Does Shopping Local Include Rental Housing?
by John H. Fischer on November 10th, 2009
There is a big push to shop local, the thought being that money spent with locally-owned businesses keeps this money here locally. There are two sides to this philosophy.
Of course there is the shop local side of things. That if you spend money in a store owned by Mr. Smith who lives here locally, Mr. Smith will then use that money to pay other local bills. However, if the money is instead spent in huge big box store, a good chunk of that money leaves the Wausau area never to be seen again, at least not here locally.
However, the counter to that argument is that often (not always, but often) it is more expensive to shop locally. The big box stores are able to use volume to get their products at a lower cost and can use economies of scale to then offer the same product at a lower cost than a local, small retailer. In this economy, everyone is trying to make their dollar go farther, so if you can get the same product for 5-10% less at a big box, doesn’t that make more sense? And, not all of the big box revenues leave the local area, after all, they do employ local people, they do pay local property taxes, etc.
With the big boxes able to out-price the small, locally-owned retailer, how do the small, locally owned retailers continue to stay in business? Simple, they must learn to not compete on price, but instead compete on service.
Being an owner of a local business, I am faced with the same economic realities that our local retailers are faced with. According to the Wausau Daily Herald, in the last five years, there have been over a thousand rental units added to the local market place – most of these from out-of-town investors. They build in a scale that I cannot come close to. Because of economies of scale, they are able to offer their product for less cost than I am. Because of the size of their portfolio, they are able to undercut prices in certain markets (like mine) and make up for it by increasing prices in other more lucrative markets (like Madison or the Fox Valley). Therefore, I am faced with the same dilemma that local retailers face: do I lower prices and try to survive knowing that many customers only care about the price points – even if that means lowering services; OR, do I maintain current price points and services and sell myself using services.
Being a locally-owned company, I understand what locally-owned retailers go through. That is why even though I could save money and help my bottom line by using big box retailers for almost all of my supplies, I feel that us little guys really need to stick together, so whenever practical, I make an effort to use locally owned companies rather than big boxes. Here are just a few examples of how I make an attempt to keep money local:
If you do some shopping on price, you will see that as far as a bottom line price, Best Buy will probably be the winner. However, locally-owned Grebes is really not that far out of line. And, based on volume, we can normally get appliances for a little bit less than retail. However, I don’t know that anyone can touch the service level of Grebes. It starts by being recognized and being addressed by name when you enter the store, continues to their willingness to work with us on the delivery and installation schedules, and is topped by a service department that is simply second to none. If I have a tenant with a refrigerator that won’t keep things cool, I know that one call to Grebe’s service department, and the problem is as good as taken care of.
In 2008, my records indicate that $10,867 was spent on new appliances. Although $923 was spent at big boxes like Menards and Home Depot, $4,964 was spent at Grebes and the rest was spent at other local businesses like Yesse Heating, Ace Hardware and Baumgardt Plumbing. So far in 2009, of the $7,118 spent on new appliances, $4,120 went to Grebes and the rest to the other local businesses already mentioned.
Staying local was also done with money spent when appliances simply needed to be repaired instead of replaced. In 2008, all but $792 (which also stayed local) of the $3,632 spent went to Grebes. So far this year, all but $93 of the $1,696 spent went to them.
I could probably save money by going to a big box for carpet, but then the problem of coordinating installation comes up. Sometimes, we have a very tight window to work in of only a few days to get the old carpet out, and the new carpet in. Also, from time to time, we will change carpeting in an occupied rental for a long-time tenant, and this requires a great deal of coordination. In 2008 we spent $17,630 in carpet and installation, so far this year, $11,396 has been spent. All of this has gone to locally owned Showcase Carpets and one of their installers. Keeping the money local, and at the same time getting a level of service that no big box could ever match.
Although we try to keep things local when it comes to general building and maintenance supplies, sometimes simple convenience does matter. Although over 25% of our maintenance supplies are purchased from Ace Hardware in Weston ($4,675 in 2008 and $5,290 so far in 2009), a good chunk is purchased from big box retailers. However, when choosing a big box, the vast majority comes from Menards. First, because they are a Wisconsin company, and second, because I personally HATE the self-check out lanes that they try to steer you to at Home Depot.
So, do those large, out-of-town apartment owners also shop locally for supplies? Or do they get volume discounts from the big boxes and are more concerned about bottom line than supporting the local economy? To be honest, I don’t know because I am not them.
Although I do believe when keeping dollars local when I can, I also know that I am not going to do business with you just because you are local. I chose to do a majority of my business with local companies like Grebes and Ace Hardware and Showcase Carpets because of the service I receive. If you think I should shop in your store because you are local but you don’t offer me a good value, and you don’t offer that “Northwoods Service” that I am willing to pay a little more for – than don’t expect my business. However, I will pay more to be more than just another customer coming through the door.