Why “Buy Local” Should Replace “Buy American”

In the ‘80s, I knew a lot of people who insisted on only buying American-made cars. Nowadays, though, it’s tricky to figure out what qualifies as “Made in America.” Honda, Toyota, and Nissan all have US-based plants. Nike, Patagonia, Gap and Wal-mart, are just a few of the brands that have most of their merchandise made offshore. We import food from all over the world, and sell most of it in US-owned stores staffed with US employees.

With jobs being slashed in industry after industry, people are increasingly aware of the connection between what they buy and where that money goes. The House-passed fiscal stimulus bill makes it clear that protectionism is on the rise - not out of patriotism, but out of economic self-interest.

Can consumers hoping to support their domestic economy buy Nike, Wal-mart, Toyota or the others and stay true to their conscience? Should we consider the “domestic content” of what we consume, and assume the higher the better? How would consumers figure it out? It’s time to let go old notions of protectionism and adopt a “Buy Local” mindset.

Just what does “Local” mean? Local stores can be part of a chain. They can sell merchandise from elsewhere (including other countries). And they can hire or be owned by people from elsewhere, too. What makes stores local is that they’re nearby - they’re in the neighborhood.

My Top 5 reasons for supporting local businesses are that they:

1. Provide jobs for the people who live nearby
   
   
2. Contribute to the tax base of their communities, which makes better schools, roads, police, fire, sewage and other services available to residents
   
   
3. Also contribute to a vibrant sense of community by supporting local charities and events
   
   
4. Can best fulfill local preferences and needs because they know us better through interacting with us day in-day out
   
   
5. Demonstrate that people we all know work hard and give back
   

It’s not realistic to think we can buy everything we need in our neighborhoods – stores in most residential neighborhoods simply don’t offer the selection or the pricing. And change is an incremental process, anyway. It starts by buying more locally than we have historically, making the 10+ mile trip to the mall a little less often and spending a little less at those stores when we do go.

Many retailers have deepened their connection to the local communities they serve lately. While some people don’t view chain stores as part of the local retail scene, I disagree. Here are a few examples that illustrate why:

• Macy’s – is rolling out its successful MyMacys program across the chain to return merchandise decision making to local stores

• Origins - has tailored some products for specific geographies, like its High Elevation Hydration Cream sold in the Denver-area stores.

• Starbucks – their support and call to action for customers to volunteer in their communities is a great example of getting local

I’m going to try the “Buy Local” argument the next time I’m with people who spout off about protectionism and buying American. Wish me luck!

Home Town Feeling

I was married in my mother’s wedding dress. She got it at Bullock’s Wilshire, and I had it hemmed there 33 years later. The fantastic art deco, totally L.A. facade housed a high-touch store that was an institution in its day. Bullock’s Wilshire is gone now. So are Bullock’s, Robinson’s, I. Magnin and a whole host of local department stores I grew up with in Southern California.

I was sad when they disappeared. Starting in the early ‘90s, retailers began centralizing corporate functions to wring costs out of their far-flung store operations. Store managers lost control over inventory, and their stature within their organizations began to diminish. Like the computer game Pac-Man, department stores gobbled one another up in search of economies of scale.

In hindsight, it looks like they should have taken a closer look at the intangible assets of the acquired businesses. The goodwill on the company’s balance sheet was largely overlooked in favor of short term cash flow improvements. Too bad. Now it looks like the pendulum may be swinging back.

The Chicago Tribune reported Sunday on Macy’s move to resurrect some of its “retired” brands, including Marshall Fields in Chicago. According to the story, "the steps are part of a pilot program in Chicago and a few other markets where the department store chain is attempting to customize its stores to local tastes after a two-year effort to 'Macy-ize' the hundreds of regional department stores it bought in 2005."

As a team from Bain & Company pointed out in their 2006 article in the WSJ, success at local customization “hinges on getting the balance right: Too much localization can cause costs to spike; too much standardization leads to stagnation.”

So, what are the dimensions that lend themselves to localization? Merchandise assortment, sizing, pricing, store design, and naming all make sense to tailor to the people and the place. Restaurants and grocery stores have known this for ages: McDonald’s serves bratwurst in the Midwest and pineapple in Hawaii.

Banana Republic loads up on small sizes in West Coast stores that cater to Japanese visitors. Origins is another example of a brand that has tailored some products for specific geographies, like its High Elevation Hydration Cream sold in the Denver-area stores. Estee Lauder, Inc., owns Origins, and a huge number of other cosmetics brands (Clinique, Estee Lauder, MAC, Aveda, Prescriptives, Bobbi Brown, and more). Most are offered in the cosmetics department of most department stores – it’s hard to tell one store from another.

What’s unique about the Macy’s situation is its robust portfolio of department store brands that have deep roots in distinct local markets. Selectively bringing back some of those brands can lend real local credibility to the chain and go far to break up the tedium of homogeneous shopping that characterizes today’s malls. As the ‘shop local’ movement accelerates, look for Macy’s to resuscitate more of these retired brands.

