Independents vs. Chains Studies

*United States| Posted: 1/20/2009

Reports and Studies on the Economic Impact of Shopping with Local Businesses versus Chains

Thinking Outside the Box: A Report on Independent Merchants and the Local Economy, by Civic Economics, commissioned by The Urban Conservancy, 2009. This report shows that local businesses generate two to three times more local economic activity than chain businesses. Analysts compared the locally owned businesses on Magazine Street in New Orleans, which recycled 32 percent of their revenue back into the local economy, with an average SuperTarget, which recirculates only about 16 percent of their sales revenue into the local economies where they are located. The report suggests that if just 10 percent of retail purchases in Orleans Parish were to shift from chains to local merchants, the effect could translate to $60 million for the local economy.

Local Works: Examining the Impact of Local Business on the West Michigan Economy, by Civic Economics, commissioned by Local First Grand Rapids, 2008. This study calculated the economic impact of local and chain pharmacies, groceries, restaurants, and banks in Grand Rapids and the surrounding Kent County, Michigan. Local restaurants were shown to circulate 56.1% of their revenue into the local economy in the form of paychecks, products and services purchased locally, profits, and charitable giving. In contrast, chain restaurants only recirculated 36.8%. The study determines that $1 million spent at local restaurants generates $900,000 in local economic activity and support 15 jobs, while chain restaurants only bring $600,000 to the local economy and 10 jobs. Similar findings were true for the other categories (with the exception of banks, which researchers were unable to analyze necessary data sets). The study suggests that if consumers were to shift 10% of their spending from chains to locally owned businesses in the Grand Rapids area, it could generate $140 million in new economic activity, and add 1,600 new jobs and $53 million in payroll.

The San Francisco Retail Diversity Study, by Civic Economics, commissioned by the San Francisco Locally Owned Merchants Alliance, 2007. This study calculated the market share in San Francisco and adjacent communities for independent and chain bookstores, sporting goods stores, toy stores, and casual dining restaurants. In each category, independent businesses capture more than half of the sales within the city. The data demonstrates that independent businesses have a greater economic impact than chains across each category. For example, every $1 million spent at a local bookshop, creates $321,000 in additional economic activity in the city, including $119,000 in wages paid to local workers. A chain bookstore, on the other hand, generates only $188,000 in economic activity and $71,000 in local wages. Another example: For every $1 million in sales, independent toy stores create 2.22 local jobs, while chains create just 1.31. The study concludes that if consumers shifted 10% of their spending from chains to independents that it could generate more than $191 million in economic activity for San Francisco, provide $71.8 million in new income for workers, and create 1,295 jobs.

The Andersonville Study of Retail Economics by Civic Economics, commissioned by the Andersonville Chamber of Commerce and the Andersonville Development Corp., 2004. The study examined the economic impact of 10 local businesses in the Andersonville commercial district in Chicago against that of chain businesses. The study concluded that for every $100 spent with local businesses, $68 remains in the Chicago economy; $100 spent with a chain, $43 remains in the Chicago economy; for every square foot occupied by a local firm, local economic impact is $179; for every square foot occupied by a chain firm, local economic impact is $105; 70% of consumers surveyed prefer shopping with locally owned businesses; and over 80% of consumers surveyed prefer shopping in traditional urban business districts.

The Economic Impact of Locally Owned Businesses vs. Chains: A Case Study in Midcoast Maine, by the Institute for Local Self-Reliance with the Friends of Midcoast Maine, 2003. Eight local businesses in Rockland, Camden, and Belfast shared their revenue and sales data to prove that three times as much money circulates into the local economy of Midcoast Maine when spent on products and services from locally owned businesses.  The combined total sales in 2002 for the eight businesses was $5.7 million, of which 44.6% was spending in the surrounding two counties and 8.7% was spent elsewhere in Maine. The businesses, which employed 62 people all together, funneled their local dollars toward paying employees' wages and benefits; on products and services from other local businesses; and on taxes.  In contrast, a big-box retailer in the region circulates only 14.1% of its revenue into the local economy, mostly in the form of wages, while the bulk of revenue earnings returns to the corporation's headquarters or suppliers outside of Maine.  This shows that when Midcoast Maine shoppers spend $100 at a local business, it generates $45 in local spending, while $100 spent with a big-box store only generates $14 in local spending by the retailer.

Economic Impact Analysis: A Case Study: Local Merchants vs. Chain Retailers, by Civic Economics, commissioned by Livable City, 2002. The study compared revenue and expenditures of two local businesses against Borders, which was slated to occupy an adjacent storefront and was publicly subsidized. Researchers determined that for every $100 in consumer spending at Borders, the total local economic impact is only $13. The same amount spent with a local merchant yields more than three times the local economic impact. They suggested that if each household in Travis County redirected $100 of planned holiday spending from chain stores to locally owned merchants, the local economic impact would reach approximately $10 million.

This study concludes that if residents of Grand Rapids and surrounding Kent County, Michigan, were to redirect 10 percent of their total spending from chains to locally owned businesses, the result would be $140 million in new economic activity for the region, including 1,600 new jobs and $53 million in additional payroll. The study calculates the market share of independent businesses in four categories: pharmacy (41%), grocery (52%), restaurants (50%), and banks (6%). It analyzes how much of the money spent at these businesses stays in the area compared to national chains. Local restaurants, for example, return more than 56% of their revenue to the local economy in the form of wages, goods and services purchased locally, profits, and donations. Chain restaurants return only 37%. Measuring the total economic impact of this difference, including indirect and induced activity, the study estimates that $1 million spent at chain restaurants produces about $600,000 in additional local economic activity and supports 10 jobs. Spending $1 million at local restaurants, meanwhile, generates over $900,000 in added local economic activity and supports 15 jobs.