Buy local

By: J. David Chapman/June 4, 2020

You are about to see an abundance of “Buy Local” campaigns funded by cities, chambers of commerce and local economic development entities. Everyone is wondering how they can do their part in helping improve the struggling local economy as we come out of the pandemic and enter into recession. Now more than ever, it is important to ask yourself when making purchases, if you can buy something local before buying online, out of state, and certainly try to buy products made in the USA.

Oklahoma made a hugely impactful decision a few years ago to charge local sales tax to online purchases. This has been very important during the last few years as more and more consumers purchase online, but even more important during the last two months as online purchases have soared. While this decision has had a huge effect on municipality sales tax, it is little justification for not buying local. Buying local provides many benefits to you, your neighbors, and your community.

First, buying local builds community. The casual encounters you enjoy at neighborhood-scale businesses and public spaces around those entities build relationships and community cohesiveness. I have written about placemaking efforts by cities. Local businesses can become placemaking opportunities and these buying opportunities can become networking occasions.

Secondly, buying local provides what we call a multiplier effect. Studies on purchasing show that on average, 48% of each purchase at a local independent business is recirculated locally, compared to less than 14% of purchases at chain stores. Therefore, buying at locally owned, independent businesses has a significantly larger impact on other businesses in your community than buying at national chain stores.

Lastly, buying local has a big impact on real estate and the built environment. When compared to national big-box retailers, small neighborhood-located businesses’ real estate generates a higher net return to municipalities and real estate investors. This is due to the higher cost of infrastructure and maintenance cost incurred by cities for the larger buildings and higher price per square foot for real estate investors and owners for the smaller neighborhood real estate products. Local businesses put less demand on our roads, sewers, and safety services. They also generate more tax revenue per sales dollar. Now that our economy has opened back up, let’s go out and buy from our locally owned restaurants and retailers and positively affect our community.

J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).