Ttykuu

Recently I have heard movements from the local stores (say clothes, electronics, foods, etc) and some politicians (of a particular wing) that argue that you should buy in the local, small stores. Appealing to the feeling of nostalgia, They say those stores have been there for a long time and now running away from them is not the best thing to do.

A quick search for the keywords compra en la tienda de barrio which roughly means "buy in local stores" cite some reasons like helping the local and familiar economy, less contamination, customized attention (taken from here, in Spanish). Besides of the fact that these reasons are at best questionable, the purpose of every buyer is to maximize savings, one way or another.

Say for example, Amazon usually offers you a better deal in a home appliance or a phone, way better technical support and extended warranty than a local store, or a supermarket chain that can deliver your fresh meat and groceries within two hours or in an allocated time slot, instead of going all the way to the local store to buy the goods. These, amongst other reasons are crucial for the buyers. Then, my question arises: From a buyer's economic point of view, what would be a good reason to keep buying local?

If location is needed, I'm in Spain but the answer could be related to other locations.

There are several reasons, but in my view they all basically boil down to this: the "purpose" of each buyer is not, as you say, "to maximize savings". Rather, each person's goal is to have a good life. When viewed narrowly, buying from large stores offers the best savings on the individual purchase; however, when viewed more broadly, the lower price may have hidden costs, or the higher price may have hidden benefits, which are not directly tied to the immediate transaction. In many cases, these benefits are diffuse, and often they are uncertain because they involve potential repercussions in the future. Thus, buying local is in some sense a hedge.

Here are two examples:

1. The large store offers higher prices in order to compete with other stores, large and small. However, if everyone always buys from the same large company, and all other stores go out of business, the large company will have a monopoly. It may then raise prices with impunity. Thus, by buying local you pay a small premium in the present as a sort of insurance against monopolistic price-gouging in the future.




2. Often, local businesses are supporters of local charitable causes and civic organizations. For instance, in my area, local businesses buy ads to support things like local theater companies, concert series, and festivals. Although large companies may do this to some extent, they are typically less likely to do so because they are not as in tune with the calendar of such events in the local community. This kind of community support does not appear on the bill when you buy a toaster or an onion, so its importance and its relationship to local business may not be immediately obvious, but you might well miss it if it were to disappear.

The overall idea of small, "non-local" effects of individual buying choices is well analyzed in an old paper by economist Alfred Kahn called The Tyranny of Small Decisions. (I've linked to the Wikipedia article about it, but you can find the paper itself online if you poke around.) Kahn's primary example involves people choosing whether to travel a certain route by train, bus, or plane. The train was the only option which provided reliable, timely service regardless of weather conditions or time of year, but people tended to use bus or plane when possible, and only use the train when the other services were not available (e.g., due to bad weather). The result was that the train service was stopped, leaving people with no transportation option during the difficult conditions that the train used to handle.

The basic idea there is the same: by focusing solely on the direct costs of a single purchase, you are making a very small decision. In so doing, you may gradually and unwittingly make a large decision (e.g., "this local store goes out of business") which you don't want to make. In particular, you may not realize the consequences of making that large decision until it's already happened (e.g., you may not think you would care if the local store went out of business, but it might have negative effects that you're not foreseeing).

When I spend $1.00 at a local store, some of that money goes as salary to a local person, and some as taxes (property, income, sales etc) to my local government. When I buy the same item for 10% less online, none of the 90 cents goes to those things. For some people, the total benefit (keeping local people employed, providing revenue to the government that would otherwise come from higher personal income or property taxes on me) of the local purchase exceeds its cost, more than the same arithmetic on the online purchase.

Some people may also add a sort of "insurance" value to the local purchase of knowing the local store will continue to be there on the sorts of occasions when online purchases are not a good solution, or to serve as a return/repair point. For example, I make a point of buying whatever I can at my local pharmacy in my very small village, even though they may charge $3.50 for something that is only $3.00 in a city an hour away. I do this because I need that pharmacy to be there when I have a prescription to fill and I don't want to go all the way to the city when I am sick. I also buy gas in the village from time to time to be sure there will continue to be a gas station in the village.

On the particular matter of food, only by being hyperlocal (eg joining a Community Supported Agriculture program, or buying at the farm gate) can you be completely sure of provenance.

These three reasons along with habit and a sort of neighbourly attachment explain most of it. BTW, where I live, the prescriptions in the village pharmacy are cheaper than in the big city (he waives the dispensing fee) and the eggs on the farm are cheaper than in the supermarket. But the logic holds even for things that are more expensive.

One aspect of a buyer's concern is knowing what they are buying.

Eggs are a pain point for me. I can afford a premium egg price to satiate my morality. I don't like the idea of chickens in battery cages; I don't want to eat eggs from chickens in battery cages. I don't want to eat eggs from chickens in "furnished/enhanced housing" (large battery cages). I can tolerate eating eggs from chickens who only ever lived in barns. As long as the barns won't crowded. My preference is fenced-in, open-air uncrowded chickens.

Let's go back to your question. "What would be a good reason to keep buying local?" When I go to a supermarket, I see "free run", "free range", "enhanced housing", "cage free", "'organic'" and more labels on the eggs. Few of these tell me anything. The few that do require a special understanding of the vernacular. This is only for eggs, every other food has it's own tricky marketing buzzwords. When I go to the producers' sites, the information is as vague and unspecific as the packaging. Some eggs carry a hefty premium because they have the right buzzword but are simply battery cage eggs.

At the local store or farmer's market, I can ask the person "how are the chickens raised?" I can go to the farmer's Facebook page or their farm. For local stores that carry smaller brands, the producers' sites are informative.

(This is out of necessity; they need to differentiate since the supermarket is often cheaper, quicker, and has a wider selection. The farmer's markets compete by claiming quality and transparency. My local grocer is actually 50% cheaper than the supermarket. They do this by being a building with four walls, fruits & vegatables, a cashier, and no backroom inventory. They carry two dozen different items. Little selection, albeit the selection changes each week.)