Kansas City Buy Local
Ten New Studies of the “Local Economic Premium”
Published October, 2012 by AMIBA staff
Since 2002, a growing number of studies have quantified the local economic benefits delivered by independent businesses, demonstrating locally-owned independent businesses return much more of each dollar in revenue to their communities than chains (i.e. the local premium).
The American Booksellers Association (ABA) underwrote the cost of economic impact studies for 10 cities where ABA members that also are members of an Independent Business Alliance or similar group raised funds to supplement their support. The firm Civic Economics evaluated the local economic impact of retailers in all 10 cities and also studied restaurants in five of these. While we reported Salt Lake City’s results in August, new studies were just released from (links all are pdf) Louisville, KY, Milwaukee, WI,Ogden, UT, and the Six Corners area of Chicago. The data continue to demonstrate findings consistent with previous studies.
Kansas City Buy Local
When buying local is compared to chains, up to 48% of the revenues are recirculated back into the local economy, buying from chains, only 14%.
Economic Multiplier Effect
Explaining the local economic multiplier effect or “local premium” is an essential component of effective “buy local” public education campaigns.
The multiplier effect is the boost to your local economy that results from locally-owned independent businesses, owners, and employees spending business revenue within the region. Typically, local independent businesses recirculate a much greater percentage of sales locally compared to absentee-owned businesses (or most locally-owned franchises*).
Total economic impact is determined by measuring three components — the direct, indirect, and induced impacts.
- Direct impact is spending done by a business in the local economy to operate the business, including inventory, utilities, equipment and pay to employees.
- Indirect impact refers to the conventional multiplier that happens as dollars the local business spends at other area businesses re-circulate.
- Induced impact refers to the additional consumer spending that happens as employees, business owners and others spend their income in the local economy.