The cash mob mentality: the economic case for Stocktonians to shop locally

On Friday, August 3rd, Stocktonians filed in to Whirlow’s Tossed and Grilled on Pacific Avenue to show their appreciation and support for the Miracle Mile restaurant. Today, August 16th, a similar phenomenon is taking place at Capital Donuts in the College Square shopping center. Both of these events are not random, and represent a new social media trend– with an altruistic twist– known as the cash mob.

The cash mob concept was born in the fall of 2011 in the equally distressed city of Buffalo, where local businesses struggle to survive amidst chain stores and a falling population. Residents there, concerned with the loss of local businesses, came up with a simple yet powerful idea: get a lot of people to spend some money at a local business– all at the same time. In addition to giving local merchants a one time boost, planners also hoped to introduce small businesses to residents who may have never gone to the store otherwise in hopes of creating repeat customers. Since the cash mob concept came to fruition, the trend has spread to many other cities and neighborhoods, and as of this month, Stockton is now one of them.

Stockton Cash Mob, created by Stockton resident Lauren Sage, has so far hosted two such events, according to the group’s facebook page. The goal is to target two local businesses per month in an effort to provide these stores with a much needed boost in revenue as well as providing some extra exposure. The thought is that by supporting local businesses, we can help keep our friends and neighbors who own these businesses afloat.

But beyond being a nice gesture, what are the benefits of supporting a local store? For many in Stockton, it is much easier to shop at Wal-Mart or cheaper to dine at the Olive Garden. Why should we support local businesses, outside of the fact that the people who run them are our neighbors?

As it turns out, there is a very strong economic case for doing more of your shopping at small businesses, and it has nothing to do with being nice.

In a nutshell, spending your dollars at a locally owned business helps the local economy much more than shopping at a chain store. The money you spend at Manny’s California Fresh is staying within the community, while revenue collected at the Jack in the Box across the street does not.

In a report released this month, researchers from Civic Economics examining businesses in Salt Lake City discovered that local restaurants returned 79% of their revenue back into the local economy. National restaurant chains, such as McDonald’s and PF Chang’s, on the other hand, recirculated just 30% of their revenue. This research in Salt Lake City is just the latest in a plethora of studies done on shopping locally, and reaffirms the findings of reports done in other cities. For example, last year in Portland, Maine, The Maine Center for Economic Policy found that for every $100 spent at a locally owned business, an additional $58 is contributed to the local economy. By contrast, $100 spent at a chain store generated just $33 in economic impact. In New Orleans, only 16% of the money spent at the local SuperTarget stayed in the local economy, while 32% of revenue generated by small businesses went back into the local economy. In Michigan, another analysis of restaurants yielded the same results: chain restaurants put 37% of their revenue back into the economies of Grand Rapids and the surrounding Kent County, while local eateries cycled 56% back. You get the picture.

How is this possible? Big stores, small stores, they all pay taxes, right? Correct, but it’s what they do with their revenue where the real distinction is made. Local businesses generate more for the local economy because they generally purchase goods and services from local vendors, whereas chains generally do not. Chili’s relies on a huge national network of vendors, while an independent restaurant joint is probably using local suppliers.

The most striking takeaway from these studies is not about how much more money gets put back into the community through shopping locally, but how greatly local economies can benefit even from small changes in consumer habits. In Portland, researchers found that if residents there simply shifted 10% of their purchases to local merchants, it would generate $127 million in new economic activity as well as create 874 more jobs. In New Orleans, the same shift of 10% from chains to mom and pop shops would generate $235 million extra in economic gains.

These findings illustrate the ease with which consumers in Stockton can help change the trajectory of economic activity in the city: Just small adjustments in the way we shop can help keep enormous amounts of our money here, instead of some corporate headquarters in another state. The best part is that we don’t really need to abandon our regular shopping habits to make a big difference.

On a more qualitative note, small businesses are what give cities and neighborhoods a sense of place. If we allow the businesses of our neighbors to go under in favor of chain stores, we lose the uniqueness of our city, and any unique ties that come with it. This article is not meant to demonize chain stores; they can provide us with affordable products local businesses simply cannot offer, provide employment opportunities and often times contribute generously to local charities. However, a place that is devoid of small businesses and solely dependent on chain stores is in danger of losing its identity. So when you are grabbing your desert today at Capital Donut as part of the cash mob, consider making a stop to your neighborhood store or restaurant more often than just once or twice a month. In a city so engrossed in socioeconomic issues, making a trip or two to a local business is a simple step that almost every resident can take to help our neighbors stay afloat and help our city retain its character.

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Categories: Community Commentary

Author:David A. Garcia

David A. Garcia founded SCL in March of 2012. He holds degrees from UCLA as well as Johns Hopkins University and currently works as the Chief Operating Officer at Ten Space in Downtown Stockton, and previously worked as a researcher/analyst for a congressional agency in Washington DC. The views expressed here are solely of the author.

