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Shopping Local vs. Shopping Locally

Written by Nickel - 11 Comments

The Ethics of Saving Money

Do you make a point of shopping locally? What about shopping local? While they might sound same, there’s an important distinction — at least in my mind. When I say “shop locally,” I’m referring to the practice of buying from stores in your community. But when I say “shop local,” I’m talking about buying from locally-owned small businesses.

While many people take great pride in shopping locally (vs. buying online from Amazon or some other e-tailer), they miss the point by hitting up Wal-Mart or another big box retailer. Sure, these places employ local citizens and collect local sales taxes, but a significant portion of there revenue goes elsewhere.

This reality was underscored in a study from Maine that I recently ran across. The study, which focuses on a particular section of Midcoast Maine, compares the economic impact of shopping at locally-owned businesses vs. major chains. Yes, it dates back to 2003, but the findings are still quite interesting.

In short, the study’s authors found that for every dollar spent at a locally-owned establishment, nearly 45% of that revenue stayed in the local community with another 9% being spent elsewhere in the state. These expenditures included employee wages/benefits, inventory, supplies, and services from other local local businesses, profits accrued to the local owners, state and local taxes, and charitable contributions.

In contrast, for every dollar spent at a chain store, only 14% of the revenue stayed in the local community, mostly in the form of payroll. The balance of that money flows to out-of-state suppliers, or back to the parent corporation.

Based on these numbers, three times as much money stays in your community when shopping at a locally-owned business vs. shopping at a chain store.

Sadly, in many places, you just don’t have that many options when it comes to patronizing locally-owned businesses. Around here, it’s easy to find a locally-owned restaurant or coffee shop, but for groceries, electronics, etc. most local retailers have been pushed out by their big box brethren.

I still make a point of buying from our local hardware store whenever possible, and I frequent a few of the local businesses in our downtown shopping area, but it’s tough to “buy local” when there are just so few options left.

And when it comes to shopping at a big box vs. shopping online? I let prices and convenience dictate my choices. Yes, there’s a marginal local benefit to shopping at Best Buy vs. Amazon, but it’s not enough to offset the better prices and vastly broader selection.

What about you? Do you make a point of shopping local when you can?

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Published on December 12th, 2011
Modified on December 20th, 2011 - 11 Comments
Filed under: Consumer, Economy

About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

11 Responses to “Shopping Local vs. Shopping Locally”

1
Brian Says:
December 13th, 2011 at 3:17 am
I love the idea of buying local… I wish the prices were better but the concept being good for the local economy is hard to argue.

The one area which I think is arguably good for the local economy which I always do local is hit the 2nd hand items at Craigslist.

In a way this is an underground economy but it sure does keep the money flowing in a very local way. My wife and I are constantly upgrading our baby items from Craigslist as our little guy grows up and simultaneously selling off his old stuff on Craigslist.
2
JimL Says:
December 13th, 2011 at 8:22 am
What about shopping at the big box store when the headquarters are in your city/state. If I shop at Target or Best Buy which are both located in the Twin Cities where I live the percent of my dollar staying in the state is quite high even though they are big box stores. I feel that in shopping these stores in my situation is still a version of shopping local in that it keeps the money here in Minnesota. Granted, I still like to support the small locally owned businesses in my city too. Just some food for thought.
3
BG Says:
December 13th, 2011 at 10:27 am
14% of the money staying local when shopping big box retailers, is still better than 0% at Amazon.
4
Nickel Says:
December 13th, 2011 at 10:53 am
JimL: Excellent point, though it’s worth pointing out that ownership of those companies is distributed around the world b/c most are publicly-traded.

BG: It’s probably not 0% because they have to pay for delivery (local UPS employees, gas in the delivery vehicles, etc.) but your point is well taken. For me, however, the other advantages (primarily cost and selection) outweigh the 14%.
5
Bumper Stickers Says:
December 13th, 2011 at 12:07 pm
Out of town shops have done a good job of convincing us all that local shops are expensive, but the evidence just isnâ??t there to back this up. If you add in travel costs, fees to transport larger items home and your time, the overall cost is often much higher.
6
Dave Says:
December 13th, 2011 at 12:29 pm
I’ll buy online whenever it’s a better deal, which is usually. Exceptions are food and often clothing (which I like to see and try on). Shipping is usually free (yay Amazon Prime), my former coworkers at UPS get the work delivering what I bought, and I save time and gas.

I live in Colorado, but I also don’t buy Colorado-grown limes or avocados or dates or, in winter, Colorado-grown lettuce or tomatoes. I do most always buy Colorado-brewed beers, and buy them “local”.
7
almost there Says:
December 13th, 2011 at 1:12 pm
We try to shop local vs big box or online but sad to say in these hard times money will out. I would rathr pay online for the item if it is quite a bit less expensive. I look at the local business person and if they are touted in the newspaper as bringing in so much money than I know they can get along without my business.
8
The Frugallery Says:
December 13th, 2011 at 2:54 pm
I agree with your important distinction between shopping local & locally. I try to avoid big box stores as much as possible–they are too tempting. On food, I try to shop at farmers markets as much as possible. For other items, I do shop online. This allows me to buy ONLY the item I need and not be subject to other tempting impulse buys!
9
Newlyfrugal Says:
December 13th, 2011 at 3:05 pm
I shop online through rebate portals like bigcrumbs, fat wallet, and ebates. Many times, I get free shipping, pay no tax (although this will change eventually), and get online discounts not available at physical stores.

To balance this out, I eat at locally-owned restaurants so I can put money back in the community.
10
BG Says:
December 14th, 2011 at 8:09 am
…yet another person bragging about their online purchases and talking about how much money they ’saved’ in their illegal tax cheating.
11
OKgal Says:
December 14th, 2011 at 2:52 pm
I shop mostly locally- the things that I purchase online are mostly things that I just cannot get without a 2 hr drive. That being said, a large % of my shopping is at large chain stores, mainly because that is what I have easiest access to and familiarity with.

There is a independent supermarket locally at which I shop, with two stores. While most of the prices are competative, there are just some items that cost 25-50% more that I buy elsewhere (items that I use frequently). The store is an ESOP (employee stock ownership plan) and stocks some local independent items, like honey from less than 2 hrs away.

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