Neighborhood's a craphole? Are you shopping locally-owned?

A number of studies have shown that more of each dollar you spend circulates back into your local economy when you shop at a locally owned store vs. at a national chain. Both hire local employees, but local stores are much more likely to hire local business services (graphic designers, lawyers, consultants, etc.), to use local suppliers (linens, office supplies, food, etc), and to donate to local charities.

So, how much more of your money stays local? Most studies have shown about 2X as much, but the Economist cites one study that showed more than 3X as much stayed local at bookstores. That study was commissioned by a local bookstore, which could have caused bias. But I think the higher amount is because of the nature of books--they're a simple product to sell without much local labor involved vs., say, a cappuccino.

To benefit from this, some cities have started "Buy Local" campaigns. I prefer to call this "Shop Local", so as not to confuse with buying locally produced goods as in the locavore food movement. (E.g. at some national groceries, you can buy local produce, even though it's not locally owned.) The lines often get a bit blurred, but these shop-local campaigns are an effort to bring some awareness to people's purchasing decisions, and to get them to shift some of their shopping--10% is a common goal--to locally owned retailers. (Some even create local currencies, which I can't say I have my head fully around yet. I hope to follow up on that soon.)

"Pure protectionism" some devout free-marketers will complain. Except that it's not protectionism, which is about banning imports or imposing tariffs on them. This is simply an attempt to make people aware of their choices and what the consequences are at the different places they can spend money. "If everyone else does it, your city will lose business" others will proclaim. Regarding shopping locally owned (not locally produced), this is only true if you happen to live in a city where a lot of national retail business is based.

I wouldn't encourage a friend to spend significantly more at a locally owned store for the same product, but if the price is about the same, it's probably in your interest to shop local.

As for buying locally-produced, it may be a different story. I hope to dig into that more in the future.


Further reading:
Time: Buying Local: How it boosts the economy
The Economist: A rising vogue for shopping near home (subscribers only)
CMU: Carnegie Mellon Study Finds Shopping Online Results in Less Environmental Impact (pdf)
BALLE: Studies that support Local First

Even further reading:
http://localfirst.com/why
http://sustainableconnections.org/thinklocal/why
http://www.fastcompany.com/magazine/126/neighborhoodlums.html crap article, but some good comments
http://www.csmonitor.com/2006/0724/p13s02-lifo.html
http://www.newrules.org/retail/news/modest-changes-shopping-habits-would-produce-big-economic-benefits-study-finds