When Buying Local Does (and Doesn’t) Make Sense

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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Choosing to buy from an out-of-town vendor rather than buying local seems to be small-business blasphemy. Those who stray from the “buy local” idea allegedly thwart efforts to grow the local economy, which, in turn, dampens prosperity for the entire community.

But local sources may be perfect matches, or they may incompatible with your business’s requirements.

When my small-business bank was purchased by a global financial institution and decided that my account (with its dearth of fee-generating activity) was not profitable enough to retain in its current state, I moved my business to a local provider with just a few offices in my area. This decision was based on a variety of factors such as price, convenience, and service. Certain treasury capabilities are limited, but whenever I need assistance from the corporate office, I can speak with a real person within minutes, rather than suffer through an automated voice-response menu.

Similarly, when my local supplier of fine paper closed its office several years ago, I replaced this vendor with a local source. The purchasing process was cumbersome, however, requiring a lengthy phone conversation, significant wait from the time of order placement to its receipt, and travel time to retrieve the order at the vendor’s place of business. When e-commerce merchants finally began offering my favorite brand and I located an online source with competitive prices and free delivery, the switch was easy. (In hindsight, my zeal to use a local vendor may have been misplaced: My infrequent order of a non-inventoried item probably wasn’t profitable to the company.)

Many factors influence vendor selection. Purchasing name-brand items from a low-cost supplier with reliable delivery is reasonable. Choosing a nearby source that carries urgently-needed items makes sense. Beyond price and convenience, consider these potential advantages and disadvantages of buying from local vendors:

Reasons to Buy Local

• Local vendors and service providers may be able to more accurately judge your needs and present more informed recommendations because they are more likely to understand local conditions, hold face-to-face meetings, visit your facility to observe your operations, and allow testing of new products and services. You may also be more likely to buy precisely what you need, avoiding irrelevant products and unnecessary features.
   
• Proximity and the presence of a meeting place (e.g., brick-and-mortar store or office) can facilitate connections among business owners and consumers with similar professions, client relationships, and interests. These connections can increase market awareness of your business and lead to greater sales opportunities.
   
• Certain manufacturers, software developers, etc. may sell through local dealers only. To purchase these items, your business must buy from a local company, which may provide specialized training and technical support to your business.
   
• Information on new products, industry trends, and technology developments may be more accessible from local vendors. You may be more likely to meet with vendor representatives or attend educational sessions offered in your community.

Reasons to Buy Elsewhere

• Your business needs products and services not available from a local vendor, or your company’s demands routinely exceed the vendor’s capacity.
   
• Local vendors may rely too heavily on face-to-face meetings, requiring extensive interaction with you in order to specify products and finalize orders. Out-of-town vendors that deal with customers nationwide may have more streamlined procedures for customizing products, verifying accuracy, and placing orders.
   
• E-commerce merchants sell branded products, shipped directly to your place of business. Pricing is competitive and shipping is free. Your business can easily compare prices to save money and travel time associated with visiting a brick-and-mortar store.
   
• Your company must purchase from suppliers that have earned industry certifications, but no local suppliers have qualified for these designations.
   
• Service providers with specialized expertise and an exceptional understanding of global trends relevant to your business may be located somewhere besides your hometown. Your company can tap this knowledge to serve customers locally and nationwide.

When I reviewed my list of vendors and service providers, one thing surprised me: I buy local more often than I realized. One of the reasons I hadn’t considered the depth of my local connections is that my purchase decisions are based on careful analysis, rather than a response to a “buy local” initiative.

Businesses can consider these ways to becoming a vendor of choice for local and non-local customers:

• Strive to be the best vendor in your niche, not just the best in the local area.
   
• Follow and demonstrate knowledge of national and global trends in addition to being aware of local market activities.
   
• Streamline the product specification and purchasing process so that buying from your business is straightforward and fast.
   
• Create an environment in which customers learn from your expertise and share ideas with each other.
   
• Source your suppliers carefully so that you can offer unique, valuable, exclusive offerings that are not available elsewhere.