Made in the USA. Buy American.
You see these terms often in reference to where things are manufactured because purchasing domestic products strengthens the US economy. In this second guest column, I would like to posit how the same can be said when we “Shop Local” and “Shop Benicia.”
To begin, I need to refer to a study commissioned in 2015 by the National Retail Hardware Association. Like chambers of commerce, this is a trade group for independent hardware retailers. The study focuses on retail hardware, but one can reasonably estimate how the results apply to other local businesses, like grocery stores, restaurants, coffee shops, etc.
A small Midwest firm, Civic Economics (CE), performed the research and presented its findings in a report called “Home Sweet Home.” In it, they looked at a hypothetical $10,000 home improvement project that was sourced locally or purchased out-of-town at a chain store. The goal was to measure and compare the economic benefit of monies re-circulated after the initial purchase on a host community. They determined that the lion’s share of economic return following a purchase came from four factors: labor, profit, procurement, and charity. So, let’s start with labor.
Arguably the single largest expense in most small businesses is labor. In retail, this would include sales personnel, clerks, managers, bookkeepers, while in restaurants this would be wait staff, prep and chef, etc. CE reported that local labor is the largest source of re-circulated dollars following a purchase. This should be no surprise. Locally employed individuals spend a significant part of their earnings in town, in grocery stores, restaurants, coffee shops, etc. They also noted that dollars re-circulated by large out-of-town companies or online companies were “insignificant to a local economy,” adding that chain store and online companies, like Amazon, often have administrative offices elsewhere such that they hire few or no one locally.
The next source of re-circulated revenue derives from company profits. Here, profits of chain store companies are directed to corporate headquarters and held in corporate bank accounts until distributed to shareholders via dividends. Locally owned businesses are much more apt to hold and/or spend profits locally and in the host community, thus contributing to the local economy.
Third is procurement, that is, goods and services purchased by business. Local businesses procure and purchase far more goods and services locally – for janitorial, landscaping, accounting, legal, technology, etc. Chain stores coordinate their purchasing from corporate headquarters and contribute little to local economies.
Finally, there is charitable giving. Owners and employees of local firms generally live in the community. As such, they support charities in their own backyards to causes and nonprofits near and dear to their families and employees. National firms more often support national causes or donate to charities near corporate headquarters. Sometimes marketing campaigns around said donations exceed the cost of the gift(s), which is a sad reality of our over-hyped marketplace.
So, how did these four categories add up?
Home Sweet Home found that independent retailers had the highest re-circulation to the local economy, that is , 30.4% of the initial spend was returned to the local economy via re-circulated dollars. For chain retailers, the amount was 13.2% and for Amazon, a mere 4.5%.
Applying those results to Benicia we can estimate a local benefit in a simple way: Spend $100 in Benicia and $30.40 would be re-circulated back into the local Benicia economy. Spent out-of-town, the economic recirculation would be $13.20. And for Amazon?… that local impact drops to $4.50.
The results are clear: spending locally results in a much higher re-circulation and economic benefit. And when you decide to purchase locally, Buy Benicia, it can and does have a tremendous benefit.
It is important to note one other benefit, not part of the Home Sweet Home study: the effect of sales tax. Recall that Benicia sales tax is currently 8.375%. Of that, almost one quarter, or 2%, is returned to City coffers. So, for every $100 spent in Benicia – in a restaurant, bookstore, antique store, etc, – the City gets two bucks!
This adds up! According to Mario Giuliani, Economic Development Manager, “Sales tax is a significant resource to the City.” He noted that even with the pandemic’s economic devastation, “The City remained relatively unscathed during Covid.” He explained that while tax revenues decreased for many closed businesses, they had simultaneously increased for grocery and online purchases.
Bottom line: When you Buy Benicia, Benicia benefits! Benicia businesses (BB’s) employ local residents who in turn spend locally, re-circulating dollars into the local economy. BB’s purchase local goods as well as services like accountants, lawyers, contractors, etc, many who spend locally in turn. BB’s also get involved in community activities and events, both by volunteering through financial and charitable support. And finally, the City benefits too… depending on a consistent 2% tax that funds services which the City provides to you!