Should You Support Local Businesses at All Costs?

by Kevin on December 4, 2008

With the economy dropping faster than Southeastern Conference football coaches, I pondered this question last night. Should I support local businesses and entrepreneurs at all costs?

At first glance the obvious answer seems to be, “Yes, of course. Support your local community.” As I thought further I just wasn’t convinced entirely.

The Pros of Supporting Local Businesses

  • You support you local economy which has somewhat of a trickle down effect. How? Imagine you buy your produce fresh from a farmer at a farmer’s market. The farmer retains more profit without a grocery store middle man. The farmer turns around and buys fertilizer, gasoline, and other supplies (hopefully) locally which helps provide income to those businesses and employees. The farmer’s income can also be used to buy everything you might expect from a normal person — movie tickets, sports tickets, clothing, etc. This all helps the local economy assuming he buys from other local businesses.
  • It feels “right”. Why support megacorporations that could care less about you?
  • Local businesses should provide better customer service. This is not a certainty, but usually one would expect a local business to provide better customer service than a large corporation. With local businesses you are likely to develop a relationship with the owner or the set of employees on site. Due to their smaller size, they are also more likely to bend when they are wrong in order to keep you happy. I would also expect the return process to be easier and more flexible.

The Cons of Supporting Local Businesses

  • You may pay a steep price over a large corporation or online-only store. Sometimes small businesses undercut the margins of large companies in order to grab some market share. However I think that is the exception rather than the rule. Usually if you get your car serviced at a local mechanic you will end up paying more than a national chain — the national chain has pricing power to buy cheaper oil, cheaper filters, and cheaper parts.
  • A local business may not have a large inventory. They may only stock really popular items and not be able to quickly meet your specific need without special ordering it.
  • Some small businesses are less convenient than a national chain. Imagine one of your favorite stores in a downtown area, but they are only open until 6pm Monday through Friday. You work outside of downtown and getting down to the store before it closes is near impossible. A national chain is likely to be open until 8 or 9pm on each night and also have more locations.

So what’s the bottom line here? As always… it depends. I like working with local businesses — especially restaurants. Each person is going to have different needs for purchases. I recently talked about buying a laptop and some PC hardware from NewEgg.com. I stick with NewEgg not because they are local to me, but because they have an extraordinarly large and diverse inventory, most shipping is free, and they have great customer service. If NewEgg were a local business I would definitely support it.

What about you? Do you go out of your way to buy local? Or do you go for lowest price no matter what?

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Philip December 4, 2008 at 10:36 am

I have not found computer equipment stores that local matters, but in some businesses being local means more.

In particular I am talking about cycling, by purchasing and getting to know the store sometimes they can help you out when you are in a pinch. One time I had a race, and went in the morning of the race to get a wheel fixed, he dropped it all and fixed me up right on the spot. If I had gone to the big stores they would not know who I am and would have stuck it in line to be fixed in a few days or so.

I also know that smaller stores will go out of their way to get what you want for other things too. I know some small electronics equipment that I have used for various projects that would never be carried at the big box stores but the local stores happened to have or would get for me. Then the expertise on what they knew about the equipment was helpful.

I guess for me it depends on what I am getting and how much support I will want later for that product.

Mr. ToughMoneyLove December 4, 2008 at 11:03 am

I will support a local business that provides sufficient value (proximity or customer service) that compensates for higher prices. A local hardware store does this for me. Unfortunately, most local businesses fall short.

[email protected] December 4, 2008 at 11:49 am

When it comes to my food, yes, a very large percentage of it is local. True, a lot of it I grow or raise myself, so that’s not a normal purchase. But almost all of the meat and fish I buy, and some of the dairy as well, is from local producers. I don’t buy many fruits or vegetables because we produce our own, but those I do buy are local so far as possible. Grains and oils I buy at a local Mennonite bulk foods store. I feel lucky to live in an area where this is possible.

For other things, I generally look for the best price. I doubt I could find local producers for things like socks and clothing. I have made purchases from local potters that were more expensive than I could have justified if I were shopping online.

Christina December 4, 2008 at 1:49 pm

This is a question I ask myself frequently. I live in a rural area where you know WHO you are supporting. And you know that the more shopping you do online (at a cheaper cost), the more local options will start to disappear. it’s a tough call.

Russell Fascenda December 4, 2008 at 3:47 pm

I’m with Christina, and it’s more than just a loyalty to local businesses. Kevin pointed out how the national chain has pricing power because of their volume. That must cut into the profits of the vendor, I wonder who makes up for that? You know who, the smaller local merchants. As more smaller stores disappear, who is going to make up the profits then? I think nobody, and WalMart might be the only store in town by then, but they won’t be able to maintain those low prices. And that will take a lot more income out of the local community.

Frugal Bachelor December 4, 2008 at 10:49 pm

I put zero extra value on local businesses. I choose small versus large based strictly on pricing and quality. I usually prefer large stores because I walk around without being bothered. I find “personal service” at the smaller stores to be annoying. When I go shopping, I want to find what I want, pay for it, and then leave, with minimum of hassle. Also smaller stores tend to have more rules, e.g. credit card minimums, and usually have inferior internet presence so they are hard to find out about unless you seek them out.

Of course if the smaller business has better deal I will purchase it there, and for certain businesses (such as restaurants) it is typical for the smaller business to have better quality for the money.

When you shop at local chain stores you are still supporting the local economy because the workers are local, also any sales taxes, even if the razor thin margins are going to Bentonville. Most stuff is made in China anyways so it doesn’t really matter what store you buy it at.

Philip December 5, 2008 at 7:58 am

@FB – What are your thoughts on this topic in regards to your out of country travel and what kind of stores you shop at during those time and how you think it affects the economy?

Kevin December 5, 2008 at 9:30 am

@Philip: Good point about the expertise and bending over backwards to help you out during the race.

@ToughMoneyLove: Good point. I wouldn’t say most small businesses in our area fail that proposition, but it is unique as well.

@Kate: Sounds like you a really lucky to be surrounded by so much.

@Christina: Then again how many local suppliers do you have for stuff that is sold primarily online? That is, do you have a bunch of expensive computer shops locally?

@Russell: It’s a delicate balance…

@Frugal Bachelor: Good point about the taxes. Then again if the company’s profits are also taxed in your area, that’s more going into the local economy (rather than Bentonville).

TStrump December 11, 2008 at 8:31 pm

Buying local is definitely better, but sometimes, it’s hard to not be seduced by the cheap prices at these big stores.
Plus, the big box stores have better return policies and frequently, customer service.
Of course, the scary thing is, what will happen to prices when all the local stores have had to close?

Kevin December 20, 2008 at 12:23 pm

@TSTRUMP: Thanks for commenting. When the local stores close, others will open up. The cycle of capitalism will continue. (In my opinion.)

Start-Up January 8, 2009 at 3:35 pm

What are your thoughts on losing your longtime head football coach and having him replaced by an NFL scarred head coach? At least he’s bringing his dad along who is a defensive genius.

Infocities March 24, 2013 at 9:04 am

if you know you can get a product you want from a local business, then you should support your local small business. For example there are a lot of electronics stores, but people usually go to the big national stores because they are used to it. Buying from local businesses also takes effort because you probably have to travel to a couple or even a few different stores instead of going to one national store which has everything. But in the long run, if you dont support local small businesses you are destroying your own community, because small businesses is what makes a city unique and it brings tourists and people from near by towns to shop at these stores. So, yes you should support local businesses at all costs, in the long run you will win. There is a great article here with more facts: http://www.infocities.com/articles/top-reasons-to-support-local-businesses

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