NorthBay biz takes a look at the North Bay’s “living local” economic movement, which depends on—and feeds—a vibrant community.
But when Petalumans woke to the smoking ruins of the historic Rex Hardware building, there were spontaneous outpourings of grief and support. Owner Jeff Tomasini vowed to rebuild the 100-year-old business as faithfully as possible—right down to wooden floors engineered to develop creaks as they age. Condolences from locals poured in, many attached to the chain-link fence surrounding the construction project. Fifteen months later, when Rex Ace Hardware held a grand reopening and 100th anniversary celebration in the store’s gravel parking lot, 2,500 loyal fans showed up, bringing food enough for a battalion. Today, Rex Hardware is flourishing as a cherished local institution.
The issue is complicated. Development proponents say cities need taxes that national chain stores generate; this is a powerful argument as cities, many near bankruptcy, struggle with funding cuts. Independent business proponents counter that large stores at the edge of town drive locally owned businesses out of the socially and culturally important town center and replace well-paid jobs with those that often don’t pay a living wage or health care benefits.
Jay Beckwith, one of the founders of the Sonoma County GoLocal Co-op, cautions against pitting these two business models against each other. GoLocal proponents, he says, recognize that not all needs can be met through locally owned businesses. But, he adds, those are the businesses that give a community its uniqueness and sense of place, drive new job creation and recirculate money locally. What’s needed is to carefully assess not just the jobs and revenue a corporate-owned business brings in, but also what businesses, jobs and revenue will be driven out if it causes independent businesses to fail.
New movements generate new metrics
Studies comparing benefits to the community of local businesses versus non-local ones vary, but one widely quoted study finds that, of every $1 you spend at a locally owned business, $0.45 continues to circulate locally, while only $0.15 of $1 spent at a non-locally owned store stays around.
Why is this? For one thing, locally owned businesses are more likely to choose independent local service providers for their marketing, printing, bookkeeping and accounting, office needs and the like. National stores tend to handle these things at corporate offices. So a locally owned business is supporting half a dozen jobs in the community in addition to its own employees. “Small businesses make up roughly half the private economy and create 60 to 80 percent of all new jobs,” notes Michael Schuman, author of The Small-Mart Revolution: How Local Businesses Are Beating the Global Competition.
A San Francisco study in May 2007 cited on the GoLocal website found that, by switching just 10 percent of their purchases to locally owned businesses, customers could generate 1,295 new jobs in San Francisco. In Santa Rosa, says GoLocal Executive Director Kelley Rajala, “We’re seeking a 1 percent shift—$22 million total.” That would mean more than $70,000 in additional annual revenue for each of those locally owned businesses. In short, there’s more involved than just how much money people are willing to pay for a toaster or a head of lettuce.
Sonoma County GoLocal is one of several groups studying the impact of locally owned business on the North Bay economy. Others are Local First Napa and Think Local West Marin. All three are members of a national group called Business Alliance for a Local Living Economy (BALLE). In Petaluma, local businesses, spearheaded by Wayne Morgenthaler of Jungle Vibes Gift & Toy Emporium, formed the Petaluma Independent Business Alliance, a member of the national American Independent Business Alliance (AMIBA).
Think Local West Marin, cofounded by Steve Costa (Point Reyes Books), is developing a survey that will go to every business and residence in West Marin to determine buying habits and how much retail is lost “over the hill” to Central Marin County. “And then we’ll do an analysis and, hopefully, figure out ways we can make more services and products available here in West Marin,” Costa says.
The effort is financed by a $25,000 grant from Marin Fourth District Supervisor Steve Kinsey. One possible solution is a cooperative that would stock a variety of commonly needed items in bulk—if locals would support it. Smaller communities across the country have adopted the co-op model when big stores have pulled out of town. Rural co-op members contribute a membership fee that provides seed money to start the business. Effectively, the whole community owns the business.
The “community first” effect
As a rule, any profits local owners realize also stay in the community, as owners patronize restaurants and entertainment venues, use local resources to make improvements to the business or just park the money in a local bank—such as Santa Rosa’s Community First Credit Union (CFCU).
CFCU, a member of Sonoma County GoLocal, was started in 1961 by a group of seven schoolteachers who found that banks weren’t receptive to their needs. Seven original members invested $10 each to start the new institution and began saving. Because CFCU is strictly local, a whopping 98 percent of every $1 deposited is returned to the community in the form of dividends or local loans for vehicles or homes.
“We’re what’s called a community charter,” says David Williams, CFCU’s vice president of marketing. “We can only take deposits in Sonoma and Mendocino counties; we can only do loans in Sonoma and Mendocino counties. By the very nature of our charter, we’re local, and since this is GoLocal Sonoma, there’s a nice alignment in its solution areas as well as ours.”
Williams says CFCU and other credit unions engaged in none of the risky loan practices that were the downfall of bigger banks (nor did it have the high overhead of management bonuses, golden parachutes and other executive perks). Indeed, CFCU’s deposits have increased by 11 percent since January of this year. As a not-for-profit, CFCU passes all of its excess revenues back to its members in the form of higher deposit dividends, lower loan rates and at-cost services.
CFCU uses local vendors for nearly every business function, including Santa Rosa’s Advent Furniture, Ad-Vantage Marketing for print needs and the Office Spot in Healdsburg for office supplies. The Office Spot has been independently owned and operated by Ray Palacio for 20 years. The Office Spot offers a full range of competitively priced office products and a whole separate catalog of green office products. In addition, the Office Spot’s business model makes it highly attuned to customers’ individual needs. Locally owned businesses provide the best customer service and support, Sonoma County GoLocal notes, because everyone involved lives here.
