Sales & Marketing

Why AmEx Wants You to 'Buy Local'


(Corrects time period in the third paragraph and attribution of quotes in the fourth and fifth paragraphs.)

Independent retail stores have been running marketing campaigns to capture a greater piece of the post-Thanksgiving shopping rush for the better part of a decade. This year, the "buy local" movement traditionally led by mom-and-pop business owners is getting a boost from a multinational promoter: American Express (AXP).

The company is calling the Saturday after Thanksgiving "Small Business Saturday." Wedged between the door-buster sales at big-box stores on Black Friday and the online deals offered on Cyber Monday, Small Business Saturday is a marketing campaign to encourage shoppers to spend at locally owned, independent brick-and-mortar stores. AmEx is offering 200,000 cardholders who register on the campaign's website a $25 credit if they use their cards on Nov. 27 at American Express merchants that fit this profile.

Grassroots networks like the American Independent Business Alliance (AMIBA) and the Business Alliance for Local Living Economies have promoted local shopping around the holidays since the early 2000s. "We welcome folks jumping on the bandwagon with that message," says Jeff Milchen, co-founder of AMIBA, based in Bozeman, Mont. "This year the localization movement reached somewhat of a tipping point where we started seeing a lot more energy going in that direction."

Credit-Card Competition

What's behind AmEx's push for local shopping? Getting a bigger share of consumers' holiday spending in what's likely to be another lean year, says David Robertson, publisher of credit-card industry newsletter The Nilson Report. "Card issuers are lining up just as retailers are and [they're] putting together their best offer to be first in wallet," Robertson says. "Target vs.Walmart is no different than AmEx vs.Chase." The National Retail Federation forecasts holiday retail sales to rise 2.3 percent over 2009, to $447 billion.

American Express, which generally charges retailers higher transaction fees than competitors Visa (V) and MasterCard (MA), is accepted at less than 4 million merchants, compared with more than 8 million for the other major payment networks, Robertson says. "AmEx is always trying to justify its higher fees by bringing the merchant into the promotion," says Robertson.

So far, independent businesses appear receptive to the credit-card company's marketing campaign. "There's bad co-opting and there's good corporate co-opting, and I definitely read this as good corporate co-opting," says Dana Eness, executive director of the Urban Conservancy in New Orleans, which runs the city's Stay Local project. Eness and Milchen say they do not consider the effort "local-washing," the way they characterize national chains' attempts to encourage shopping at their stores under the banner of supporting the local economy.

Facebook Tie-In

On Nov. 23, AmEx doubled the number of cardholders who can use the credit in response to demand, says AmEx spokeswoman Rosa Alfonso. AmEx and Facebook are also giving 10,000 merchants credits for free advertising on the social network. The Small Business Saturday Facebook page had more than 885,000 "likes" by the afternoon of Nov. 23.

AmEx is partnering with an effort known as the 3/50 project, led by speaker and retail consultant Cinda Baxter, that encourages people to shift $50 of spending each month to their three favorite independent retailers. Baxter, who is being sponsored by American Express for an undisclosed amount, says they are looking to extend the local business promotion beyond the holiday season. "This isn't just a one-weekend kind of arrangement," she says. "We're going to look at the entire year going ahead."

American Express announced the campaign on Nov. 8 in an event with New York Mayor Michael Bloomberg and Chief Executive Officer Kenneth Chenault. The mayor is the founder and majority owner of Bloomberg LP, the parent of Bloomberg News.

John_tozzi
Tozzi is a reporter for Bloomberg Businessweek in New York.

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