Northwest Business Magazine

Buying Local: Why it Matters to You

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In an age when so much about our economy feels out of control, it’s good to know that it’s within our power to impact our local economy. Learn why ‘Buy Local’ is not just a slogan for good business, but a strategy for economic recovery.

The Nicholson family has been selling hardware in Rockford since the late 1800s.

We’ve heard the admonition for decades: “Buy local.” Someplace in the back of our minds, we know it makes sense, just as it makes sense to “Buy American.” We know that supporting our own retailers and manufacturers is the best way to help ourselves, especially in tough times. Money spent at locally owned businesses stays in the community; it doesn’t make a beeline for Big Box Headquarters in Arkansas or elsewhere. Likewise, buying American-made goods helps our friends and neighbors to stay employed.

But it’s in the midst of tough times that we’re most tempted to cut corners and compromise on quality. We listen to advertisements that promise the impossible and we want to believe they’re true. We try to do things ourselves that we have no business attempting, rather than hiring a professional. And, we run to the Big Box to pick up that $6 widget that’s on sale for $2. Trouble is, we pick up some other items, too, which have been marked up to pay for the store’s loss on that widget.

Let’s face it, none of us is likely to cut the Big Box entirely out of our shopping habit. It’s oh-so-conveniently located, and most of us are desperate to save time. But shifting even 10 percent of our expenditures to locally owned businesses – whether retail store, restaurant, pet grooming parlor or anything else – could make a huge, positive impact on the health of our community and the quality of our lives.

David, Trina, Dale and Christopher Gustafson. Dale’s father began selling appliances to the Rockford market in 1928.


Myth: Local Stores are More Expensive

“Especially in these tough times, people want to tell themselves, ‘I got a deal,’ and they think the best deal is at a big-box store, or the store that advertises ‘free’ installation,” says Lonnie Presson, owner of Lonnie’s Carpet Max, Rockford. “But at the end of the day, they’re not always saving money and the result is often disappointing. They’re getting nickeled and dimed for this and that. They pay to take home samples. They pay to have their homes measured. Then, a lot of times, they end up paying me to send my guys out to fix what some other installer didn’t get right. I get those calls all the time.”

The good intentions of do-it-yourselfers commonly go awry, too. “I look back on my lifetime and we’ve gone through phases like this two or three times, where unemployment is high, and you’ve got to be extra careful because you actually end up paying more in the process of trying to save yourself money,” says Presson.

“You’re better off to let people who’ve made this their life’s work get it done once and get it done right.”
Presson purchases his inventory through Flooring America, the largest flooring buying group in the nation, which gives him better group buying power than national chain stores have.

“We work on very slim margins. I’m not sure what people think we earn on a $1,000 job, but I guarantee it’s not as much as you think it is.”

“There was a day, before independent retailer buying groups, when mom-and-pop stores were more expensive,” says Dale Gustafson, owner of Gustafson Furniture and Mattress, Rockford. “But the reality is that we’re part of a buying group, called Furniture First, which has 300 members who buy $1.8 billion in furniture a year. That helps us save money, and so does the fact that we don’t have a big headquarters in Schaumburg or some other place. The profit we make stays entirely in our own communities.”

“We shop the competition, we know what they charge,” says Darwyn Guler, owner of Guler Appliance, Rockford, which sources its inventory through Nationwide buying group. “Something costs just $1 at the Big Box, but there’s a $6 charge to deliver, another $6 take-away fee, and pretty soon you’re paying an extra $70 to $120 that wasn’t in the advertised price, just to do the things we’ve always done as part of our service.”

“The chain stores have what they call loss leaders,” explains Paul Nicholson, who co-owns Nicholson Hardware with his uncle, brother and three sisters. “They’ll actually take a loss on an advertised item to create the perception that they have the best prices on everything in the store. To make up for that loss, they’ll increase the margins on other items. When you pick 15 or 20 items and comparison shop, you find we’re typically in the ballpark, and the quality of our inventory is much higher overall. But the place where we really distinguish ourselves is in service. Our average employee has been here 20 years and you have to work hard to ask a question we can’t answer. At the big box, that can be a little different experience.”

The Quality Factor

“My guys can open a bucket of adhesive and sniff it and tell you whether it’s good or not,” says Presson. “It’s what they do for a living and they know things that people outside the industry just can’t know. We conduct training sessions and constantly keep up with all the new products and procedures. There are certain products that can only be installed in certain places using certain methods. We know about these things and can help you to make a good decision instead of one that will cost you money down the road. For example, a do-it-yourselfer installs ¾-inch hardwood in his basement and wonders why it doesn’t last. Then we get a call and have to come out and re-install engineered wood that can tolerate the moisture of a basement. Why didn’t they come to us first? What seems like an inexpensive route so often catches up with you.”

