A new economic impact study from the north side of Chicago, Illinois says that local businesses produce enhanced economic impacts when compared with their chain store competitors. The 32 page report, written by Civic Economics, studied 10 locally-owned retail businesses, and 10 chain stores in the Chicago neighborhood of Andersonville. Researchers found that for every $100 in consumer spending with a local retailer, $73 remained in the local economy, whereas $100 in spending at a chain store left only $43 in the local economy. Civic Economics says that locally-owned businesses, therefore, “generate a 70% local premium in enhanced economic impact.” The study also concluded that for every square foot occupied by a local firm, the local impact was $179, again 70% higher than the $105 local impact for every square foot occupied by a chain store. The study says that “local merchants generate substantially greater economic impact than chain firms,” and that “replacement of local businesses with chains will reduce the overall vigor of the local economy.” Civic Economics found that locally-owned stores and national chains had about the same revenue per square foot, but the 70% “local premium” represents a quantifiable advantage to the city provided by locally-owned businesses. “That means 70% more money circulating in the local economy, which may mean 70% more home improvements, 70% more in the collection plate, and 70% more in taxable transactions to fund city services.” Local stores spent an average of 28% of revenue on labor, compared to 23% for chains. Local stores bought local goods and services at twice the rate of chains, and locally-owned stores gave more to local charities and fund-raisers than the larger chains. The study looked at several categories of businesses: restaurants, retailers, and services. Local retailers had a “local premium” advantage of 63% over national chains. The large retailers in the study included a Borders book store, a Petco, and a corporate-owned convenience store. The study did not model Home Depot or Wal-Mart, for example. “The gradual replacement of local firms with chain competitors instead produces serious negative consequences,” the report states. “The findings of this study make quite clear that local firms contribute mightily to local prosperity in comparison to their chain competitors. The 70% Local Premium is a real and quantifiable demonstration of the drainage of dollars from the community by chain businesses.”
The Civic Economics report says that local stores and chain stores should not be compared by how much revenue they earn, since in either case the dollars that enter the store are from Chicagoans, but rather “the appropriate measure is how much of that revenue it shares with the community rather than siphons from it. The findings of this study make clear that economic development goals are actually hindered when chain businesses received preferential treatment.” For a copy of the new Civic Economics report, go to www.AndersonvilleStudy.com
