If rural residents want to see their favorite local business survive, it's best to spend their dollars at them this holiday season.

Holiday sales account for around 19% of some businesses' annual sales, according to the National Retail Federation

Ryan Pesch, University of Minnesota Extension educator in community economic development, recently wrote about how spending locally supports communities.

According to Pesch, retail accounts for 5% of Minnesota’s total economic output and 7% of the state’s employment. He said in rural areas, locally owned businesses make up a greater share of stores in a community and sometimes bolster a main street.

"When Main Street looks active and healthy, it affects the way people feel about their community," Pesch said.

Pesch said when it comes to supporting the local economy, it matters where rural residents decide to spend their money. When that money goes to local, independent businesses, there's a "spillover effect" that goes to support other local businesses and services (accounting, legal, printing) that are partners with it.

"Whether you are shopping at a national chain or a local independent retailer, wages are paid to workers. However, a family-owned and operated business also supports the income of local business and building owners," Pesch said.

It's also important to pay attention to what businesses carry local products, said Pesch, rather than imported products.

"You can think about your local economy like a leaky bucket. When dollars flow out of your area, whether to another region, state or country, they are lost," Pesch said. "Economic development officials like to talk about money recirculating, but that only happens when those dollars stay in your region and aren’t lost to an out-of-state wholesaler or international manufacturer."

Grocery stores

Kathy Draeger is the director of the U of M Regional Sustainable Development Partnerships. She was the lead researcher on the Minnesota Rural Grocery Survey Report that was published last month.

Draeger said the report, which surveyed hundreds of grocery store owners in towns with populations of 2,500 or less, revealed a number of key takeaways and issues.

"These grocers are a real hub of community life, and employ both adults and students," Draeger said. "And overall, this is a sector that has a pretty narrow profit margin."

The average survey respondent was in their mid-50s, said Draeger, and 40% of those surveyed indicated they didn't intend to be in business in five years; 45% said they don't plan to pass their store on to the next generation in their family.

One of the most common concerns by rural store owners was increased competition.

"We've all seen that through the years, with the advent of regional centers and superstores," Draeger said. "But more recently, over the last five or six years, we've seen proliferation of dollar stores."

She said that 80% of the rural grocers surveyed said they had a dollar store within 15 miles of their store.

The COVID-19 pandemic brought unexpected gains to rural grocery stores, and U of M researchers have heard reports of sales increasing by as much as 50% early in the pandemic and 10% above the same time last year.

Draeger said that rural grocery stores benefited during the pandemic from having multiple supply chains, which didn't collapse like some of the supply chains to big-box stores.

"We had a more resilient food system in rural Minnesota because we have these small-town grocery stores," Draeger said. "And their supply chains are just different enough that in many cases, they did not suffer from the empty shelves that we saw at some of the larger stores."

She said it's critical for rural residents especially to spend at least a part of their holiday shopping budget at grocery stores near them.

"These grocery stores are a huge asset and are there in a time of need," Draeger said. "But they won't be if we don't invest some of our food dollars."