Finance vs. Feelings: Buying Local vs. Online

by Kevin on August 30, 2012

This is the first post in a series to contrast spending, saving, and investing your money with your head vs your heart. I hope you’ll join me in the conversation.

Everyone loves to support local businesses. Politicians rally around small business owners, and can you really hate the Mom and Pop shop on the corner? They supported your rec league soccer team when you were growing up; their logo was on everything you wore on game day. They are good people, members of the community, and hard working.

Admittedly, their prices aren’t always the best, and they have a limited selection sometimes. But they are your neighbors, so you have to support them. Right?

Enter online businesses that offer a cornucopia of seemingly endless options. An amazing selection.

And that selection is surprisingly affordable. With no brick-and-mortar locations, just basic warehouses stocked to the gills with stuff you want to buy, their prices soon began beating down small business owners. You can order whatever you wanted from anywhere in the world and have it on your doorstep in 2 days. No store, no parking, no hassle. (And returns are usually pretty easy with paid shipping back to the company.)

But what about the nice neighbors that are suddenly struggling to keep their heads above water?

That’s my finance vs. feelings struggle: the best financial decision is to go for whoever can offer the best mix of price, selection, and customer service. In most instances price is my main driver. So hopping on to Amazon — the faceless corporation with a bevy of warehouses across the country — is almost always my first choice. Amazon rewards me for finding the things I want, spending more than $25 to get free shipping, and waiting a few days with great pricing and overall value.

But it means I’m robbing a local merchant of another sale that would keep the doors open another month.

My heart tells me that small business owner needs me to support them. Nevermind that they might be doing fine, my heart tells me I’m the only thing standing between them and the closure of the business.

Sometimes that is true on an individual basis, but usually not. Most firms will survive losing your specific individual purchase.

But the aggregate impact of many individual purchases going online slowly drains a community of the local businesses, leaving megacorporations that can compete on price and online vendors.

How much money would it cost me to spend locally rather than going online? You can’t paint with a wide brush because it depends on what you’re buying. Maybe it’s 5% or 10% more added onto the price of whatever you’re buying. So your new running shoes cost $110 from the local business versus $100 when purchased online. Is it worth it?

Not only does the business miss out on the revenue from your sale, but the local municipality misses out on both the sales tax from the sale and the income tax from the owner of the business. That revenue goes to some other company in some other city in some other state.

Granted, it depends on the type of item and whether or not there is even a supplier in the local area that could sell you the item you want.

But even if there was — would you look? If you were looking to buy a specific shoe and knew you could get it online, in your size, correct the first time, with just a couple of clicks of your mouse, would you even bother running from store to store locally?

Most people wouldn’t. Myself included.

Is that wrong?

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