If You Buy Local You'll Have Less Money to Spend Locally

 

Buying local sounds good on paper, but it doesn't make sense.

Reporting for the Seattle Times, Erik Lacitis observes protesters at a Walmart Occupy Black Friday event:

A 23-year-old protester, who goes by “Brit” and says she works as a barista, explains, “If we all chose to pay a little more, we could shop locally,” meaning not buying the cheaper, imported products.

This may sound true enough on its face. After all, buying locally tends to be much more expensive. You also tend to have to visit more stores, and plenty of items aren’t even sold locally these days thanks to big box stores and the internet.

But is it true?

Let’s say you have $1,000 dollars to spend on anything y0u like – gadgets, clothes, food, whatever. You want to buy a television, some new pants, and a few gifts for family. If you shop at big boxes and online, you can make all your purchases for $750. If you shop at local stores you can make all your purchases for $950. You’ve decided that anything left over from your shopping adventure can be spent on a night out.

So let’s say you shop locally. At the end of your day or night or early morning of shopping you pocket your $50 bucks, go home and take a nap, and later that night go out on the town to a local restaurant where you blow the remaining $50 on a dinner for two plus tip.

Now let’s say you shop online and at big boxes. At the end of the day you go out to a nice dinner, a movie, and then get drinks at a local dive. You drop $250 on the evening.

The fact is, money isn’t just disappearing from the universe when you save it by buying cheaper goods at Walmart. It just means you have more money left over to save or spend elsewhere, including at other types of local businesses. Given the fact that margins on things like televisions are very low, it makes sense for them to be sold by big companies that can operate at scale. So long as there’s still healthy competition, corporations won’t benefit from a captive market.

Whereas a big retailer has a distinct advantage over a small, mom-and-pop retailer, the same isn’t necessarily true of restaurants and bars and other entertainment goods. Often local places are more desirable, have better food, and can operate at a comfortable profit compared to their retail cousins.

So if you save money shopping at big box stores, go spend it doing something fun locally. Just buying goods locally doesn’t guarantee that you’ll help the local economy. Of course there may be some really great local shops that sell things the big boxes don’t carry, or who provide a better customer experience. The point I’m trying to make is simply that it’s never as straightforward as shop local. Sometimes it comes at a price you can’t even see.

Source: Forbes.com