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Why Shop Local?

I’ve had extensive conversations with Sankalp Gosain about why I think Cash Mobs and, by extension, shopping local, is important right now for our economies.  Basically, it comes down to support for local economies and local businesses as engines of wealth-creation in our communities.

I’ll start with three basic, and I think non-controversial, propositions:

  1. The wealth of a community is the sum of the wealth of the individuals within that community.  A community with wealthy individuals will itself be wealthy; a community with poor individuals will be poor;
  2. Wealth can be measured in a variety of ways (including family strength, health, etc.), but the most measureable and comparable way is in terms of dollars; and
  3. When we spend money within our communities, more of that money stays in our communities than when we spend it outside of our communities, or with people or businesses that are based outside of our communities.  Indeed, every $100 spent in the local economy has an additional impact of $58

When we buy local, from local businesspeople, wealth is both created and retained in the community.  At a time when people across the country are concerned with international business, Wall Street and “too big to fail” banks, it’s natural that we’d want to support ourselves and our local businesses first before giving our money to businesses that aren’t based in our communities.

Here are two situations that can occur in a normal consumer transaction:

In the first situation, a buyer goes to Big Store to buy a trinket. Big Store bought the trinket for $1 and is selling it for $10.  The buyer pays $10 and takes the trinket away. Big Store uses the $9 it made at the transaction first to pay for running the store and employing people, then to buy a replacement trinket for the sold trinket, and finally takes any other profit that it made and sends it to its corporate headquarters.  The profit is then used to open other stores in other markets, pay C-Suite salaries, and as dividends to shareholders spread far and wide.  The profit is thus distributed thinly around the world.

In the second situation, the buyer goes to a Local Store to buy a trinket.  Local Store bought the trinket for $1 and is selling it for $10.  The buyer pays $10 and takes the trinket away.  Local Store uses the $9 it made at the transaction to pay for running the store and employing people, then to buy a replacement trinket for the sold trinket, and then the owner retains the profit.  The profit is thus concentrated and controlled by someone in the community.

At this point, Big Store and Local Store have both “made” money in a very Napoleon Hill sense when they sell each item; until then, the item is simply the potential for value to be created.  When the item sells, money is created for the seller.  The Local Store’s owner then, can take this money and save it, invest it, buy things with it, give it away to charity – anything, really, that they want to do with it.

Regardless of what the owner does, however, he or she will end up with more than what they had before the transaction, either in material goods or mental satisfaction.  They have created wealth for themselves, and the more wealth they create the wealthier they – and the community – will be.  The community will ideally be able to support more and bigger businesses, more infrastructure, more employees and a larger, more vibrant economy.  When this happens, the community is more self-sustaining, self-controlling and self-sufficient.  It is in each community’s self-interest to make sure that their local businesses are thriving; Cleveland should be taking care of Cleveland, Portland should be taking care of Portland and Indianapolis should be taking care of Indianapolis.  Also, the act of growing these businesses is where wealth is generated; it is better to start a business and reap the benefits of growing it than to invest late and just collect a few dividends.

When we shop local, it is as much about making an investment in our communities and economies as it is about getting things we normally would have bought elsewhere.  Marty said that, for him, Cash Mobs was all about “LOVE.”  For me, it’s about “COMMUNITY.”  When we support the businesses in our community, they support us right back.

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9 Comments

  1. Heidi says:

    I love this “cash mob” concept!

    I just came across your site via a news article referencing it along with our small business tonight. I had to chime in that beyond the owners, here’s where our money goes after it leaves the hands of our customers and makes it’s way to the register: to pay our employees, all who live within a few miles of our restaurant (they spend that money in the community as well). Taxes! The local sales taxes we file each month as a small business (brought in by customers) stays in our city. Not to mention the other various state taxes & licensing fees we pay that go to our city. A big chunk of our gross revenues goes to all our vendors, even the ones that aren’t considered “local” still use local truck drivers and delivery people…people who live and work in our community. We buy food from several local wholesalers in town (vs a big chain restaurant buying their food from an out of state central location)…all these places employ people in our community. The UPS guy, the FedEx guy, the window washer, the trash company, the utility company….again, some of these are larger companies, but operated by folks in our community and we pay them all monthly for their services.

    All these folks, in a small way, earn their living when you buy a sandwich at our restaurant.

    Even the local brewery who’s owner drives his beer to our restaurant himself. Buying local, puts money into a huge community web with far-reaching benefits to everyone connected to that business. Even the houses in the neighborhood surrounding our business who may never eat there. They benefit from the property tax, & transit improvement tax money we bring in to keep their roads in repair and plowed! I could go on, but I’m preaching to the choir here 🙂 Keep up the good work. Hope you start a cash mob in MN if you haven’t already.

  2. I’m not sure what big box stores pay as a percentage of what they mark the item, but most independents that I know generally are paying $5 for a trinket they try to sell for $10 or $10.50. Economy of scale definately works against the little guy.

    a group in ann arbor is having their first cash mob tonight at one of my fellow shopkeepers stores – I’ll be there!

  3. […] The response over the last few hours to Cash Mobs has been incredible and wonderful and exciting and inspiring!  If you want to learn more about Cash Mobs, check out the pages above, including the Mob Rules we work off of and how to set up your own Cash Mob.  Also, follow us on Twitter, and see if there’s a mob in your area!  If you want to contact us directly, you can email us here. Oh, and for a few perspectives on why you should Cash Mob, check out the pieces by Amanda Shunta, Sankalp Gosain, Marty Mordarski, Marilyn Koop, Lauren Way and me (Andrew Samtoy). […]

    • Pam says:

      Hi! We’d like to set up a cash mob for the Shelter for Emergency Help here in Charlottesville, Virginia as a part of our service activities that we do for Ayyam-i-Ha. Baha’is celebrate Ayyam-i-Ha with fun and service before fasting from 3/2 – 3/21 during the day. Baha’is believe that all mankind is one and that the unity of mankind is what we need to develop to our full potential. I’d like a little help setting up the cash mob for our group. Thanks for your time and efforts!

  4. […] 24, 2012, and know that thousands of other people are doing the same thing as part of this Cash Mob Community! Share this:TwitterFacebookLike this:LikeBe the first to like this post. Published: February 15, […]

  5. Cash Mobs says:

    […] Mobs help reorient consumer buying behavior toward locally-owned stores.  There are all sorts of economic benefits to […]

  6. cmbendigo says:

    Reblogged this on Cash Mob Bendigo and commented:
    Another really good reason to mob!

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