We humans are social creatures, and nothing highlights our need for human interaction and goodwill like the holiday season. That’s why many shoppers prefer to patronize local stores, where a staffer might greet them by name, and help them select the perfect gift. For some, that experience is worth paying a few dollars more, even if an online search can turn up a cheaper price.
But while savings may be found if you’re only looking at the price tag on a particular item, the bigger picture could convince even the most cost-conscious consumer of the benefits of the “buy local” argument. Here’s why:
Follow the money
Studies consistently show that money spent locally tends to remain in the area, explains Matt Cunningham of nonprofit Civic Economics in Evanston.
His group’s most recent stats show that 52.3 percent of every dollar spent at an independent retailer remains in the local economy, and 15.8 percent of every dollar spent at a local branch of a chain retailer stays local.
Each dollar that stays close to home helps keep you and your neighbors employed and boosts the local tax base, which in turn helps fund schools and community services. And all those factors help support housing prices, benefiting area homeowners, explains Olivia LaVecchia of the Institute for Local Self Reliance in Washington, D.C.
In contrast, when you buy online, your purchase is pulled off the shelf of a warehouse (which might be hundreds of miles away), piled into a truck and shipped, eventually arriving at your front door.
It’s difficult to estimate the local impact of the massive increase in online shopping, notes Cunningham, because it depends whether warehouses are located nearby. But even if the delivery route isn’t long, the impact of an online purchase is significantly less than any spending in-store, he adds.
Count the dollars
Why did one randomly selected group of shoppers spend an average $175 for all the fixings for Thanksgiving, while another group shopping at the same store spent just $145?
The answer, says New York University marketing professor Priya Raghubir, is that shoppers who had lower tabs paid in cash, while the other group paid by credit card. Her study confirms a phenomenon other studies have found, too: when paying by cash, we spend less.
It’s all due to the “pain of purchase” Raghubir says. When we count out paper bills to pay the cashier, we are more cognizant of how much things cost. That awareness “hurts,” and prompts consumers to keep purchases within a budget.
Moreover, the attention to spending and budgeting tends to last when consumers use cash, according to research by Purdue University professor Richard Feinberg.
Get close and comfortable
The farther removed consumers are from seeing their actual dollars change hands, the less aware they are of the fact they are even spending money, Raghubir says.
While paying in cash is more painful than using a card, there are now options that remove shoppers even further. For example, online retailers encourage customers to register at the site, and store their shipping and credit card information. Then the pain of even inputting a card number is eliminated, because all the purchase takes is one click to place an order.
So, if you want to enjoy picking out the perfect holiday gifts without incurring a jolt when the bill arrives in January, consider drawing up a budget and stocking your wallet with cash, Raghubir advises. Then, head to local shops where you can see items up close and keep spending to a comfortable level.