“My driver will stock shelves and tell customers when they’re low; we do a real nice shopping list that’s a hard copy and is also available online,” Palacio says. “They’re customized to the company’s product list—their favorite paper, their favorite writing tools. When people call, they get someone who knows them and knows what they want. We become extensions of their service department.”
Palacio is passionate about the responsibilities of locally owned businesses to their community and employees, so much so that he’s borne the financial burden of the recent downturn on his own shoulders rather than lay off employees or ask them to take a pay cut. “There’s a local social consciousness that exists—a whole layer of contributions that a local business makes that are unseen. We’ve been here long enough to become personally connected to our employees.”
Locally owned businesses are more likely than nonlocal stores to provide health insurance to their employees, relieving taxpayers of the burden of taking up the slack. Finally, according to Sonoma County GoLocal, independent businesses are by far the best supporters of community projects and nonprofits, giving back to their community in much deeper ways than chain stores, whose charitable donations often consist of 2 percent to a blanket international aid organization without regard to local needs.
Chris Burns, vice president of Napa’s Vallerga’s Market, calculates the store has donated nearly $8 million in goods and services to the Napa community during its 62 years in business. Morgenthaler’s recent “Kids Open Mic” on the riverside deck of Jungle Vibes is one example of the many free events he concocts for customers young and old. Local businesses are the mainstay of school programs, Little League teams, food kitchens, arts programs and civic improvements. CFCU has contributed generously to Elsie Allen High School’s athletic program, puts on financial education classes for students and, each August, distributes 4,300 eagerly awaited copies of the August-to-July school year calendar. Marin’s tiny Point Reyes Books has raised more than $300,000 over the last four years for local nonprofits through author events.
Putting it into play
The big challenge, notes Beckwith, is to fire the public’s imagination with the unseen community benefits of locally owned businesses and to raise awareness of local business value. As a cooperative, Sonoma County GoLocal issues a rewards card good for discounts at its member businesses and distributes a GoLocal poster that reminds customers of the benefits of buying local.
GoLocal has an ally in the marketing department—KZST, Sonoma County’s only independently owned for-profit radio station. Chad Carlson, creative marketing consultant for KZST, KJZY and K106.3, has put together a series of campaigns—starting with the Eat Local campaign in August—to promote GoLocal Co-op businesses and the GoLocal rewards card. “Besides promoting the GoLocal Co-op, these campaigns are intended to educate our listeners about the benefits of buying locally,” he says. “The intention is to increase traffic and awareness for our locally owned businesses.” Carlson also offers affordable radio advertising and unique co-op campaigns to locally owned and operated businesses that are members of Sonoma County GoLocal.
Other locally oriented marketing efforts include Buy Santa Rosa, which offers free Web space for local businesses to post coupons through a website (one that looks suspiciously like Sonoma County GoLocal’s); and www.bigsidewalk.com, a Petaluma-based site where local businesses can post printable coupons. Calendar sites such as www.NeighborhoodNow.com (also a Petaluma startup) offer affordable advertising for local businesses that’s seen by anyone who views the local calendar.
And the public is responding. Despite the downturn, says Burns, the number of customers at Vallerga’s has remained steady. These loyal customers are willing to pay a little more for products they consider superior. Vallerga’s works hard to maintain that reputation—three days a week, a Vallerga’s buyer makes a midnight run to two San Francisco produce markets to taste and select the best produce available. And Vallerga’s is able to respond to customer requests in ways that chain stores can’t. “If you want it, we’ll stock it,” says Burns.
Corporate stores are tracking the burgeoning GoLocal movement and have begun to react. Read chain supermarket ads, and you’ll see many references to “local”—locally grown produce, for instance, is promoted front and center. But savvy customers realize there’s no actual legal definition of the word “local,” which is why a supermarket can advertise a locally grown guava—from Guatemala! It’s why Wal-Mart can hang a banner over its produce aisle that simply says “Local,” or why HSBC, one of the world’s largest international banks, can call itself “the world’s local bank.” Local business activists call this “localwashing,” mirroring the term “greenwashing” for faux claims of environmental friendliness. As Stacy Mitchell, founder of AMIBA puts it, “Buying local is all the rage, and global corporations want in on it.”
The bigger picture
GoLocal proponents see their movement as going beyond just supporting local businesses. A living local economy depends on a vibrant social community as well. The most effective marketing for local business, says Palacio, is apt to be word-of-mouth referrals from satisfied customers to their own social and business contacts.
The best local living economies generate as many locally produced goods and services as possible, say advocates. Practically speaking, most communities aren’t likely to start manufacturing screwdrivers or blue jeans—that sector has long ago disappeared overseas. But nearly all communities can grow food. That’s why leaders in the GoLocal movement are often the same people leading the charge for community gardens, produce that’s sustainably grown nearby and concern for the environment. That, in turn, is linked to another commodity that’s enjoying an uptick in local interest: energy.
New legislation is paving the way for communities to buy or generate—and even sell—their own renewable energy. More than 50 California communities are in the process of implementing Community Choice Aggregation (CCA), giving them the option to shop for a mix of renewables or even to generate their own renewable energy. Other pending legislation will allow feed-in tariffs, which require energy utilities to purchase renewable energy from anyone who generates it, paying an above market rate until renewable energy becomes a significant portion of the energy mix.
A Praxis Peace Institute conference on October 18 to 23, co-sponsored by Sonoma County GoLocal, will explore the wider implications of local economics. Visit www.praxispeace.org for more information.
Locally owned businesses in the North Bay have an advantage over other locations that haven’t yet begun the discussion about how local spending affects a local economy. How will this dialog play out over the next decade? Will we end up like Richmond, its downtown economy obliterated by a freeway bypass and a huge mall outside of town? Or will we follow Marin County’s model, a successful mix of locally owned independent businesses and a modest number of chain stores? It’s up to all of us, as business owners, consumers and community members, to decide.