7 Comments on “The cash mob mentality: the economic case for Stocktonians to shop locally”

  1. August 16, 2012 at 2:26 pm #

    All of my most favorite places are mom and pop. No question about it.

    However there is something profoundly different between a staples store (usually associated with convenience) and a trendy, interesting place which is part of one’s identity and sense of belonging to a certain tribe (marketing term).

    So, it’s not an either or proposition of mon&pop vs. chain. Nor could you look at it in terms of percentages because it’s a function of unequal bases.

    You say for example that a local store might contribute 80% to the local economy. That’s fine; but what’s the total base sales $ number contributed by all mom and pop stores? And how does this compare to chain store total generated business?

    For example, 30% of 20Bil. economy is 6Bil. But 80% of 4 Bil economy is 3.2 Bil. Therefore % comparisons on unequal bases are meaningless. This is the exact same logic developing countries use. They sport a GDP growth of 10% and above and then they compare themselves to US growth of 2% and claim some sort of accomplishment. However the US is $15 Trillion economy and those with impressive growth rates are only a few hundred Billion economies (not even close).

    Obviously you are not suggesting that if we replaced all chain stores with mom and pop stores that such stores could produce the same business in terms of $ volume.

    So, mom&pop places are cool but a local economy based only on mom and pop stores would be both somewhat insignificant and volatile because of the success/failure ratio of such businesses. It’s the “too much of a good thing” aspect which stands in the way.

    • Stockton City Limits
      August 16, 2012 at 7:00 pm #

      Dean,

      Thanks for the insight, I am in no way advocating for an all mom and pop shop based economy. Obviously, national chain stores provide benefits that local stores do not (as I mention in the article). 80% was just one of the studies done, but the body of literature shows that more money definitely gets put back into the local economy through the revenue of local stores versus national ones. Do chain stores bring in a lot of sales? Absolutely. More so than local stores? I have no idea (though some of the research I looked at pegged mom and pop shops to make up about 30-50% of the market share, depending on the industry). The point is not to argue against national chains, just to inform consumers that there are other factors to consider beyond the price tag when we are deciding where to shop.

      • August 16, 2012 at 7:43 pm #

        David:

        It makes sense that 80% or even more of mop&pop revenues stay in the local economy. All the admin and overhead of a local store is by definition local vs. a large chain’s which is usually elsewhere.

        But the 80%+ number is kind of irrelevant. It basically explains why a store is mop&pop rather than the other way around. A store is mop & pop because a high % of its revenue stream is local. You just can’t turn such proposition on its head and suggest it’s the other way around because you are committing a sophism.

        A sophism would be to say for example that “all Cretans are liars; Leonides is a Cretan. Therefore Leonides is a liar”. It doesn’t work like this because such line of thinking commits a deliberate misappropriation of cause and effect.

        In select environments around the globe almost all stores are mom&pop. Say, a Chinatown for example. Or a Latino town somewhere. It’s part of the charm and ambiance of the place and it’s 100% local. But even in a place like Berkeley which is a vibrant expression of boutique mom&pop stores, eateries and other super interesting small places with a unique culture and experience binding it together, the grocery shopping is still mostly chain related and is not local.

        I hope you are not suggesting that the likes of SaveMart or Food4Less are local and therefore mom&pop type. Because even if they are I could never set foot in such places which in my book are beyond mediocre and kind of disgusting.

        Therefore be careful how you use the label “local” and “mom&pop”.

      • Stockton City Limits
        August 18, 2012 at 9:02 pm #

        Dean,

        I think you are referring to a syllogism, where you draw a conclusion based on two premises. I am not sure what your variables are.

        Is it, “all local merchants bring in more revenue than chains; X is a local merchant, therefore, X brings in more revenue than a chain”? If so, you are right. “Local” does not necessarily equate to “mom and pop,” though I think we are just getting bogged down in definitions here. The conclusions remain the same: stores that are locally owned and operated generate more economic activity locally as they rely on local suppliers more so than chain stores.

        Grocery stores are a whole other animal, and most of the studies I cited did not include groceries since as you correctly point out, they are largely all chain stores today in almost all communities. That being said, where there are locally owned grocers, the same conclusions would probably hold true. I would wager that Podesto’s cycles more revenue back into the local economy than does Safeway.

    • August 19, 2012 at 6:01 am #

      David:

      You say: “podesto’s cycles more revenue back to the local economy than Safeway”.

      That’s impossible. You mean in total revenue? No way.

      You mean as a % of its total revenue? But that’s irrelevant.

      Take for example a price gouging and monopolist local business that recycles back most of its revenue locally. But in doing so, it overcharges its customers and generally engages in unethical and punishable business conduct.

      According to your logic (BTW syllogism is a Greek word which means to contemplate, think through) such a monopolistic behavior is excusable because it somehow eventhough it steals from the citizens but then returns back to the local economy part of the illegal loot?

