Where we spend our dough really does matter

Why local businesses matter and why we should all think about our dough

There was a time not so long ago when most neighbourhoods and high streets were full of locally owned shops and businesses. Fast forward to today where we are living in an increasingly impersonal world, where local stores are getting replaced by corporate chain stores and our neighbourhoods are losing some of their individuality and charm.

We cannot stop progress and the world will continue to move forward at lightning speed whether we like it or not but we should maybe stop and think about where we are headed. Do we really want to live in a world where we have lost our locally owned neighbourhood stores, where the continued drive for efficiency and optimisation can come above the needs of employees and the impact on their livelihoods and communities?

Let´s talk dough

To illustrate how important the role of small businesses can be in communities let´s look at the hypothetical example of bakeries. We all eat bread in one form or another. So let us look at two different scenarios, large factory vs small artesan bakeries.

Scenario 1 – mass manufacturing of bread in a large factory

In this scenario we have a factory that produces large quantities of bread and supplies a wide area. The business has an owner who has invested in the factory and runs it and the factory employs 99 people to manage, operate the production line, pack and deliver the bread. Let´s now say that due to factory automation and bulk buying of raw materials each loaf of bread costs 50p to produce and retails for 3.00p.

Total people employed: 100, price of a loaf of bread to the customer 3 pounds

Scenario 2 – 50 local bakeries supplying their local neighbourhoods

In this scenario we have 50 small neighbourhood bakeries and each of these bakeries employs 10 people including the owner to bake, pack, sell the bread to local customers. Let´s say in this example that each loaf of bread costs 2.00 to produce and sells for 4.00.

Total people employed: 500, price of a loaf of bread to the customer 4 pounds

These two scenarios are of course very simplistic and completely made up to illustrate a point but let´s imagine for a moment that we are not too far from reality here. If we look at these two fictitious scenarios we have one where there are over five times more people in employment. In addition the quality and variety of the bread is likely better due to smaller hand made production and the bread may cost a little more but not a price that is out of the reach of customers or unacceptably high.

Big business is not all bad, the opposite in fact

Large, well funded corporations are needed for key industries where being small is a real disadvantage, think automobile manufacturing, airlines and aircraft manufacturers as a few examples. A small business cannot create a large aircraft to compete with Boeing or Airbus or make a reliable and economical mass production car that can compete with the likes of BMW, VW, Ford or Fiat. On the other hand a bespoke low production sports car could be viable as it again comes back to smaller hand made production which can have its advantages and appeal.

A wider impact and knock on effect on suppliers

The bread baking scenarios discussed above can also have a potentially wider impact on suppliers of raw materials. In scenario 1, suppliers of raw materials to the large factory will most likely encounter price pressure due to volume buying from fewer bigger customers, if a major customer goes out of business it could have a devastating effect, whereas if one or two smaller customers disappeared the effect would be much less of a problem. By supplying a small amount of big customers raw material suppliers are far more dependent on these big customers and leave them in a potentially risky situation. In contrast raw material suppliers serving the 50 bakeries will most likely be able to enjoy a better profit margin by supplying many customers with smaller volumes, if a few bakers were to go out of business or stopped buying the impact should be much lower.

Most people would probably agree that our values have become somewhat skewed, from fast fashion to low cost outsourcing to mass manufacture we have perhaps lost our way a little. As a society we maybe need to re-calibrate our sense of value and look at the bigger picture, is it really worth driving down the price of a pint of milk to the point where farmers cannot make a fair living? Is there really the need to buy a cheap shirt for 5 pounds that will maybe end up in the dustbin after a couple of times of wearing it? Shouldn´t we indeed be prepared to pay a little more for a loaf of locally produced artesan bread if it help support our local communities?

The fact is we as consumers hold the key, where we spend our hard earned money matters.  If we reject cheap low cost products that provide little or low value they will eventually cease to exist. Instead we can support industries and small businesses where being small has value and leave car manufacturing, aircraft manufacturing and running airlines to the big guys. There is space and a need for businesses large and small, ultimately it´s up to us where we choose to spend our dough and that can make a massive difference!

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