How to shop small businesses without overspending this holiday season

Creating big change in local communities often means starting small—such as choosing to shop at small, local businesses around the holidays.

While Black Friday, Cyber Monday, and other holiday-related sales events lead to big crowds at big-box stores and other national retailers, small businesses are the main economic engine in the United States. More than 99% of the businesses in the U.S. are classified as “small,” and they employ more than 46% of American workers. Furthermore, small businesses accounted for nearly 63% of all job creation between 1995 and 2021, according to the U.S. Small Business Administration.

Yet many consumers may eschew shopping at small businesses in their communities for one reason or another—often because national retailers can offer products at lower prices than local competitors. However, experts say it’s important to think about the broader picture when choosing where to shop, and to think about where your dollars could eventually end up once they leave your wallet.

An investment that comes back around

Choosing to shop at small businesses not only benefits the owners of those businesses but also “benefits employees, suppliers, local landlords, and brings the whole broader community benefits,” says Abigail Ingram, executive director of the Polsky Exchange, part of the Polsky Center for Entrepreneurship and Innovation at the University of Chicago. “When small businesses grow, they create jobs in local communities and create economic growth,” she says, and tax revenue collected also tends to stay in local areas, funding schools, social programs, and more.

In that sense, Ingram says that shopping at small businesses is “an investment” in local communities.

That runs up against the reality, though, that bigger retailers have outsize economic power. They can absorb costs better and even sell products at a loss and still come out ahead in the long run. Those are luxuries that many small businesses simply don’t have.

Ingram says that’s also something to keep in mind, and that we shouldn’t necessarily hold it against people who choose to buy a toaster at, say, Walmart as opposed to a small local retailer in an effort to save a few bucks.

“I think a lot of us are making decisions based on our immediate economic reality, and we can’t fault consumers for making the best choice for them at the moment,” she says.

Balancing the finances of shopping small

If you do plan to patronize small businesses, there are some things to consider. You might be willing to spend a little more, but there are some other things to keep in mind as well, experts say. And who knows? You may end up actually saving money shopping at small businesses.

“For all that can be negative about giant businesses, there certainly are some positives,” says Matt Schulz, chief credit analyst at LendingTree. “The volume of merchandise that they move allows for lower prices, and their systems may be more streamlined in terms of returns,” he says. And if you do run into an issue with an order or purchase, it may be easier to smooth things out as large retailers often have entire teams or divisions dedicated to customer service and satisfaction.

Plus, there’s also the chance that a small business will add a surcharge to your bill if you try to use a credit card—something that’s rare at a national chain. On the other hand, customers may have a bit more power when shopping at a small business in terms of the price tags.

“Depending on what you’re trying to shop for, you could try and negotiate a little bit on price with a small business, because you may be talking to the owner or someone one step away from the owner on the org chart,” Schulz says. Negotiating “may be a little more possible at a small business.” Furthermore, customers can try to angle for a discount for paying with cash.

Pitfalls to watch out for

But there may be risks when shopping at a small business. Some small retailers may utilize drop-shipping or other tactics to increase their margins—something that can rub consumers the wrong way if they find out about it. While there may not be much you can do to avoid, say, an Etsy shop charging you a premium and then sending you something from Amazon, Schulz says that it’s best to go with your instincts as a consumer.

“Trust your gut when you’re shopping, and if something doesn’t look or feel right, consider taking your business elsewhere,” he says.

Shopping at small businesses can have pros and cons, but overall, it’s the impact on local communities that consumers should try to keep in mind when deciding between going to Target or the mom-and-pop store down the road.

“Nobody shops at small businesses as much as they want to because it’s easy to shop at the mega retailers and eat at chain restaurants,” Schulz says. “But even if the small business is a little more expensive, there can be value in still shopping there in terms of giving back to the community.”