The Case for Shopping Locally

Illustration: Amanda Assadi-Rullow, based on a concept by Local First West Michigan and data from Civic Economics. For a larger version of the chart, click here.

Your alarm didn’t register in your brain this morning, and you somehow slept way too late. You’re running late for work, and you’re starving. You didn’t even have time to make coffee at home today, much less feed yourself some breakfast. As you head to the PATH station, you have choices: Dunkin’ Donuts, Starbucks, the local bodega, the local upscale cafe. Maybe you’ll pick one based on its position on your route, or how crowded you expect it to be.

But many advocates say that another factor should play a role in your decision: Is this business locally owned?

Let’s say you spend $5 on breakfast and coffee this hypothetical morning. Using figures from studies done in other cities, if you shop at the locally-owned business, $3.40 of that $5 will stay in the community. But if you shop at the non-locally owned chain business, the figure falls to $2.15. And that’s just on your $5 purchase: once you start thinking about how much money changes hands each day at Jersey City’s retail establishments, the individual choices we make start to mean something.

Exact dollar figures for retail transactions in Jersey City are not available, but state data show that so far in 2009, Urban Enterprise Zone (UEZ) certified businesses sold an average of $42.8 million of taxable items each month in the city. The UEZs are areas in urban areas where businesses receive extra incentives to encourage growth. While this $42.8 million barely cracks the surface of retail business in the city; it does make clear that we’re talking about a lot of money here.

A groundbreaking 2004 study done in Chicago’s Andersonville neighborhood showed that “local merchants generate substantially greater economic impact than chain firms.” The study, done by the firm Civic Economics, found that for every $100 spent at a locally-owned business, $68 stayed in the local economy, and that for the same amount spent at a non-local business, only $43 remained in the local economy.

Just using the UEZ figure plugged into the Andersonville study findings, each month there is at least $10 million for the local economy on the line when it comes to personal spending choices.

Local economic impacts for businesses that serve a local market are primarily made up of four components, the Chicago study found: wages and benefits, profits to local owners, local procurement and charitable contributions. In all four of these categories, Civic Economics found that locally-owned businesses contributed more to the local economy. They paid higher wages, gave more to local charities and were more likely to purchase items needed from other locally-owned businesses. (And, of course, they had higher profits to local owners.)

And that’s only the first level of sustainable local economies. Keeping more money in the local sphere is a compounding economic action: as a consumer spends more at a locally-owned store, wages and benefits increase not only at that particular store, but at other businesses that store works with or at local charities that business owner gives to.

“Most businesses — local and nonlocal — hire local people and pay taxes,” explains Michael Shuman, the director of research and public policy for the Business Alliance for Local Living Economies (BALLE). “But locally owned businesses contribute significantly greater levels of income, wealth, jobs, taxes and charity to a community.”

Schuman says that local businesses are also “better positioned to respond to the special needs of the community, and more tied to the community’s future.”

Jersey City supports the shop local movement, according to city spokeswoman Jennifer Morrill. She says the city uses the Economic Development Corporation and the UEZ to promote local shopping, and markets the UEZ zones with advertisements in an array of media, from print to checkout TV at supermarkets.

The city also hosted the first annual “Made in Jersey City” day this spring, in an effort to draw attention to the wide array of businesses that are based here.

“While larger companies often capture the headlines,” Mayor Healy said at the time, “we all know of the many — and significant — contributions innovative, smaller businesses make to our ongoing growth and success every day.”

Another local-first business group, the American Independent Business Alliance (AMIBA) sponsors the upcoming Independents Week, from July 1-7. As part of the festivities, AMIBA encourages everyone to take the “Indie Challenge.” Use the week to explore your local independent businesses and see how much of your purchasing for that week you can do with them.

This story is a joint effort between the Jersey City Independent and NEW magazine.

Jon Whiten

co-founded the Jersey City Independent. He is currently the Deputy Director of New Jersey Policy Perspective.