Ten Studies of the “Local Economic Premium”
Published October, 2012 by AMIBA staff
Since 2002, a growing number of studies have quantified the local economic benefits delivered by independent businesses, demonstrating locally-owned independent businesses return much more of each dollar in revenue to their communities than chains (i.e. the local premium).
The American Booksellers Association (ABA) underwrote the cost of economic impact studies for 10 cities where ABA members that also are members of an Independent Business Alliance or similar group raised funds to supplement their support. The firm Civic Economics evaluated the local economic impact of retailers in all 10 cities and also studied restaurants in five of these. While we reported Salt Lake City’s results in August, new studies were just released from (links all are pdf) Louisville, KY, Milwaukee, WI, Ogden, UT, and the Six Corners area of Chicago. The data continue to demonstrate findings consistent with previous studies.
Among Retailers… (click on thumbnails for full-size graphs)
Spending at indie retailers generates 4 times more local economic return than spending at chains in Louisville.
3.55 times more in Ogden, UT
Average results for all ten communities
Averaged across the 10 communities in the retail studies, spending at indie retailers generates 3.7 times more direct local economic benefit than spending at chains.
Civic Economics analyzed annual reports for four major national chain stores (Barnes & Noble, Home Depot, Office Max, and Target) for comparison. These stores are estimated to recirculate an average of 13.6% of all revenue within the local markets.
Spending at indie restaurants created 2.2 times more direct local economic return than spending at chains in Louisville.
1.87 times times more in Ogden
Civic Economics analyzed public reports from Darden, McDonald’s, and PF Chang’s to project local procurement percentages for chain restaurants. These eateries were estimated to recirculate an average of 30.4% of revenue within the local market. The multiplier is higher with restaurants than retailers largely because local labor costs comprise a higher portion of overall operating expenses. Also, local restaurateurs often can source significant portions of their fare locally — something not possible for many retailers.
Framing the findings. Reporting such data to your audience in an accurate and memorable way can be tricky (learning the issue thoroughy can help), but here’s one idea: “More than one dozen studies over the past decade show locally-owned independent restaurants re-spend twice as much per dollar of revenue in our local economy than chain restaurants. And independent retailers re-spend more than three times as much of each sales dollar locally compared to their chain competitors. That adds up to a huge difference in creating local jobs and local wealth.”
Also consider the Louisville Independent Business Alliance‘s approach of adding calculations of local demographic and economic data to the study results, as in “a market shift of just 10 percent from chains to independents would retain an additional $416 million in the regional economy every year.” Each of the studies in this group calculates the impact of a 10% shift.
What’s an independent Business Alliance and how can one help our community prosper?