11/24/2020
Shop Local to Make a Big Difference This Holiday Season
Chelsey Taylor from Alignable
Nov 20th, 2020
As we go into the holidays, local spending is more important than ever. Here’s why: The more money you spend locally, the more opportunities you provide for your local economy to recover, a phenomenon known as the local multiplier effect. And these economies desperately need a boost this year.
To find out more about why local spending matters and how you can spread the word in your community, we talked to Derek Peebles, Executive Director of the American Independent Business Alliance (AMIBA).
AMIBA is leading the way on movements that emphasize the importance of local spending for business owners and consumers alike. Below, you’ll find Derek’s tips to help small businesses and their communities invest in each other to thrive.
Why Does Spending at Local Businesses Make a Big Impact?
So what exactly is the local multiplier effect and why does it matter so much?
Essentially, it means that purchasing from locally-owned businesses has a ripple effect. Those businesses employ local people, provide salaries that continue to drive the economy, and reinvest in the community. When you spend at big box stores or online retailers, far less of that money stays in your community.
AMIBA sums it up like this:
..spending locally creates more local wealth and jobs.
Simple, right? Here’s how it works:
“The multiplier effect consists of three elements,” Derek explains.
Direct: “The direct impact is spending done by a business in the local economy to operate the business. That includes inventory, utilities, equipment, and pay to employees,” says Derek. “COVID and shutdowns have affected that direct impact on local economies.”
Indirect: The indirect impact is when those dollars spent by local businesses recirculate. “The indirect impact happens when the recipients of the first business take the money they received and spend it on something else.”
Induced: “The induced impact refers to the additional consumer spending that happens as employees, business owners, and others spend their income in the local economy,” Derek says.
Understanding and conveying the local multiplier effect is essential when creating successful shop local campaigns, AMIBA suggests.
And our data backs this up—business owners reported that the number one thing that would shift spending back to local stores is if people understood the impact that it has.
That impact is significant, especially when you compare it to the impact of spending at national chains. “The Institute for Local Self-Reliance conducted a study that found that each $100 spent at a local independent generated $45 of secondary local spending, compared to $14 for a big-box chain,” Derek explains.
How to Kickstart Local Spending in Your Community
shop local recovery happens where you spend your money
So how can you use the local multiplier effect to rev up your local economy?
As a business owner
See if you can source from a local business instead of from a big-box store. And find “a way that [you] can offer your services or products online during the holiday season,” Derek suggests. “That would allow consumers to purchase your products and still keep those dollars locally.”
As a consumer
“The biggest thing consumers can do to help local businesses is to buy their products,” Derek says. Are you buying as many local products as you can? To find out, take a look at your spending habits. Then, shift some of that spending to locally-owned businesses.
To help you determine how much money you’re currently spending on local businesses, follow this simple formula.
Aside from that, Derek points out that there are other forms of currency that consumers can tap into. He points to gift cards as a good way to get businesses the cash they need now. “That’s what our businesses really need, especially during the holidays,” he says.
Ultimately, we all need to keep amplifying the shop local message in our businesses and communities.
Continue to promote the impact that local businesses really have on our economy.
