Why buying local is hot

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As a small-business owner, Colin Murray anticipates a bright holiday season. The president of Dane Buy Local, he knows other locally owned businesses in Madison share his optimism.

Different By Design Today, the Madison-based business that Murray owns with his partner Michael Anderson, creates original works of art from repurposed materials, such as wallpaper, paint and other supplies left over from the couple’s decorating business. Now seven years old, the business has attracted a following through appearances at art fairs around the Midwest. Murray believes the visibility his company has gained will help boost holiday sales.

Other small-business owners in Wisconsin anticipate similar success this season, thanks to consumers’ increasing awareness of the value of “shopping small” and buying from locally owned businesses. It’s something that not only helps local merchants succeed, but also has a significant economic and social impact on the community.

“Local begets local,” says John McLaughlin, owner of The Brass Rooster, a men’s hat and accessories shop located in Milwaukee’s Bay View neighborhood. “By shopping local you are acting like an owner, helping shape the neighborhood you want by helping local businesses pay their bills.”

Beyond the profit margin

Why buy local? The social and economic benefits are many according to Local First Milwaukee, an organization like Madison’s Dane Buy Local that supports locally owned businesses. Some of the best reasons, according to Local First, include:

Buy local and support yourself. Studies show that locally owned businesses purchase their goods and services locally, meaning more money stays in the community.

Increase support for community groups. Nonprofit organizations receive an average 250 percent more support from local business owners than they do from large businesses headquartered elsewhere. For instance, BiltRite Furniture, a locally owned fourth-generation family business, partnered with United Way this year to conduct a food drive that continues through Dec. 23. 

“Milwaukee has supported our store for 84 years, and we look for ways to support the community that’s supported us,” says Rachel Arbit, who recently became Bilt-Rite’s first director of development – a position created specifically to find ways to support the community.

Keep your community unique. One-of-a-kind businesses are an integral part of a community’s distinctive character, helping tailor its personality to the needs of the local population.

Reduce environmental impact. Locally owned businesses make more local purchases, requiring less transportation and leaving a smaller carbon footprint. They also tend to set up shop in town or city centers, reducing urban sprawl, habitat loss and pollution.

Create more good jobs. Small, local businesses are the largest employers nationally and provide the highest number of new jobs.

Get better service. Local businesses often hire people with a better product understanding and people who take more time getting to know customers. 

Invest in the community. Local businesses are owned by local people who have a greater personal investment in their community’s future.

Put your taxes to good use. Local businesses in town centers require comparatively little public sector infrastructure investment and make more efficient use of existing public services compared to nationally owned stores entering the community.

Buy what you want, not what someone wants you to buy. Local businesses select products based on local preferences, rather than national buying patterns. It’s the best way to ensure innovation and low prices over the longterm. “A local business understands Milwaukee’s needs, which are not the same as every other place in the nation,” Arbit says. 

Encourage local prosperity. A growing body of economic research shows that in an increasingly homogenized world, entrepreneurs and skilled workers are more likely to invest and settle in communities that preserve their one-of-a-kind businesses and distinctive character. 

“We can all accept the fact that dollars stay local when spent at locally owned businesses,” says Chuck Bauer who with partner Chuck Beckwith, owns The Soap Opera, a retailer of body care products located on Madison’s State Street. “But we also can offer a depth and breadth of products from more than 100 different vendors because we know that’s what our clientele wants.”

In addition to keeping dollars at home, unique locally owned businesses also can draw customers from outside the area, bolstering their community’s financial wellbeing. The Garden Room/Anaba Tea Room, a retail garden supply business that also operates a restaurant in Shorewood, is seeing greater growth from customers outside its neighborhood, according to general manager Doug McDonald.

“We see approximately 36,000 customers per year, with 60 percent of them coming from outside the 53211 ZIP code area,” McDonald says. “Local to us is Milwaukee County, but we see many customers from the greater southeastern Wisconsin area and beyond.”

Maintaining any business’s financial vitality means expanding its reach, something The Garden Room/Anaba Tea Room has mastered by presenting a unique retail profile, McDonald adds.

The impact

Estimates differ based on various studies and the cities in which they were conducted, but all point to the basic truth that locally owned businesses are economically and socially better for the communities in which they operate. Statistics collected by Dane Buy Local, the country’s largest buy-local organization – with more than 600 members – show an impressive financial footprint that small businesses in Dane County leave on the local economy.

“Madison has always been incredibly supportive of local business,” says Murray, who has been president of Dane Buy Local for three years. “But even we were surprised by the economic impact our members are having.”

In 2011, according to a recent study, Dane Buy Local member businesses employed 4,277 full-time employee equivalents. That number jumped by 467 last year, meaning employment growth among small locally owned businesses increased 11 percent in 2011.

Those same small businesses last year paid salaries totaling $85.4 million and contributed state and local taxes totaling $9.1 million. In addition, member businesses donated 178,330 person-hours supporting charitable and not-for-profit organizations, and contributed $2.4 million to those organizations.

For every $100 spent at a locally owned store, $73 remains in the community, while non-locally owned businesses leave behind just $43 in the community, said Dane Buy Local surveyors. citing a similar study done in Grand Rapids, Mich. When asked how important local business ownership is to customers, member businesses said it ranked 8.2 on a 10-point scale.

Buy Local Milwaukee found that locally owned businesses in Milwaukee County recirculate 44.1 percent of revenue to the community, compared with 13.6 percent by national chains. Restaurant figures increase those numbers slightly to 52.5 percent of revenues recirculated by locally owned restaurants versus 30.4 percent recirculated by chains.

 “I re-spend the money that comes into my shop back into other local shops,” says Brass Rooster’s McLaughlin. ”If I have to expand and hire someone, I will hire from the community, and then that person will spend his or her money here. It is an endless cycle.”

The spending cycle gained momentum Nov. 24 when consumers spent $5.5 billion nationwide on Small Business Saturday. The shopping day followed the traditional Black Friday, but was devoted to shopping small, locally owned businesses. Retail expenditures for the post-Thanksgiving holiday weekend totaled $59.1 billion, according to the National Retail Federation, meaning local enterprises captured slightly more than 10 percent of all dollars spent.

“We saw an 18 percent increase in sales over last year for both Garden Room and Anaba Tea Room during the ‘Shop Small’ weekend,” says McDonald. “This is the first year we promoted a Small Business Saturday sale, and I definitely think it contributed to the increases in traffic and purchases.”

Whether you call it social activism or conscientious consumerism, buying local is gaining traction among shoppers who realize their purchasing decisions affect more than a business’ profit margins. By making the right buying decisions, consumers can have a say in the future of their community and its economic wellbeing.