Buy Local for Broad Impact

In communities across the U.S., the buy-local movement is gaining momentum among consumers. Advocates say buying local appeals to people who like to have control in their lives and to speak through their purchases. They’re changing their communities, a dollar at a time.

Studies show even small changes in shoppers’ habits can have a huge impact locally. For instance, a study conducted by Civic Economics in Grand Rapids, Mich., a few years ago showed shifting just 10% of shoppers’ spending from chains to locally owned businesses could create nearly $140 million in new economic activity and 1,600 new jobs for the area.

Locally owned businesses also boost local economies through what economists call the “multiplier effect.” A Civic Economics’ study of Chicago’s Andersonville neighborhood, for example, found that each $100 spent at local businesses generated an additional $68 worth of local economic activity, compared with just $43 for chain stores.

A local business owner spends more money locally, such as to hire graphic designers, accountants, printers, and other service providers. Those local businesses, in turn, spend money for other local goods and services. And the owners and employees of all these businesses spend part of their salaries on local businesses, as well. The effect ripples through the community.

A chain business, on the other hand, isn’t as likely to buy from local businesses but instead spends most of its money somewhere else, such as in some distant city where it has its headquarters.

This dynamic plays out at credit unions and national banks, too, says Steve Rick, senior economist for the Credit Union National Association, Madison, Wis. “When Bank of America makes a profit off  you, that money goes to New York City,” he says. “But your credit union’s earnings get reinvested into new branches and member services. That money stays in your community. And it comes back to you in better fees and higher interest rates on deposits. You’re bettering the community and also yourself.”