      Only Republicans could make such flawed associations. What is this? The reverse Robin Hood theory according to Stockton?

      That’s laughable. Actually beyond laughable.

      • Stockton City Limits
        August 19, 2012 at 7:25 am #

        Dean,

        In total revenue, no, probably not. As a percentage of revenue, most likely.

        And I don’t see how that is irrelevant. If I as a consumer want to keep my own money circulated locally, this information is extremely relevant. Based on the research done by Civic Economics, if I spend $10 at a locally owned business, about $5 to $6 of that ten dollars spent (depending on the type of retail) will recirculate back into the local economy. If I shop at a chain, only $2 to $3 will be put back into the local economy. How is that irrelevant? Because total revenues are more important? Potentially on a macro level, but I am not advocating for the elimination of chain stores, simply providing information on where consumer spending goes so that people can make informed decisions when they are in the market for goods and services.

        To your second point about unethical conduct, you are referring to economic phenomenon known as rent seeking, where a business is simply charging more because it can, not because it is providing better services or new innovations. However, this is a straw man argument on your part, because I never say that mom and pops should be given a monopoly, nor can I think of any mom and pop monopolies in Stockton or anywhere else. In fact, we see the exact opposite: chains come in, and drive out mom and pop businesses because they drive wages down. If Podesto’s was the only grocer in town, might they partake in rent seeking? Maybe. But since they face competition from Safeway and Trader Joe’s just across the street, they will never have a monopoly and will never have the opportunity to rent seek.

        So, the argument you mention is indeed laughable, but it is not the argument that I make.

      • August 19, 2012 at 3:29 pm #

        David:

        What you say is illogical and in fact baseless.

        You say: If I spend $10 at a local store $5-6 or even $8 will stay local. So? Of course it will stay local. Can the local store go some place else? If it could, it wouldn’t be local. Since profit & overhead is probably the largest item on every mom&pop budget it goes without saying that such will remain local and be recycled back into the local economy.

        Then you proceed to say that If I spent $10 at a chain store only $3 stays here. So what? First of all are you buying the same things and quantities at a local store that you buy at a chain store? Obviously not and as such you are mixing apples and oranges. Staples purchasing vs. discretionary purchasing (which is the essence of most mom&pop stores) are 2 completely different components and usually don’t mix(like oil and water).

        If you buy $10 worth of donuts at a local store for the freshness or coolness of its environment, the local economy part is incidental. I know of no people that when after they enjoy local specialties of any kind they then rationalize the whole thing based on contributions to a local economy. This is the thinking of a bureaucrat you are displaying not that of a consumer.

        The consumer will consume that he/she feels is best and for the right reasons. These reasons could have a wide range and include issues such as protecting the environment, lifestyle, worthwhile causes of many varieties but not the “local economy”.

        It so happens that the “local economy” is the argument used by those who are deeply entrenched and already profiting from the “local economy” . It’s more of an argument in preserving the status quo to the benefit of local monopolists or quasi-monopolists.

        When a mediocre local merchant is deeply concerned that a chain store might clean his clock, instead of saying the obvious(i.e. that his ill-gotten monopoly will collapse), he uses as a cover/pretext the argument of the “local economy” benefit. In most cases this translates to a license for local abuse, a hidden tax and a hidden subsidy all rolled into one.

        And of all the examples you could have used you chose podesto’s market? What’s so special about this irrelevant and somewhat uninteresting food market? Is it that it’s kind of empty most of the time or that the local geezer carnivores (who BTW are responsible for 99.999% of all Stockton’s ills) shop their red meat there?

        You couldn’t have chosen a worst conflict of interest. So the offender is putting forward the “local economy” argument and you are buying it?

        If you said instead let’s try to make an edible city movement and thus support the local economy, I might be the first to subscribe. But instead you asking me to accept that price gouging by locals is an excusable act on the basis that the gougers leave more of the ill-gotten profit here? Are thieves better thieves when they are local? Or is crime more acceptable when it’s local? Or have you forgotten that anything that exists around here has a large subsidy component to it?

        BTW, the cash mob movement is a great display of community support but what will it happen to the same store 3 months from now or 3 years from now? A mop&pop store can only flourish if its consumer proposition is the correct one; not because of looks, temporary trend or label. I once managed a shopping center in Rancho Palos Verdes consisting of 27 different mom&pops. I knew them all personally and treated them as my friends. I participated in a great deal of sessions with them trying to promote events and augment their business in very unique and creative ways. So, I think I know the mom&pop business quite well. It needs constant attention and TLC. And even that sometimes is not enough. And I did my part as a landlord keeping the center in top shape, which is not usually the case because the vast majority of landlords are absentee and therefore indifferent. You want to build a local economy? then try becoming the leader of a group of mom&pop stores and breath and share their concerns and daily challenges as if they are your own. Then you will have a community.

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