Supporting Local Businesses this Holiday Season

Shop LocalNow that Halloween has passed, we are starting to once again be reminded that the gluttony of holiday shopping is just around the corner. Already my Facebook wall is full of memes and commentary from my friends about where they will and won’t shop on Black Friday. However, there is a larger and much more important question at stake when it comes to where to do your shopping for the holidays. In a time when rural communities are threatened by unemployment, out migration, and job loss, where we spend our hard earned dollars counts more than ever.

We know that small firms (less than 500 employees) account for 67% of the net number of new jobs. Let me emphasize what you just read. Net new jobs. Even if we are not looking at new jobs, according to the United States Small Business Administration small businesses account for 55% of all jobs in the US.

As if that were not enough of a reason to support small businesses, study after study has shown that revenues generated by small businesses tend to stay in the local community in the form of jobs and wages that then flow back into the economy in the form of purchasing power. The amount in question is not small. One study from Utah saw on average only 14% of revenues at big box stores such as Walmart or Target remain in the community compared to 52% of revenues from small, local businesses. Even greater disparity exists in the restaurant industry, where local restaurants recirculated 79% of their revenues locally compared to 30% of chain eateries. So when you are out shopping and you stop to eat at that mom and pop diner, almost 80% of what you spend gets re-spent locally.

There are three main ways that money spent locally flows back into the local economy. We call this the Multiplier Effect. The first type is what is called a Direct Impact. A Direct Impact is when a business makes a purchase from another local business in the form of inventory, supplies, services, employee wages, or utilities. The second type of impact is an Indirect Impact. This is when the dollars that local business spent at another local business get spent AGAIN in the local economy. The third type of multiplier is called Induced Impact. This is when those local people who were paid by the local business spend their money in the local economy.

SBA Shop SmallUnderstanding this flow is key to understanding why it is so imperative to shop locally and support small businesses this holiday season. Money has to flow through the economy to keep a community strong, and it flows best when it is spent locally. So this holiday season, I hope you join me in supporting your local Main Street!

(Submitted by Laura Fuller, County Extension Educator, Noble County & Buckeye Hills EERA)

2 thoughts on “Supporting Local Businesses this Holiday Season

  1. Laura, this is important information to learn. Many times the big box stores have fantastic sale prices that the local merchants cannot match, so it might be hard to put our own personal finances ahead of the benefit to the local economy. We have to remember that those local merchants are our friends, and sometimes family, and need our support. I am going to pass along your post to my Facebook friends and LinkedIn contacts. Thanks for posting!

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