, goods and services purchased locally, profits, and donations. Chain restaurants return only 37%. Measuring the total economic impact of this difference, including indirect and induced activity, the study estimates that $1 million spent at chain restaurants produces about $600,000 in additional local economic activity and supports 10 jobs. Spending $1 million at local restaurants, meanwhile, generates over $900,000 in added local economic activity and supports 15 jobs.

The study also analyzes the economic impact of independent vs. chain businesses on a square footage basis, noting, “In a largely built-out city like Grand Rapids, policy dictates seeking the highest and best use of available properties, and this analysis strongly supports the idea that local firms should be the preferred tenants for city sites.”

Download the study [pdf]

The San Francisco Retail Diversity Study

Studies and Research  

by Civic Economics, May 2007

This study finds that San Francisco remains a stronghold for locally owned businesses, which generate sizable benefits for the city’s economy. The study has three parts. The first calculates market shares for independents and chains in several categories: bookstores, sporting goods stores, toy stores, and casual dining restaurants. In all four categories, independent businesses capture more than half of sales within the city of San Francisco, a much larger share than they have nationally. The second part examines the economic impact of locally owned businesses versus chains.

It finds that local businesses buy more goods and services locally and employ more people locally per unit of sales (because they have no headquarters staff elsewhere). Every $1 million spent at local bookstores, for example, creates $321,000 in additional economic activity in the area, including $119,000 in wages paid to local employees. That same $1 million spent at chain bookstores generates only $188,000 in local economic activity, including $71,000 in local wages. The same was true in the other categories. For every $1 million in sales, independent toy stores create 2.22 local jobs, while chains create just 1.31.

The final part of the study analyzes the impact of a modest shift in consumer spending. If residents were to redirect just 10 percent of their spending from chains to local businesses, that would generate $192 million in additional economic activity in San Francisco and almost 1,300 new jobs.

Download the study [pdf]


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