Will shopping locally really save your community?

The message this spending season is: shop local. But is it enough?

Kate Hughes
Money Editor
Tuesday 27 October 2020 12:38 GMT
People walk through the shopping area in Manchester
People walk through the shopping area in Manchester

The end of British Summer Time means two things. First, you’ll be finishing work in the dark for the foreseeable future and, second, your spending is likely to start rising around now in the run-up towards Christmas.

Contrary to popular belief, 40 per cent of us do our Christmas shopping in November, with just a fifth leaving it until December, according to market research firm Toluna, while others have been quietly slotting items away for months.  

But whenever we do our buying, this year we’re pretty anxious about it all, to say the least.  

Half of us are worried about affording Christmas this year and a third are planning to spend less due to concerns about the wider economy, changes in our own personal financial circumstances and a desire to save as much as we can for fear of what may be coming at us in 2021.

Meanwhile, our perceptions over physical risks, alongside dramatic improvements in delivery times by online retailers, are spurring 65 per cent of us to do the bulk of our Christmas shopping online this year, says market research firm Walnut.  

It’s no surprise that the message we’re getting – louder every day – is that the world is especially precarious for the small-scale independent businesses that prop up a startlingly large proportion of the British economy.  

Almost half of small business owners say that if everyone in their local community just spent £5 extra per week with small businesses it would help to keep them open in the long term, according to Visa.

This year, we’re being urged, spending our money locally will be the key to effectively supporting our communities and perhaps, ultimately, protecting ourselves from the economic monsters in the room.  

Shoppers are increasingly concerned about the outlook for their local high street, with half saying they fear a rise in empty shopfronts and three in five saying they could do more to support it.  

A recent report from data agency Kantar found that 65 per cent of UK consumers believe that local shops are important to the community.  

Patterns of behaviour

We prioritise buying local because we want to stay close to home, are more trusting of items’ origins and believe it is better for the environment. But far more of us say it’s important to support the local economy, the brands and the people they know.

“Consumers may have begun shopping locally out of necessity rather than choice, however they are rediscovering their local shop as a place for human contact and personal service when they need it most,” Deborah Womack, director at Deloitte Digital, says.  

“With people increasingly supporting their local area, businesses that have a strong understanding of the community will be the most likely to recover well and thrive in the coming months.”

And yet, at a time when 7.6 million retail jobs are said to be at risk and small-scale retailers are warning that if consumers want to avoid a sea of vacant premises next year they need to use them today, that same Kantar report found those local shopping commitments are waning, with the figure dropping from 75 per cent in May and 67 per cent in June.  

It’s not the only one. Survey after survey is now finding the local and community focus that buoyed us at the height of lockdown is slipping back – just at the wrong time. So what’s going on here?

“When people are confronted with an extreme context they are not only more short-term focused but the things around them matter more,” says Ben Voyer, a behavioural scientist and professor of entrepreneurship at ESCP Business School.

“Meanwhile, the messages around social distancing and mask-wearing, that we must protect others, have offered real potential for a shift in mindset, with the resurgence of the idea that we must look after the people around us rather than pursuing the individualistic mindset that dominates western cultures like the UK’s.  

“We’ve seen that across social media and in little actions on the ground throughout the pandemic – the giving and taking of support from the community. That affects the treatment of people and businesses in our local area,” he says, adding that the staff at his own local bakery in central London knew his name by the end of lockdown.

But Voyer also warns that even a decade of living with Covid wouldn’t significantly change individualistic cultural points of view that have been centuries in the making.

While British consumers like to do good things, that’s not enough of a driver on its own to, for example, keep a local shop going, he suggests.

In other words, those heady days of collective altruism for its own sake probably aren’t going to last.  

Follow the money

But how much does it really matter? Are all those local currencies and other spending nudges that have sprung up in the wake of out of town shopping centres crammed with global brands worth the effort?

How much can our Christmas spending really influence the survival of not only our local high street but the surrounding streets we live in?

Quite a lot, it would seem.  

Although it’s understandably difficult to do, there have been studies into the dissipation of cash through local communities, and at least one large piece of work is currently under way to calculate the impact of local spending and the potential for the virtuous cycle of cash that can initiate.

For now, there’s precious little to go on in terms of retail money trails, but in terms of local employers – of which, of course, retail businesses are a critical component. NEF Consulting, the consultancy arm of think tank the New Economic Foundation, has come up with a model that reveals how money loops around our communities, or doesn’t.

The model measures how money is spent across three stages or rounds of spending – the turnover of a business in a particular location, the amount of money in that business spent on locally based people and organisations, and the money then re-spent by those individuals and organisations.  

For businesses like care homes, for example, where a huge proportion of their costs are labour, how much they pay their workforce and whether that means those people can live locally will have a big impact on the chances that those wages are then spent in the same community.  

Here, Christian Jaccarini, a senior consultant for NEF Consulting, has found that for every £1 spent with such businesses, it typically means around 56 extra pence is spent locally as the money dissipates. An extra 56p of economic activity is supported in the local economy.

But if all the staff in a business lived locally to their workplace, that same £1 spent at a local business could mean another £1.64 would subsequently be spent locally by associated individuals and businesses.  

There’s effectively an extra £1 up for grabs if local businesses like this then employ local individuals and buy from local suppliers.

“For retailers, the likelihood of that £1 spent multiplying as it flows through a local economy is whether the people employed at the shop live locally,” says Jaccarini.  

But because retailers are more reliant on suppliers than other kinds of businesses, where our local shops buy their supplies from – whether they are supermarkets or tiny independent businesses – has a huge impact on whether the money stays local and supports local.

“Governments and consumers, to an extent, can play a role in supporting this local business ecosystem,” says. 

“The economic multiplier will also be dependent on how we define ‘local’ – a bigger local area generally means a larger multiplier. 

“But the bigger issue is the need to take local supply chains seriously if we want to engage with a ‘levelling up’ agenda that enables people to take control of their own destiny.”

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