Being Big and Local – An Exercise in Creativity

My in-laws once owned a drugstore in Seaside, California, where my father-in-law was the pharmacist and chief merchant. He used to special-order merchandise for his customers, and knew them by name and their orders by heart. Back then, big chain stores and department stores did the same thing, and each store was run by a powerful store manager.

Over the last two decades, most retailers have been wresting that control away from store managers and shifting it to centralized departments in the name of cost controls and consistency of experience, but something may have been lost in the process.

In previous posts, I’ve speculated about the challenges facing big brands at a time when consumers want their shopping experiences to feel “special” and not mass-produced. That was before the economy took a nose-dive. Now, I think people are outright scared, and they want to know that the people they deal with understand and care about them. At the same time, leading retailers are pursuing initiatives to “get local."

So, is the pendulum swinging back in favor of store managers? It surprises me to say so, but I have to answer "maybe."

Macy’s recently announced its My Macy’s initiative to "design and merchandise stores to reflect local tastes. The program will shift more decision-making to the local level, tapping ideas from customers and sales associates." According to a Chicago Sun-Times story last week, in Chicago the initiative aims to woo back loyal Marshall-Fields customers, lost when Federated acquired their favorite retailer and retired the brand. In Pittsburgh, it’s aimed at reengaging fans of Kauffman’s, which was also obliterated by acquisition, according to a September story in the Pittsburgh Tribune-Review.

Keeping those names may have been the best way to retain loyal customers in those markets. It’s an expensive proposition to bring in local merchandising managers and buy and warehouse region-specific inventory to recreate the home-town feeling those brands gave customers.

In a variation on this theme, some retailers will introduce a few high-profile items into their assortment to speak to local tastes and needs. That’s one direction Origins is exploring. As I mentioned in a story last month, Origins has created unique products that address the effects of Denver’s mile-high atmosphere on a woman’s skin and is testing them in a few of its company-owned Denver stores. If they test well, Origins could offer them to area retail accounts to help them get local, or keep them for itself to give customers in Denver a reason to come to their stores.

What can retailers do to go local without incurring the inventory and personnel costs of store or market level merchandising and logistics?

Best Buy recently opened a store-within-a-store focused on musical instruments and music lessons. The concept could do a lot to promote the company’s "local-ness," depending on how it’s implemented.

The company has a great opportunity to get local across a whole host of categories by becoming a channel for local instructors. Some instructors might even choose to sell instruments or teach in the store. The key to appealing to them is to acknowledge they are small business owners with a passion for their area of expertise and arguably less interest or ability in marketing.

This approach could apply to several categories of current Best Buy merchandise – from cooking to computer programming to web design classes. And it could make the music lessons idea work, too. In the way it supports and showcases local class providers and promotes their connection to Best Buy, the company could ensure that the providers’ “local-ness” rubs off on its own brand.

The beauty of this approach is that it does not involve payroll or inventory expenses. It hinges on a creative approach to execution. And that should be music to any CFO's ears!

Does Big have to be the Opposite of Special?

In pursuit of profitable growth, brands expand their distribution and extend their offering but risk losing what makes them special. Starbucks immediately comes to mind as the poster child for this dilemma. Macy’s, too. Do economies of scale necessarily mean diseconomies of soul?

Part of what makes a brand special is uniqueness – offering a distinctive product assortment or customer experience or both. Another ingredient is not being widely known – so that customers feel “in the know” – or widely available, so that customers make an effort to participate in the brand.

The Wall Street Journal interviewed Urban Outfitters’ CEO, Glen Senk last month. He talked about his vision for the company, and how he’s ensuring its relevance by avoiding cookie-cutter stores and keeping concepts small and close to their target audiences. The company is designing its brands to stay special by not saturating the market. For example, no brand will have more than 250 stores.

This made me wonder whether brands that have passed the saturation point - like Starbucks - can ever become special again, and if so how. I think it has to do with going micro/massively local and tailoring the "mass" brand to appeal to one neighborhood at a time. Then came an NY Times story about Origins – one of the skincare brands owned by Estee Lauder – trying to do just that.

In time for its official opening on Sept. 16, the store is rolling out an exclusive Made for Denver line, which was designed with the high altitude and dry climate in mind. The current pilot store is testing several ways of expressing its soul – from uniquely tailoring its own products like High Elevation Hydration Cream to offering merchandise by with local providers like English Retreads, a company in nearby Boulder, CO that makes and sells handbags made from recycled tires.

“If we could bring to the new store the principles and core of what Origins is about, what would that look like?” asked Ken Stone, the vice president for retail stores. The idea behind this Denver outpost is to re-envision the retail experience.

"Can big brands afford to do this?" you ask. My question is: "Can they afford not to?"