In a year of darkness, Saturday is the day for small businesses to shine bright.
Small-Business Saturday, now in its 11th year, allows independent stores across central Ohio and the nation to pitch their wares and remind consumers of their value — especially during a pandemic that has hit their ranks particularly hard.
Amid the sales and promotions is a message: We are important to the economy.
Small businesses and economists agree that locally owned businesses put more money back into a regional economy than large chains. A mom-and-pop restaurant for example, is more likely to buy its napkins and utensils from a local supplier and keep profits in local hands.
A 2018 study by American Express, which created Small Business Saturday in 2010, found that every dollar spent at a national chain puts about 30 cents back into the local economy, whereas every dollar spent at small businesses returns roughly 67 cents.
“Large chains make money on economies of scale,” said Russell Mills, senior director of the Bowling Green State University Center for Regional Development. “They typically have contracts with larger firms (to procure the goods they sell) who are probably out of town.”
The American Express study mirrors other research on the subject, said Denison University Professor of Economics Andrea Ziegert.
“Numerous studies have shown that local businesses contribute more to economic activity in a community than do the big box stores or retail chains,” she said.
Patti Riordan, owner of the Smoke Stack Hobby Shop in Lancaster, employs people who live in the community, and estimates that about 50 cents of every dollar spent at her store are recirculated in Lancaster.
Additionally, the store is part of a group of Lancaster businesses called Destination Downtown Lancaster that have banded together to celebrate shopping locally.
“We try really to create this community of shopping and eating,” Riordan said.
Zari Carmona-Tonger, owner of JPS Print on Parsons Avenue, said all of her staff are local and all of her suppliers are based in Ohio. She also makes a point of supporting local tradespeople.
“It is something we encourage everybody to do,” she said.
Shopping local keeps independent businesses open, which in turn supports local vendors they buy from, said economist Bill LaFayette, owner of the central Ohio economic consulting firm Regionomics.
“The whole point is simply that the more money that you can keep circulating in the local area, the better,” Lafayette said. “By sourcing your supplies and your business services with local suppliers, the better off the local economy is.”
Small businesses are particularly eager to get the word out this year, which has been devastating. A National National Federation of Independent Business survey in August found that 21% of small businesses might be forced to close if the economy doesn’t improve and another 19% said they would not last more than 7 to 12 months under current conditions.
Economists note that drawing a clear line between small and large, and local and non-local, businesses, isn’t always easy.
Individual franchisees of chain operations, for example, fall into a gray area. How much money they put back into a local economy depends on how much freedom the franchise owner is given to order from local vendors, Lafayette said.
Franchisees are more likely to live in the communities they serve and hire people from the surrounding neighborhoods, said Michael Levin, a professor of marketing at Otterbein University.
If you buy lunch from a Panera owned by a franchisee, “a portion of the profits are going to go back to Panera’s corporate office, but also a portion of that profit is going to the franchise owner,” he said.
The money a business returns to its community is only one measure of its value, some experts cautioned.
While national chains are often criticized for underpaying employees, others are known to provide benefits that most small employers simply can’t afford, Levin said. Starbucks, for example, offers generous health insurance plans to low-level employees who only work part time.
“It’s a nuanced picture,” he said.
Prices are another part of the equation, said Michael Jones, a professor in the economics department at the University of Cincinnati.
“It matters much more what the dollar buys rather than where it’s going,” he said.
A 2007 study published in the Journal of Applied Economics found that food prices at big box stores like Walmart were 15% to 25% lower than prices charged by local stores. Saving money on staples such as groceries frees up more disposable income to spend at independent shops and restaurants, Jones said.
Small businesses and large chains at times have a mutually beneficial relationship, said Daniel Shoag, a professor in Case Western Reserve University’s Weatherhead School of Management.
Malls and shopping centers, for example, are often home to independent retailers even though they are anchored by big national chains. Easton Town Center prides itself on being a nursery for rising central Ohio businesses, and Polaris Fashion Place says it is home to more than 30 small businesses.
Nonetheless, economists largely agree that small businesses contribute to their communities in many intangible ways that big stores owned out-of-town do not. For one thing, independent shops and restaurants have a vested interest in neighborhood institutions, Levin said.
“Your locally owned store is much more likely to support the Little League team, and more likely to be an advertiser in the (local newspaper),” he said.
Small, locally owned shops might also provide better customer service, helping to offset any added expense of shopping there, Jones said.
“Their advantage is in knowing the customer,” he said. “They can be more responsive, they can provide better service.”
Dispatch reporter Mark Williams contributed to this report.