Looking after your local economy...
I HAD the great fortune of being in two shops last week - something I do once in a blue moon.
Two learning points - those who work in superstores and listen to that music must be made of steel. Local service is everything and it's vital for society and the economy as a whole.
The short-term gain of a few pounds saved here and there cannot be offset against the integrity of a local family running a business and giving you outstanding service. We can either use our money to serve society or not. We cannot have Swedish standard services for American prices. The damage, not only to the economy as a whole, but your local economy and lifestyle, is unfathomable and potentially irreversible.
I’ll use a metaphorical story to explain. We can throw our money (water) into a river. For this story, we can call it The Amazon! The more we throw in, the more it gushes. The more it gushes, it rips the sides of the banks of rivers on the way down leaving ghost towns behind it. At the end, it falls off a waterfall into a non-tax paying lake, never to return – you can’t push a river back up a hill. The lake is indeed surrounded by other non-tax paying businesses sipping away enjoying their soaring fortunes.
Alternatively, you can create a beautiful circular lake (or ‘circular economy’ if you like). Surround that by nice bars, restaurants and accommodation which flourish and use that to fund the amenities and facilities society needs, to not only survive, but, to create even more sustainability. Block the river to create a dam and create electricity and in turn use that to create more versions of this lake.
I’m sure you get the ‘drift’.
Amazon is expected to take over 50 per cent of US digital sales this year. Margins on the high street are squeezed with consumers checking out goods at local retailers and buying online. In 2019, after not paying a cent in US Federal tax, Amazon was required to pay tax. That tax was just 1.2 per cent of Amazon’s pre-tax profit of $13.9 bn. The Federal tax rate was actually 21 per cent at that point. Its total revenue in that year was $250bn.
Its income in 2018 was $11bn and it received a Federal tax refund of $129m (see metaphorical story above)!
Concentration of wealth outside of our locality gives unstoppable power. Whether its lobbying governments around policies, or, the use of concentrated targeting through social media given the quite unbelievable powers being handed to such institutions to profile you.
It is not healthy to either compare yourself to anyone (ever) or to feel you always ‘need’ something, never to feel content.
Such unlimited powers allow for laser focussed marketing, where younger people are encouraged to ‘need’. In reality, when was the last time many of us ever ‘needed’ anything? Maybe to go to the loo perhaps, at best. Many of the greatest things in life are free. A hug, smile, sand between your toes, a walk in the woods on a summer's day, or a basic acknowledgement from your friend, partner or co-worker are all a delight.
I’ve looked at many economic studies on buying local. They have varying outcomes, much of which I believe to be on the low side, but one study by a leading university, clearly shows that when we spend money with locally owned businesses, just 27 per cent leaves the local economy in that process.
That is 73 per cent which can be recycled over and over again. With the rise in online purchasing over lockdowns, these numbers will have been catastrophic.
Some will argue that we benefit from the share price of Amazon et al, but if companies are not filing their profits, or increasing dividends, you are not.
In any event, your shares increasing in value doesn’t mean the person on the street with no shares receives any value, let alone local hospitals or facilities.
As you spend your £100 vouchers, remember the experience, the service and the interaction you have with friends. You’ll miss it if it’s gone.
Peter McGahan is chief executive of independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. If you have a financial query, call Darren McKeever on 028 6863 2692, email firstname.lastname@example.org or visit wwfp.net.