Local spending is a matter of survival
In an era dominated by e-commerce giants and multinational corporations, the fate of America’s small towns hangs in the balance. The evidence is stark: communities that fail to prioritize local spending are experiencing rapid economic decline. This isn’t merely an economic preference—it’s a matter of community survival.
The economic impact of local spending can be quantified with remarkable precision. Consider a typical American town of 5,000 residents. If each person redirected just $25 monthly from online or chain retailers to local businesses, the economic transformation would be profound: $125,000 additional local commerce monthly, that equates to $1.5 million yearly in direct local spending, that equals $4.5-7.5 million in total economic impact through the local multiplier effect. Research consistently shows that locally spent dollars circulate through a community 3-7 times before leaving the local economy. When you spend $100 at a local business, approximately $68 remains in your community. Contrast this with spending at a chain store, where only about $43 stays local, or online purchases, where virtually none does.
Looking back a few years, the COVID-19 pandemic didn’t create the local spending crisis—it dramatically accelerated it. Online shopping habits formed during lockdowns have become entrenched, with e-commerce growing 44% year-over-year in 2020 and maintaining much of that growth afterward. McKinsey & Company research indicates that digital adoption leaped forward five years in just eight weeks during the pandemic.
For many communities, this acceleration could be fatal. Towns experiencing economic decline typically follow a predictable pattern: decreased local spending, local business closures and job losses, reduced tax revenue, deteriorating public services, population decline as residents seek opportunities elsewhere, property value depreciation, increased poverty and crime rates, and further business closures completing a devastating cycle. Research from the Institute for Local Self-Reliance demonstrates that communities with thriving independent business communities see per capita income growth 7% higher than communities dominated by chains and online retail.
When COVID struck, government policy revealed a troubling contradiction. While declaring support for small businesses, authorities simultaneously designated large chains as “essential,” allowing them to remain operational. They forced many small businesses to close as “non-essential”. They failed to account for the cascading economic impact when small businesses faltered.
This approach revealed a fundamental misunderstanding of economic ecosystems. When small businesses close, the impact extends far beyond those individual establishments. They represent the primary employment base in most communities, a significant portion of the local tax base, the economic engine that supports supplier networks, as well as the foundation of community identity and vitality
Communities facing this existential threat need immediate, coordinated action. A comprehensive approach might include bringing together city leadership, chamber representatives, business owners, media partners, and civic organizations with a clear mandate to increase local spending. Using data to illustrate the concrete benefits of shifting spending patterns. For example, show that for every $100 spent locally, $68 remains in the community versus just $43 at chain stores. Help local businesses establish effective online presence and e-commerce capabilities to meet modern consumer
expectations.
They might also Implement town-wide rewards systems that incentivize local purchases across multiple businesses. Examine permitting, zoning, and fee structures that may inadvertently disadvantage local businesses. Ensure local government and institutions prioritize local vendors when possible. Create regular shopping events that highlight local businesses and drive foot traffic.
Communities implementing these strategies have shown remarkable resilience. Fredericksburg, Texas increased local sales by 18% through a coordinated “Shop Local” campaign. Watertown, Wisconsin’s loyalty program generated over $2 million in local economic activity within its first year.
This is not merely an economic issue—it’s about preserving the unique character, quality of life, and very survival of America’s communities. Every dollar sent to distant corporations and online retailers represents resources extracted from your neighborhood, your schools, your infrastructure, and your community’s future. The choice is stark: communities that mobilize to keep dollars local will thrive; those that don’t will decline. As economist Michael Shuman notes, “If you care about the strength of your local economy, the most important decision you can make is where you spend your money.”
The path forward requires not just awareness but action—not just concern but commitment. The stakes could not be higher, and the time for action is now.
John A. Newby is the author of the “Building Main Street, Not Wall Street” column dedicated to helping local communities, government and business combine synergies allowing them to thrive in a world where truly-local is being lost to Amazon and Wall Street chains. His email is john@truly-local.org