“What we offer is expertise,” says Gustafson. “People don’t want to be treated like a number when they’re out spending hard-earned money. We service them. We don’t hound them. Maybe they haven’t bought a mattress in 20 years. All the mattresses look square and white, so why is one $199 and another $2,000? We inform them, but we don’t pressure them. We work hard to be trustworthy and informative. Our employee turnover is very low, and we’re proud of that. It’s good to be able to come back to a local store and see the owner if there’s a problem, to see the guy you bought it from, the guy who delivered it, to have some consistency and know they’ll still be there two years down the road when it comes time for your next purchase.”

Darwyn Guler, owner of Guler Appliance in Rockford, is a second-generation hometown merchant. His father invested in what was then called Johnson Appliance, in 1936.

“One of the things people appreciate about us is that we’re careful about the products we stock,” says Nicholson. “We try hard to buy American-made products, whenever possible. We try not to carry low-quality items that we personally wouldn’t want to use. We filter out the junk and stand behind what we carry.”

“It all boils down to one-on-one conversation,” says Guler. “We’re just more knowledgeable about the information we supply to people, which can be critical to preventing expensive mistakes, especially when it comes to things like measurements and sizes. When people order something incorrectly, especially during new construction or renovation, it can become very costly when a project drags out and products need to be re-ordered.”

Trust

Many locally owned businesses are in the third or fourth generation of ownership. The Nicholsons have been in the hardware business since their ancestors opened a store on Seventh Street in Rockford, named Skandia, in the late 1800s. “You could say we’re all highly invested in the business and eager to see it succeed,” says Nicholson. His uncle Jon runs nearby Nicholson Lawn & Garden, specializing in mowers and snow blowers.

“We care about Rockford and how well it does,” says Gustafson, whose father started selling appliances just before the Great Depression, in 1928. “We’ve sold some 700,000 items to local people during the past 80 years. They know us, know they can trust us. My dad always said, ‘If you don’t know your jewelry, make sure you know your jeweler.’ It’s nice for customers to be closer to the decision-makers, to have access to a store’s owner if they really need it. I always try to shop at locally owned stores, and we try to ‘pay our social rent’ by donating anonymously to local organizations. Rockford isn’t just a branch for us. It’s our headquarters.”

“I’m not saying that a big box doesn’t have its place,” says Presson. “But do you really trust it to care about you and do right by you? I have to do right by you, because you can walk up to me face-to-face. You can come up and ask me a question in the grocery store.”

Lonnie Presson worked as a carpet installer before opening his own showroom in Loves Park, Ill., in 1986.

Presson installed carpet for a living before opening his own showroom in 1986. “It was scary going out on my own, because I had a family to support, and I needed a regular paycheck,” he recalls. “But flooring was all I knew, and I loved it, so that’s what I did.” Today his flooring center is the busiest in the region, having outlasted dozens of others that have come and gone.

The local landscape of independent appliance dealers has dwindled from 33 to four, since Guler’s father invested in what was then Johnson Appliance in 1936. Guler’s reputation for being both capable and willing to service what it sells forces big-box stores to compete harder.

Better Employers & Employees

Whereas some national chains quietly encourage employee turnover, to keep payroll and benefit costs lower, most local employers pride themselves on the opposite. When Dale and Trina Gustafson moved into their current location on West Riverside Boulevard 13 years ago, they worked their 35,000-square-foot showroom alone. Today they have a 109,000 square-foot showroom and employ 29 people. “We have very low turnover in all departments,” says Gustafson. “Most people have been here three to 12 years. Those who left have either retired or moved away. I want low turnover because it takes a new employee a year or two to really see what we’re doing here, and, also, our customers enjoy consistency.”

To hold onto good employees, the Gustafsons try to maintain a positive working environment.

