A Dollar Spent Locally Worth More, Study Shows

The case for patronizing local independent businesses, when possible

Have you ever pondered the concept that where you spend your money is of more importance than what you buy with those hard-earned dollars?  It is truer than you might think, a Chicago study shows.

Each dollar you spend close to home is like a vote of confidence that a business should stay open for another day. The amount of dollars you spend at that new store in Countryside, at that neighborhood retailer down the block from your home, or at the restaurant over in Lyons, can be likened to having a block of votes that will support one candidate over another. As in politics, the one with the least votes concedes defeat. In business, if you have too few dollar-votes at the end of the month or quarter—you lose, and so does the community.

Whether you buy an ice cream cone, a piping hot pizza, a fancy dress, a new snow blower or a used vehicle, or services like dental work, landscape, haircuts, arcitectual services or printing—the scale of the purchase matters little unless it occurs outside of the nine communities that make up the West Suburban Chamber of Commerce and Industry: Countryside, Hodgkins, Indian Head Park, La Grange, La Grange Park, Lyons, McCook, Western Springs and Willow Springs.

Civic Economics, a Chicago and Austin-based economic analysis and strategic planning consulting firm, designed an evaluation of the economic role that small or independent businesses play in a local economy. The results of their 2004 study, which took place in the Andersonville neighborhood of Chicago, showed that for every dollar spent at a small local business, 32 cents leaves the local economy.  But, when you spend that same dollar at a chain store, 57 cents leaves; that's more than 50 percent of the dollar that ceases to impact the area in which it was spent. (If you took Economics 101, this problem may have been referred to as leakage.)

Another interesting factoid is this: According to the same study by Civic Economics, the local economic impact is $179 for every square foot occupied by an independent local business. A chain store's local impact is $105 per square foot. That means locally owned and operated businesses have greater ties to their communities so they positively affect economic growth, employment and income to a greater degree. 

The meaning here is not that national chains, malls and big box stores—the term for stores like Wal-Mart and Target—should be eliminated. Quite the contrary: Stores of all sorts are vital to the overall retailing landscape of our nation. What is being emphasized here is that all of us should think about our purchasing power. If we think the "mom and pop" type stores are integral to the well being of our villages and city, then we should go out of our way to support them.

The soft economy will be with us for many more months. Many of our local small businesses will be challenged to meet payrolls and pay rents. With our help—no matter what the sizes of our purchases—we can make a difference.  Let's quit voting with our feet and go back to voting with our wallets.


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