By Geoff Scofield, Westlawn Finance MD & CEO 28 November 2017
As local businesses operating in regional centres, we all understand the importance of shopping local. It’s vital, not only for the local economy and the bottom line of each business, but also to sustaining the fabric of the community as a whole.
Whether living in the suburbs, regional cities or small country towns, Australian consumers understand this too and prefer to support local businesses where they can.
Over the past year, 29% of consumers increased their shopping frequency in independent local businesses, while 43% of small businesses reported an increase in turnover, suggesting that those who are shopping locally are actually spending more. And importantly, the boomerang dollar effect means that much of the money spent in local small and independent businesses stays in the local economy.
According to the report, Australians value local small businesses because they provide employment, boost the local economy and meet consumer demands for specific goods and services. More than three-quarters of consumers (76%) say they care about the longevity of small businesses in their local communities.
Small businesses are considered an important part of the fabric of local communities too, with 68% believing that local businesses make their communities more desirable, and almost half saying that small businesses define their community.
Those surveyed overwhelmingly believe that it’s important for local small businesses to support each other (75%). While 58% say that support should be financial in nature.
Australians prefer to shop local and support small businesses.
Local business supporting local business
So, what do local businesses think about other local businesses?
The survey found that small business owners have a strong connection with their local communities. Three-quarters of small business owners prefer to use local suppliers that they have a personal relationship with, while 70% have built strong relationships built on trust with other local businesses.
Further, two-thirds say that local suppliers are more likely to reciprocate custom, and 59% believe that there are cost efficiencies in being in close proximity to suppliers. Half state that they can negotiate better payment terms locally.
Nearly 70% of small business owners use local suppliers in order to keep money within the local community.
Boomerang dollar effect
The Household Expenditure Survey is conducted annually by the Australian Bureau of Statistics (ABS). It estimates that the average household spends almost $40,000 a year on a broad range of consumer goods and services. Of this, consumers estimate that a quarter (24.6%) of their spending is with local small businesses.
“What goes around comes around. Independent businesses have long been recognised as a source of employment and neighbourhood character, but the multiplier effect of choosing to spend money at small businesses is less well known.
“The ‘Boomerang Dollar’ effect shows that almost $38 billion is reinvested into our communities every year through local spending – that’s a huge amount that’s going back into business’ tills, workers’ pockets and towards worthy community causes. Shopping small can have an enormous effect.” Katrina Konstas, Vice President for Small Merchants at American Express
According to the American Express survey, small business owners say they are investing 42% of their annual turnover back into their local community. Of each dollar spent with small businesses, 42 cents is reinvested back into the local community with:
27 cents going towards salaries of local employees
12 cents being spent with local business suppliers, and
3 cents going to support local charities, schools and sponsorships.
Promoting the benefits of shopping local
At Westlawn, we believe in the value of shopping local and the boomerang dollar effect. We ensure that we use local suppliers at every opportunity. In fact, during the 2017 financial year, we paid over $3 million to local suppliers. We also supported over 50 charitable, community and sporting-based organisations through sponsorships and donations.
As local businesses, we all need to take responsibility and make the extra effort in promoting the benefits of shopping local and retaining the ‘boomerang dollar’ in our local communities.
Of course, we should also practice what we preach and use local suppliers wherever possible in our businesses.