To Beat Recession, Indies Launch Buy-Local Push

(page 2 of 2)

The jobs that those dollars support stay in the community, rather than going to chains that consolidate their suppliers and back-office functions elsewhere. The profits, too, stay with local owners who spend in the community, rather than going to out-of-state owners or shareholders.

Does it work? While the direct effects are hard to measure, several studies point to real benefits for local economies. Dan Houston, an Austin (Tex.)-based economic development consultant, projected in 2002 that spending at local Austin book and music stores returns 45 cents on the dollar to the Austin economy, compared with just 13 cents for each dollar spent at Borders. An analysis he did last year found that a 10% shift in spending to local businesses in Grand Rapids, Mich., could create 1,600 jobs with a payroll of $53 million.

Michelle Long, director of the business alliance in Bellingham, credits local businesses with preserving jobs through the downturn. Unemployment in Bellingham was 6.1% in December (the most recent month available), a point below state and national rates. Long attributes that difference to the fact that locally owned firms employ 69% of the community's workforce, about six percentage points above state and national averages.

Some question whether buy-local efforts really do help communities. "It's easy to show that the local businesses benefit. It's very hard to show the costs," says Russell Roberts, an economist at George Mason University and host of the EconTalk podcast. The costs can include higher prices and a narrower selection for consumers. "The claim is it keeps the money in the community," he says. "The money in the community isn't the goal of economic life. The goal of economic life is to have the right access to the things we care about." While Roberts says there's nothing wrong with shopping locally, he says there's no inherent economic benefit.

But many consumers choose to buy local because the intangible benefits are precisely the things they care about: vibrant downtown areas, stores with local character, and business owners who know shoppers' names. "They find value beyond the economic value," says Village Books' Robinson. Now, with businesses of all sizes struggling, some independent stores are counting on buy-local campaigns to remind consumers of that value. "It gives people a reason to think about who they're spending their money with," says Marty Jelinski, owner of Bay City Supply, a cleaning-equipment store in Bellingham. "What do they like about Bellingham? Is it the big-box stores up on the north end of town, or some of the stores that are a little bit unique?"

For a look at successful buy-local campaigns across the country, flip through this slide show.

Tozzi covers small business for BusinessWeek.com.