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Think local first

Mark Dunagan

Recently there has been a trend toward “buying local,” i.e., patronizing locally owned businesses when possible instead of doing business with national chain stores and big-box retailers. In particular, you may have been urged to buy local in connection with your holiday shopping. But with Christmas now in the rearview, it’s important that we do not lose sight of the value of buying local.

You may have heard anecdotally that local merchants generate more local economic impact than their chain counterparts. In fact, this can be seen in black and white. In 2003, the Institute for Local Self-Reliance conducted a study in the Midcoast region of Maine (population: 145,000) to determine what happens to $100 spent at a local business compared with $100 spent at a chain retailer. Local businesses were found to have spent 44.6 percent of their revenue within the surrounding two counties and another 8.7 percent elsewhere in the state. The way the in-state dollars break down demonstrates how far a dollar can go locally: 28 percent represented wages and benefits for employees, 17 percent for supplies and services from other local businesses, 5.4 percent profit accruing to local business owners, 2.4 percent in state and local taxes, and 0.4 percent to local charities.

In comparison, the study estimated that big-box stores in the same area spent only 14.1 percent of their revenues in-state, primarily in the form of payroll. This is less than one third of what local businesses put back into local economies on a percentage-of-revenue basis. The rest went to out-of-state vendors or to corporate home offices.

Studies with similar findings abound. For example, the Andersonville Study of Retail Economics, conducted in Chicago in 2004, showed that local businesses generate 70 percent more local economic impact per square foot than chain stores. Civic Economics, the group that conducted the Andersonville Study, conducted a study of Austin, Texas, bookstores in 2002 that yielded almost exactly the same result as the Midcoast Maine study. To wit, spending $100 at Borders created $13 in local economic activity, while spending $100 at a local bookstore created $45 in local economic activity.

If you’ll forgive all the numbers and statistics, what this means is that local businesses put as much as three times as much of their revenues back into the local economy as do national stores. This is because local businesses tend to bank more with local banks, purchase more inventory from local manufacturers, advertise more in local periodicals, and hire more local accountants and labor. Additionally, the Midcoast Maine study showed that local businesses gave up to 400 percent more to local charities than did corporate megastores on a per-dollar-earned basis.

Opponents of the “buy-local” school of thought often cite to the job creation associated with big-box stores. However, in 2005, M.I.T.’s Review of Economics and Statistics published a study entitled “Job Creation or Destruction? Labor Market Effects of Wal-Mart Expansion,” debunking the idea that big-boxes necessarily create appreciable job increases. The study shows that a new Wal-Mart creates a net average of 100 jobs the first year, after downsizing and layoffs by local competitors. Within four years, 40 to 60 more jobs are lost as local competitors are forced to make further cuts. In the long run, 30 wholesale jobs are also lost, because Wal-Mart handles its own distribution and doesn’t rely on wholesalers. Thus, a new Wal-Mart represents a net gain of 10-30 jobs over several years. However, these jobs may be part-time, and may pay less than the lost jobs. After factoring in the economic impact, the job creation argument doesn’t wash.

Though northern Nevada is distinct from these studied communities, logic suggests the trends are similar here. It’s a fact that shopping at a store like Scolari’s, or enjoying the dining and entertainment at hotel/casinos like Eldorado, Bonanza Casino, and Carson Valley Inn, is going to make your dollars go a lot further locally than they otherwise would.

An added benefit of buying local is that you just might catch a glimpse of something you thought was extinct: customer service. Anyone who has visited the recently-opened Carter Bros. Ace Hardware store in midtown Reno can tell you that it is a shopping experience different from that offered by their national counterparts. A store like Carter Bros. will pleasantly surprise you with the individual attention you’ll get from knowledgeable and caring personnel people who are there because they want to be and you get to feel good about keeping a larger percentage of your hard-earned money in the community.

This is not an argument for boycotting chain stores. Certainly, the convenience, value, and selection associated with large retailers are central to our day-to-day living. It would be unfair and unrealistic to expect consumers to forego all conveniences and buy everything locally. Likewise, habitually driving across the Truckee Meadows past several chain retailers to get to one local business would be irresponsible in the grand scheme.

The good news is that nobody has to overhaul their consumer habits to make a difference. Even a modest change will have a substantial economic impact. The aforementioned study of Texas bookstores estimated that if each family in the subject county redirected just $100 that it planned to spend at a chain retailer to a local business, the local economic impact would reach $10 million.

This isn’t a political argument or an anti-corporate rant. It’s just a reminder that if we care as much about northern Nevada as we should, we can all do more to bolster the economy of our community by thinking local first.

Mark Dunagan is an associate at the law firm of McDonald Carano Wilson LLP, where he practices primarily in the areas of corporate, commercial, and real estate transactions. Contact him at 788-2000.


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