Where do you spend your $?

I’m not anti-Wal-Mart, anti-Starbucks or anything like that. I think people should be free to compete in a fair market, and if Starbucks brews a better pot than Bob’s Coffee Shack, then Bob should either get better or close. But here is an interesting statistic about supporting your local establishments. For every $100 you spend at a chain, whether it is a store, movie theater, restaurant or other, only $13 remains in your community. That is done through wages, local purchasing, etc. However, if you spend $100 at locally owned establishments, $45 stays in your local community. There are a lot of reasons for this. All profits stay, more purchasing is done locally for anything from printing to produce and more activities are done locally versus at a corporate office. So, while your local companies still need to compete, consider this stat when spending your next dollar. It has been said that all politics is local. Well, most economics is local as well.

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Jamie Flinchbaugh is a lean advisor, speaker, and author. In addition to co-founding the Lean Learning Center, he has helped build nearly 20 companies as either a co-founder, board member, advisor, or angel investor. These companies range from high-performance motorcycles to SaaS tools for continuous improvement. He has advised over 300 companies around the world in lean transformation, including Intel, Harley-Davidson, Crayola, BMW, and Amazon. Jamie co-authored the popular book The Hitchhiker’s Guide to Lean, and continues to share his experiences as a Contributing Editor forIndustryWeek and as a blogger at JamieFlinchbaugh.com. He holds degrees from Lehigh University, University of Michigan, and MIT, and continues to teach and mentor on campus. Jamie is best known for helping to transform how we think about lean from a tools-centric model to one based on principles and behaviors. His passion for lean transformation comes from seeking to unlock the great potential that people possess to build inspiring organizations.

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4 Comments on "Where do you spend your $?"

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  1. Mark Graban says:

    So Jamie, do you recommend that people apply this when choosing suppliers? Isn’t it true that Toyota probably does more to support local suppliers than other automakers who are rushing to source parts from China and other overseas locations? Sure there are supply chain benefits from sourcing locally, but is Toyota also playing PR and/or being a good corporate citizen?

  2. Jamie Flinchbaugh says:

    No, Toyota isn’t doing charity here. Pick your suppliers based on performance in quality, delivery and TOTAL cost (not just piece price). Toyota PREFERS local suppliers because it reduces total cost.

    But if you’re a small, one site, local business – then picking a local supplier is both a community thing and a supply chain thing.

  3. Tom Ehrenfeld says:

    This is a nice sentiment but….first of all, where does this number come from? How can we be sure that it’s not simply apocryphal, and designed for the good of local businesses?

    Again, I think the sentiment is good but…consider Starbucks. Here you have a company that provides health care, stock programs, sophisticated training programs, and a fairly standardized, and often cheery workplace (based on what I have observed.) I have friends who have worked at local coffee shops, where they are paid worse, have no benefits, no training, and the only morale comes from sticking it to the man that is Starbucks. All profits accrue to the owner and the owner only. I’m just not sure that I can support a workplace that is microsmically anti-democratic when there’s one that on a broader scale does more to provide for its employees. Not so the case in Wal-Mart to be sure. But I just think this issue is much more complex.

    Great prior posts!

  4. Jamie Flinchbaugh says:

    Those are great points, Tom. I think the key is the “all else being equal” phrase. To me, this is just one variable in a complex, often blind process of consumer behavior. I tried to limit myself to one point at a time, but the result is often an oversimplification. Case in point – I’ll be meeting someone at Starbucks tomorrow morning. Why? In addition to all the reasons you state, the people are nicer, its cleaner, the coffee, while burnt, is consistent and they leave you alone. Starbucks is probably the wrong lone example, because I could have said Applebee’s, or Target, or whatever. I do like knowing where my dollar goes, and this was just one interesting piece of data in that puzzle. Thanks for sharing your thoughts.

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