Smaller local businesses face a lot of challenges, especially growing competition from huge online shopping corporations like Amazon and the big box stores of the world.
With the ease and convineience of purchasing online or heading to Wal Mart to grab everything on your list at once, why would someone choose to shop at thier local small businesses?
To answer this question, let's take a look at a few things that happen when you opt to shop at smaller local businesses.
When you make a purchase with a local business that sources its services or products at the local level and is owned by local owners, something very different happens with your money than when you spend with international businesses or national chain stores.
Multiple studies have shown that buying local keeps money in the community rather than allowing it to be sent away to a far-off destination where a company's stockholders and executives reside.
This is called the Multiplier Effect, and according to the American Independent Business Alliance, The multiplier is comprised of three elements — the direct, indirect, and induced impacts.
- Direct impact is spending done by a business in the local economy to operate the business, including inventory, utilities, equipment and pay to employees.
- Indirect impact happens as dollars the local business spent at other area businesses re-circulate.
- Induced impact refers to the additional consumer spending that happens as employees, business owners and others spend their income in the local economy.
- The combination of these 3 impact sources keeps a local economic ecosystem healthy. When these 3 effects are absent, revenue from the local economy gets sucked out, never to return.
When Wal-Mart comes to town (Wal-Mart always seems to be the "bad guy" in these stories, but the blame isn't entirely unwarranted), there are promises of more jobs and growth to the local community. Unfortunately, the opposite is usually true, and the local economy loses jobs, becomes weaker, and sees its decision-making power evaporate in the face of strong corporate interests.
Business News Daily explains:
"The research, done by a Northwest community group, estimates that one Walmart store, which is set to open in a Washington neighborhood, will decrease the community's economic output over 20 years by an estimated $13 million. It also estimates the Walmart will cost the community an additional $14 million in lost wages over the next 20 years."
When a large corporation – or several of them – move into a town's Main Street and begin to eliminate local businesses with their low prices and flashy sales, the town suddenly sees its decisions on local matters being influenced by companies who have no personal residences in town or even in the region.
The Institute for Local Self-Reliance explains further:
"Finally, the shift from local to absentee-owned stores means that business decisions are no longer made locally by members of the community. Who decides whether to close a store in a distressed neighborhood, stock a controversial book, sell produce from local farms, pay a living wage, or contribute to a local charity? In the case of chain stores, these decisions occur in distant boardrooms, where the values of the local community carry little or no weight."
The headquarters of Wal-Mart is in Arkansas, but they'll have enough influence to direct local policies and government decisions in towns across the nation. Not only does Wal-Mart yank its profits out of the local economy, but it governs from afar after shoving local business owners to the side or forcing them out of business.
Better Jobs Stay in Your Community
Big box stores come in promising more jobs, but those are typically low wage jobs with poor heralthcare plans.
According to the Local Insititute for Self Reliance, studies show that locally owned businesses employ more people per unit of sales, and retain more employees during economic downturns, while big-box retailers decrease the number of retail jobs in a region.
These studies show that locally owned businesses are linked to higher income growth and lower levels of poverty, while big-box retailers, particularly Walmart, depress wages and benefits for retail employees. Studies in this section also quantify the costs of these big companies’ low wages to state healthcare programs and other forms of public assistance.
As we mentioned above, the results of the Multiplier Effect are present here. Better jobs and wages are crucial for the economic health of a community, and smaller local businesses contribute greatly to that economic health.
Having an assortment of small businesses, each selecting products based on their own interests and the needs of their local customers, generates a much wider variety of product choices. Having this diverse array of local businesses also leads to competition and innovation (to keep you, the consumer interested), which also works to drive down prices in the long run.
Product diversity is another benefit. With bix box stores, you know what you're getting, but at smaller local business you may often be suprised and delighted at the products you discover.
Kate Dore of Cashville Skyline explains how anytime she needs to purchase gifts, she chooses to shop at the local businesses in her neighborhood of East Nashville. “Small businesses make my neighborhood a more interesting and diverse place to live,” Dore explains.
Competition is also a good thing, for businesses, customers and the community! Paul Nugent of Shopkeep explains:
Small businesses, like any business, need to stand out from the crowd in order to survive. They must serve a legitimate need in the community and do it better than their competitors. Having multiple small businesses all striving to be unique, innovative, and better can result in a healthy marketplace and well-served consumers.
Don’t Let Large Corporations Overshadow Your Business
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