Most people are aware that buying local is significant in helping a town, city, or state’s economy grow. However, in the era of growing e-commerce retailers and corporate conglomerates, the average consumer is spending more time and money towards businesses that do not benefit their local population. At Iowa-Des Moines Supply, we remain large advocates for the evidence which shows that purchasing local is the best way to keep money local. In this article, we will be covering what is known as “The Multiplier Effect” of buying local, as reported by the American Independent Business Alliance (AMIBA).

The Multiplier Effect Of Buying From Local Businesses

A study completed by AMIBA found that there are three elements within the multiplier that cause revenue to be recirculated in a local economy, ultimately creating more jobs.

Direct Impact

The direct impact comes from businesses that spend money within the local economy for operational purposes. This includes things such as buying equipment, stocking inventory, utilities, and paying employees.

Indirect Impact

This is the result of dollars being spent by local businesses as they re-circulate into other businesses’ revenue. Essentially, when one local business puts money towards another local business, that money should ultimately recycle back through to the original business.

Induced Impact

This impact refers to the ability of local consumers to spend money and reinvest back in local businesses with the income they’ve earned.

The biggest thing to take away from this is that both local businesses and consumers play large roles in cultivating money in a local economy. Depending on the industry a business is involved in, there could be more weight on either the local consumers or businesses to keep the revenue local.

How Chain Stores Can Negatively Impact Local Economies

For consumers and city planners, it can be exciting to learn that a national chain brand is interested in bringing their stores or services to their area. When chains propose to bring business to a city, it’s important to weigh the pros and cons of how they impact the local economy. Studies have shown that, in most cases, there is a negative impact that comes along with large brands bringing business to town, for both local businesses and consumers.

Average Return From A Purchase

A private study completed by Civic Economies examined how money was re-circulated into local economies when a consumer purchased from a local business compared to a national chain brand. Their results found that on average, 48% of a purchase from a local independent business was circulated back into the local economy. The same study showed that under 14% of a purchase from a chain was reinstated into the local economy, an alarmingly smaller number. Even more shocking, purchasing goods or services over the internet has shown an average return of only 1% of the purchase into the local economy. For consumers, this means that fewer local stores will be available to choose from, as the local economy may not be able to support them over time if most of the local residents’ dollars are transferring to companies outside of their cities. Over time, this will mean fewer options of local businesses to shop at in your communities and fewer local product options to choose from.

a graph by iowa-des moines supply shows the average dollar amount returned to a local economy from where you purchase

Iowa-Des Moines Supply Remains Local

As the City of Des Moines and all of Central Iowa grows at an incredible rate, we’ve made it a focal point at Iowa-Des Moines Supply to provide local businesses with the janitorial supplies, hotel supplies, packing products, and services needed to keep revenue local. In addition, we’ve also taken the initiative to reduce our carbon footprint around the Greater Des Moines area. If you are interested in learning more about the products and services that we offer, contact us today! We look forward to hearing from you.