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News & Press: Arizona Business News Updates

State organization promotes staying within community to shop

Tuesday, July 15, 2014   (0 Comments)
Posted by: Rhette Baughman
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Locally centered spending has surged over the past few years due in part to organizations that promote local economies.

Local First Arizona, a nonprofit that celebrates local identity and encourages consumers to support their neighbors and community through spending, has offered to businesses all across the East Valley.

There are over 400 Local First members in the East Valley, including neighborhood banks, printers, cafes, bookstores, locksmiths, restaurants, taxi services, insurance groups, bookkeepers, toy stores and animal hospitals. In turn, these businesses often seek the services of other localists — customers and businesses who seek out local merchants — to run their daily operations.

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By shifting 10 percent of a person’s everyday purchases to local businesses like those listed by Local First, individual residents can affect small businesses in a big way.

“I’d say our ultimate goal really is to shift the public mindset to think local first. By thinking local first, they keep more money in the community, which in turn creates more jobs for our neighbors and everyone living here and to create more prosperous communities,” said Erica Pederson, communications director for Local First Arizona.

Economic benefitsA study conducted by Civic Economics found a community roughly the size of Tucson or a little larger than Mesa could create 1,600 new jobs, $50 million in new wages, and $137 million in new economic activity if residents made the 10-percent shift.

For every $100 spent at a local business, $73 remains in the local economic system and $27 leaves. However, for every $100 spent at a national retailer, $43 remains locally and $57 leaves, according to a Civic Economics study for Grand Rapids, Mich.

“Just by choosing to spend your dollars in a local business, you’re recirculating it locally. We work with local accountants, we have local graphic designers, we have local printers. So, by supporting local business, you’re keeping the money in the community,” said Cindy Dach, co-owner of Changing Hands bookstores in Tempe and Phoenix and co-founder of Local First Arizona.

Local First Arizona reports up to 75 percent more tax revenue could be generated by favoring local businesses over national retailers and adopting a localist mentality. According to the Institute of Local Self Reliance’s Independent Business Survey (ILSR), national communities that adopted Local First initiatives reported a revenue growth of 5.3 percent for small businesses during 2013 and over 75 percent of local businesses experienced an increase in customers and a sales growth of 7 percent, compared with a 2.3 percent increase in communities without local initiatives.

What Local First does
Local First Arizona was created by Dach and Stinkweeds owner Kimber Lanning in 2003 as an awareness campaign for local businesses. It is the largest independent business coalition of its kind in the country, with a membership of around 2,500 local business members, Pederson said.

“We’ve seen a huge amount of growth even within the past number of years, so we really expect that to continue and to grow even more and become more present in the minds of Arizonans all across the state,” she said.

Local First Arizona provides a business directory on its website that highlights small businesses in the area. The site is broken down into Arizona counties and then cities and towns. Consumers can sign up to receive news concerning local businesses and Local First or sign up for the localist or local business member program, which offers members webinar and networking opportunities through mixers. Localist membership offers member events and discounted products at participating local businesses.

Dach said Local First Arizona has greatly affected local communities.

“I think there’s a national movement around Local First and I think there’s a tourism movement around it; when people travel, they look for the local businesses and I think, absolutely, awareness has been raised around the differences between shopping locally and not,” she said.

The problem with big-box stores
When big-box stores are introduced into a community, they are often structures large enough to accommodate a number of services, or superstores. These superstores drop prices low enough to turn consumers away from the higher-priced local businesses, according to ILSR.

Once consumer foot traffic is redirected to the superstore, the smaller business is unable to maintain a steady stream of revenue and might have to close or downsize.

“In the end, you’re going to wind up paying for those cheaper goods and services somewhere else,” said Melissa Webb of Iss’ Magic Mixes in Mesa, “I feel like for a very long time, people have been so driven by cheap that they miss the big picture of these small, using the Ace Hardware analogy, companies. People don’t need to go there anymore because they can go to Home Depot and Home Depot can drive the prices really, really low because they’re able to get things at such a huge volume that these smaller places wouldn’t ever be able to take advantage of.”

Big-box stores may also result in negative economic conditions if the store is abandoned, closed or moved to a more favorable location, per the ILSR.

Vacant buildings take up prime retail space and may lead to vandalism and a loss of community pride.

Local First Arizona also reports for every two jobs a national retailer creates, three jobs are lost as a result of local closures and that the tax revenue subsidies granted to chains by local government depletes tax revenue.

“We saw a bit of that in Phoenix during the recession when it was hard for a lot of businesses,” Pederson said. “When the big businesses go out of business, they just leave their shopping malls and vacant buildings, and it’s really destructive to the community.”

Banks also fit the big-box classification. Larger banks are less likely to loan money to smaller businesses, and they control roughly 57 percent of bank assets yet allocate only 18 percent of their loan portfolios to small businesses. Small banks, in comparison, control less than a quarter of total bank assets but are responsible for more than half of small-business lending, according to ILSR.

“We’re huge advocates of banking locally,” Pederson said, “We find that they, more than big banks, tend to lend to local businesses. That allows small businesses to expand and grow and hire local people.”

Every third cup of coffee
Dach said it isn’t necessary to transfer every purchase to local businesses and restaurants; the local economy would still benefit if every third cup of coffee was bought at a local vendor.

“Studies have actually shown that the presence of local businesses within a community and the higher the rate of local businesses in that community, the more prosperous that community is, the more residents are proud of their community. Local businesses contribute highly to placemaking and making a place feel like home,” Pederson said.

Originally posted at East Valley Tribune. Written by Sam Gauvain.



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