Hardware Retailing

JUL 2017

Hardware Retailing magazine is the pre-eminent how-to management magazine for small business owners and managers in the home improvement retailing industry.

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HARDWARE RETAILING | July 2017 42 With the budget determined, Civic Economics used real-world data from different merchants to determine the anticipated local economic impact that would be generated when these funds were spent. For the data from locally owned retailers, Civic Economics worked with real-world data from retailers in U.S. markets who provided their detailed financial information, and also utilized aggregated industry financial data from NRHA's Cost of Doing Business Study. The data for the big-box contributions to local economies came from the annual financial reports filed by publicly traded companies. To determine "local impact," Civic Economics looks at four primary activities that businesses engage in that have the greatest potential to recirculate revenue back into local communities. • Labor: The salaries of employees who live and spend money in the local community. (Although chain stores typically have more employees, functions like marketing and human resources are often outsourced to headquarters.) • Profit: The percent and amount of net profit a company generates and where those profits end up. (Local owners typically reinvest profits back into their businesses or their employees who live and spend locally.) • Procurement: The goods and services a business patronizes to maintain operations. (Again, locally owned businesses typically use services of other local providers.) • Charitable Giving: The money, goods and services donated by a business. (Many chains give to national organizations instead of local charities.) U pon fielding the information, the results were clear. When builders choose to make their purchases at a locally owned retailer, nearly twice as much of that revenue recirculates back into the local economy. "The contractor, for our one hypothetical home, with $550,000 in goods purchased, recirculates an additional $65,000 back into the local economy just by directing his purchases to other local business owners," says Daniel Houston of Civic Economics. The impact of this kind of localized purchasing becomes even more dramatic when you consider what it could mean at a macroeconomic level, Houston writes in the report findings. Nationwide, there is roughly $243 billion spent on single-family residential construction every year, according to Houston. If just 10 percent of those purchases were shifted to local suppliers, hometowns would enjoy the benefits of an additional $1.5 billion in economic activity for local communities. "Where local business thrives, the communities benefit. Owners and employees invest in local homes in a way that chain store workers can rarely do; their profits feed Little Leagues and collection plates all over town; and the enhanced tax revenue they drive ensures that the community can provide the services those businesses and their customers require," Houston concludes. Findings Methodology & Findings $0 $30,000 $60,000 $90,000 $120,000 $150,000 Cumulative Local Advantage Amount of money from purchases that recirculates into the local community Building Materials Hardware Supplies Power Tools/Equipment Source: Home Sweet Home Study Pros' Edition, NRHA and Independent We Stand Local $129,650 Chain $64,025

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