3 Vital Reasons Why Shopping Local Matters

By Tony Munene @ Colu

“Shop Local”, a campaign that encourages everyday consumers to purchase their goods and services from local businesses instead of going to large-scale retailers, began long before the COVID-19 pandemic hit; as early as 1998. However, it was only at the height of the pandemic in 2021 that the movement gained traction and started making national headlines; evidenced by the U.S. Small Business Administration’s core lending programs financing 61,000 loans worth $44.8 billion in the same fiscal year. According to the U.S Bureau of Labor Statistics, 2.5 million people were unemployed in March 2022 because their employer either closed or lost business due to COVID-19. Given that 99.7% of all US employers are small independent businesses with fewer than 500 employees, local governments and organizations launched campaigns to encourage residents to shop at local businesses to help them stay afloat. In fact, 93% of consumers reported that supporting local businesses is more important than ever since the pandemic.

Shopping locally has numerous benefits to local communities, including reducing carbon emissions – we’ve narrowed down the three most significant impacts it can have on local economies:

  1. Shopping at local businesses keeps money circulating in the local economy.

Money spent in a local business is far more likely to stay in the local economy. According to the American Independent Small Business Alliance, independent local businesses recirculate 48% of their revenue locally while chain retailers only retain 14% of the same.

Money is usually retained within the local economy through: 

  1. Wages and benefits paid to local residents
  2. Profits earned by local owners
  3. Local sales tax revenues
  4. Contributions to local nonprofits

Further, small businesses are responsible for creating two out of every three new jobs.

With the same businesses employing more than 52% of the national workforce, buying locally translates to more stability in employment levels for local residents. A case study in Kent County, Michigan, with a population of just over 600,000, estimates that the region would gain 1,600 new jobs, $140 million in new economic activity, and $53 million in additional payroll if residents shifted 10% of their spending from big-box chain stores to local businesses.

Increasing the circulation of money in the local economy leads to more public infrastructure and more money in taxable transactions to fund local government services. If every US family spent just $10 a month at an independent business in a local economy, over $9.3 billion would be directly returned to the local economy. In other words, shopping at local businesses helps ensure that your investment comes back to you.

  1. Local businesses are vital to promoting Diversity, Equity and Inclusion in the community

When consumers shop locally, they encourage diversity and inclusion in their communities. According to Clutch, two out of three small businesses (67%) are run by an underrepresented group: women (35%), racial and ethnic minorities (20%), veterans (19%), LGBTQ (14%), and those with disabilities (12%). In addition to this, immigrant business owners make up 18% of small business owners, despite immigrants consisting 13% of the US population.

Consumers are essential in keeping minority-owned businesses afloat. According to a study conducted by McKinsey & Company, minority-owned small businesses were at a higher risk of being disproportionately affected by the pandemic for two critical reasons: they tend to face underlying issues that make it harder to run and scale successfully, and they are more likely to be concentrated in industries most affected by the pandemic.

Furthermore, cities are listed as the most ideal settings to support minority-owned businesses as 82% of LGBTQ-owned businesses are based there. Shopping at small businesses, therefore, supports a wide spectrum of minority groups.

  1. Local businesses are the first supporters of local charities and nonprofits.

Locally owned businesses contribute more to local charities and fundraisers than their national counterparts. Research shows that small businesses donate 250% more than larger businesses to local nonprofits and community causes. This can be attributed to the closer ties that local businesses have with their surrounding communities. With 91% of local business owners contributing to their communities, it is clear that they have a vested interest in the future of their communities. Therefore, when you shop at a local small business, you stand a better chance of impacting the causes you care about compared to when you do so at a large chain.

One thing is sure – the Shop Local movement is here to stay. Small businesses are benefiting from this by reminding consumers that they are “local” through perpetuating vigorous grassroots campaigns. Some counties and cities are already working with tech companies like Colu to incentivize their residents to shop local. Cities that have embraced the Colu model have been able to maximize the economic impact of their budgets, using a data-driven approach to create a 7-9x multiplier on city budgets diverted to local businesses. Supporting local businesses is one of the most fundamental parts of economic development, and leaders need to focus more on strengthening the connection between consumers and small businesses. In that case, shopping locally is the way to go.


July 21st, 2022