“We try not to stuff people into cubicles and we let them be people,” says Gustafson. “We accommodate schedules as best we can. Once a year we close the store and do a big picnic and Trina and I cook for everybody. We do what we can, and we let our staff know we genuinely appreciate them.” ❚

10 Reasons to Buy from Local, Independent Businesses

Local Economic Health. Many studies have shown that even a modest shift toward local spending yields big dividends for the community as a whole. Example: A 2008 study of Kent County, Mich., conducted by Civic Economics, Chicago, projected that shifting 10 percent of the county’s per capita spending from chains to locally owned, independent businesses would create almost $140 million in new economic activity and 1,600 new jobs for the region. “Studies suggest that more than 80 cents of every dollar that you spend at Home Depot or Target or Walmart leave the community,” states Stacy Mitchell, a senior researcher with the Institute of Self-Reliance, Washington D.C.

Better Consumer Satisfaction. Retailers who live in your community and run into you at the grocery store are far more likely to take a genuine interest in your satisfaction. They’re simply more accountable to you and less likely to take advantage of you through hidden costs and gimmicks.

Better Overall Experience. Local retailers are likely to be deeply invested in their products or services and are experts in their fields. Many surveys have found that big chain stores simply can’t compete when it comes to timely service, or access to decision-makers who can help you when something goes wrong.

Cost Competitiveness. The rise of independent retailer buying groups has enabled many independent retailers to be as competitive in pricing as big-box stores. Consumer Reports, for example, has reported that locally owned appliance stores are more likely to provide a better value than their big-box counterparts.

Money Multiplies. Locally owned businesses are more likely to do business with other local businesses. A 2004 study called “The Andersonville Study of Retail Economics,” conducted by Civic Economics, concluded that every $100 spent at an independent business created $68 in additional economic activity in the city, while spending the same amount at a chain only generated $43 worth of local impact. Further, owners of local businesses tend to be more supportive of local charities and more likely to stock American-made products. Shopping at large chain stores consolidates wealth into fewer hands. Mitchell estimates that $1 out of every $10 spent by an American goes to Walmart.

Better Jobs. Local employers tend to be better employers who value employee stability. By contrast, some chains encourage employee turnover to keep wages from climbing past a certain point. Economists David Fleming and Stephen Goetz, of Pennsylvania State University, analyzed 2,953 counties and found that those with a large density of small, locally owned businesses had greater per capita income growth between 2000 and 2007. “Non-resident-owned medium and large firms consistently and statistically depress economic growth rates,” conclude the authors. “Resident-owned firms have a statistically significant and relatively large positive effect on incomes.” Overall, Walmart’s hourly workers earn 12.4 percent less than retail workers as a whole.

More Jobs. A study by University of California economist David Neumark found that opening a Walmart store typically leads to a net loss of retail jobs. The study followed 3,094 counties across the United States, between 1977 and 2002. “Sales gains at these stores are invariably mirrored by a drop in revenue at existing businesses, which then must be downsized or closed,” states Neumark. In all, 1.4 jobs are lost for every 1 chain store job that comes to a community.

Local Businesses Are More Self-Reliant. Big-box development is often associated with significant public cost in the form of infrastructure development like roads, sewers, utilities, police and fire protection. A study in Barnstable, Mass., found that the annual cost of providing services to traditional downtown business districts was $786 per 1,000 square feet. By contrast, big-box stores were 30 percent more costly. (Source: Tischler & Associates, Cleveland.) In addition, many big-box employees are underserved with healthcare, forcing them to access taxpayer-subsidized care. Also, many chain stores negotiate major tax breaks with municipalities and states. They also cost communities money when they abandon large properties. Vacant buildings are associated with higher crime rates and urban blight.

Higher Quality of Life. In numerous studies, residents who live in communities where retail districts are primarily locally owned consistently report a stronger sense of identity with their community and a higher satisfaction with their civic lives than do residents of chain store-dominated cities. A growing awareness of this connection has caused nearly 300 communities to reject big-box proposals in the past few years, according to the Institute for Self-Reliance. Communities with thriving independent retail districts also attract more out-of-town shoppers.

Environmental Concerns. “From an environmental standpoint, parking lots rank among the most harmful land uses in any watershed,” states Tom Schueler of the Center for Watershed Protection, Ellicott City, Md. A 4-acre, 200,000-square-foot big-box store requires a parking lot of about 12 acres. After a field is paved, rainwater flows across the surface, becoming warmer and collecting pollutants along the way, including many inorganic compounds like hydrocarbons from motor oils and fuels, and pesticides and herbicides. The runoff then pollutes streams and rivers. It’s also important to consider that goods manufactured far from home require more energy for transportation and more packaging. Local businesses are more likely than chains to source merchandise from the local region. The EPA estimates that the United States produces 11.9 million tons of plastic packaging each year, and more than 90 percent of it goes to a landfill after being used just once. ❚

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