October 17, 2014 / Marketing /
by C. Clifton Eason, Ph.D
Locally-owned businesses – particularly small ones – often find themselves at a disadvantage when competing with large, well-heeled, national chains. We’ve all heard that Walmart puts “the little guys” out of business. And how many locally-owned hardware stores exist in this era of behemoths like The Home Depot and Lowe’s? Do you see Walgreens and CVS pharmacies popping up more often than new locally-owned pharmacies?
Indeed, many consumers have noticed these trends. While there will always be economic shoppers (whose priority is saving money) and apathetic shoppers (whose priorities are convenience and minimal effort), there is a growing subset of consumers that has come to be known as socially responsible consumers (SRCs). Unlike other categories of consumers, SRCs make consumption decisions based on their impact on the environment and society in general. For instance, they may take into account factors like a firm’s environmental track record, a product’s recyclability, the way a store treats its employees, or a business’s economic impact on its surrounding area.
But does “buying local” really matter – I mean to the environment or society in general? Evidence actually suggests it does. Several studies have shown that when money is spent at a locally-owned business, more of it remains in and gets reinvested into the local community than when that same amount of money is spent at a national chain.
The trend toward local is perhaps most easily noticed in the restaurant industry. Here, we see restaurants whose menus tell us their dairy and produce come from a farm just down the road. They showcase wines from local vineyards and tell you the trout came from a nearby river.
But will the local trend extend to other sectors – like clothiers, hardware stores, and service providers? You may have noticed signs at some retailers reminding you to “buy local.” However, there is limited evidence at the local, Birmingham level to tell us if this attitude is catching on beyond the restaurant scene.
At the national level, however, there appears to be a significant proportion of consumers who do take local ownership into account when deciding where to spend their money. Further, one recent, nationwide study showed that these consumers who prefer buying local are also willing to pay a significant premium at a locally-owned business for merchandise that could have been bought for less at a national chain. This is particularly good news for small, local firms, as they are generally unable to compete on price anyway.
The advantages that locally-owned stores often have, such as strong customer service, can usually be easily emulated by national chains should they wish to do so. But national chains can’t simply become local. So the implication for locally-owned businesses is clear: your “localness” is a natural, sustainable competitive advantage that national chains are unable to match.
To fully take advantage of this asset, managers of locally-owned businesses must educate consumers on their firms’ importance in the local economy. Just as recycling behaviors and organic food sales have increased along with education efforts on those fronts, local buying behavior can also be enhanced with effective education and promotion. Additionally, managers need to be able to better identify the consumers to which localness is important so that they can devise marketing/promotion strategies to reach those consumers. Along those lines, researchers are making great strides in discovering who these consumers are and what makes them tick.
So it turns out that locally-owned businesses have an asset that not long ago was often seen as a liability. Simply being locally owned draws in many consumers. And marketing researchers and strategists stand ready to help local businesses take advantage of their natural asset and this increasingly prevalent consumer attitude.
C. Clifton Eason, Ph.D, Assistant Professor of Marketing, Brock School of Business, Samford University