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Wednesday, Nov. 28, 2007

The Importance of Buying Local

Independent Businesses Unite

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“It was shocking to see that kind of a change so quickly,” Beans & Barley co-owner Lynn Sbonik said of the customer exodus. “We felt it immediately, and it’s taken us a year to come back and return to the same sales level we were at before.” Sbonik says that after months of operating at a loss, Beans & Barley has rebounded, but not all independent businesses fare as well against national competition. The deck is heavily stacked in favor of the chains, which keep their costs low through bulk buying and centralized advertising campaigns, and can offer discounts and selections that local businesses can’t compete with. Chains also benefit from sheer prevalence. They use their overhead to build multiple locations and claim real estate that small upstarts can’t afford. For many customers, it’s easier to shop at nearby chains than to go out of their way for local businesses.

“Over the last 20 years or so, the country has seen a dramatic rise in the market shares of corporate and chain retailers, and an unprecedented die-off of independent businesses in every sector of retail economy,” explains Stacy Mitchell, the author of Big-Box Swindle, a book that charts the rise of America’s biggest retailers.

“Barnes & Noble and Borders barely existed 20 years ago,” Mitchell says. “They now capture over half of all bookstore sales. We’ve lost over half of all independent bookstores that existed in 1990. We’ve lost about 5,000 independent hardware stores. Home Depot and Lowe’s, which also hardly existed 20 years ago, now dominate half the market nationally, and have even larger shares in certain cities.”

There is some good news for local businesses, however. In recent years, independent businesses in cities around the country have united to launch campaigns encouraging citizens to buy local, and many of these campaigns have proven successful. “From the standpoint of independent businesses, these local business alliances are the most encouraging thing that’s going on right now,” Mitchell says.

Our Milwaukee

Local business alliances now operate in more than 50 cities, and most of these organizations have sprung up in just the last five or six years. Chicago, Madison and Minneapolis have them, and this winter a group of independent Milwaukee businesses is launching their own, called Our Milwaukee.

“The name is pretty much indicative of how we feel,” says Pam Mehnert, Our Milwaukee founding member and Outpost Natural Foods general manager. “This is our Milwaukee. These are the businesses that keep our city unique, and the stores that we take friends and family to when they visit town. It’s these local stores that deliver a real experience.”

Right now eight businesses are on-board: Outpost, Beans & Barley, Alterra Coffee Roasters, Harry W. Schwartz Bookshops, the Pabst Theater Foundation, Brewery Credit Union, Laacke & Joys and Lakefront Brewery. Our Milwaukee is inviting other businesses to learn more about the organization at an event on Friday, Nov. 30, at the Schwartz Bookshop on Oakland Avenue.

Membership is open to any privately held, non-franchise business headquartered in the Milwaukee area that meets a few basic criteria. Businesses must, for instance, have operated for at least two years before becoming a member. Once in the organization, all businesses must display the Our Milwaukee logo.

Mehnert says Our Milwaukee will operate as a support network for local businesses, and most of the group’s initial public efforts will focus around two annual Buy Local campaigns, one during the holidays and one in the summer. They will launch their first campaign Dec. 8.

Like the campaigns in other cities, this one will make not only the emotional argument that colorful independent businesses are integral to the character of the community, but also a strong fiscal case for buying local. Shopping local, these campaigns explain, benefits not only local businesses, but the entire city.

The Economics of Local

A 2002 Economic Impact Analysis in Austin, Texas, was one of the first major studies to examine the impact of shopping at local businesses versus national chains. It found that for every $100 spent at a local bookstore or CD store, $45 stayed in the local economy. For every $100 spent at Borders, however, the local economic impact was only $13. Astudy in Maine the following year yielded similar results: Shopping local kept three times more money in the local economy than shopping at chains. The studies cite several reasons for this. Proportionally, local merchants tend to employ more local labor and buy more local goods than national competitors, which operate from remote headquarters. Local business owners keep their profits in state, and contribute more to local and state taxes. Local businesses are also more likely to promote local artists and authors.

Those findings may seem intuitive enough—of course local businesses keep more money in the local economy— but less obvious is just how much difference shopping local can make. This year’s San Francisco Retail Diversity Study found that even the smallest shift in customer spending can have a tremendous impact on the local economy. If 10% of residential spending were redirected toward local businesses, the study found, it would give San Francisco a $192 million economic boost and generate nearly 1,300 new jobs. The reverse, the study warns, is also true: If 10% of business were shifted to chains, the cost to San Francisco’s economy would be almost $200 million.

Perhaps not coincidentally, Our Milwaukee is beginning with the goal of convincing city consumers to redirect just 10% of their spending toward local businesses.

Encouraging Signs

Business owners involved in local business alliances in other cities report that these organizations have been tremendously effective. Steve Bercu, president of the Austin Independent Business Alliance, says that in just five years his organization has grown to 350 businesses and earned considerable clout with Austin’s city council. The alliance has moved beyond simple buy-local campaigns, and begun to work on programs that encourage local developers to ensure their new projects reserve space for independent businesses instead of just national merchants.

Stacy Mitchell, the author of Big-Box Swindle and the co-founder of the Buy Local organization in Portland, Maine, which began in 2006, says the group has already changed consumer-spending habits. Almost threefourths of businesses involved with the organization reported that customers are making more of an effort to shop local because of the campaign.

Mitchell says she heard of one Portland bookstore owner who noticed a new customer that soon became a regular presence in the store and one of his best patrons. Eventually, the owner asked her if she was new to the city. No, she responded. She’d lived there for 20 years, but had just learned of the Buy Local campaign from another independent business and subsequently ceased shopping at national bookstore chains.

“The message really clicked for her,” Mitchell says. “I think that’s one of the most important things these campaigns can do. They become an opportunity for local business owners to reach all their customers collectively, and share business.”

In addition to encouraging anecdotes, the city of Bellingham, Wash., has hard numbers to show that its Think Local First campaign is working. Astudy released last year showed that nearly 70% of residents were familiar with the program, and that 58% were choosing to shop at local businesses more deliberately than they were three years ago. In general, independent business owners say these buy-local campaigns are an easy sell. Their customers are receptive to the message, and even if many may not initially consider whether they’re shopping at local businesses or national chains, all it takes is a gentle reminder for them to change their spending habits.