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Cash mobs: a new boost for local business?

Saturday is International Cash Mob Day. Like flash mobs, cash mobs use social media to organize. But they don't perform, they spend money at a targeted local business. 

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Hudyncia is affiliated with the American Independent Business Alliance (AMIBA), a group that considers itself the “activist arm of the localization movement,” according to AMIBA co-founder Jeff Milchen.

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“An important benefit to remember is the local multiplier effect,” Milchen said. “Each time someone makes a purchase from a local business, a far greater portion of that money is recirculated in the local economy, creating more jobs, and contributing to the overall wealth of the community.”

Milchen said that what he’s seen so far from the cash mob movement is positive, especially in terms of its raising awareness of regional buy local campaigns.

“Obviously, we hope that this will only add to that momentum,” he said. But, he also cautioned against a one-and-done pattern of altruism. “If you just patronize the local store when it’s convenient, it may not be there for your convenience much longer. Those business need day-to-day patronage, not just the occasional impulse buy.”

Some people are less enthusiastic. The problem with the buy local philosophy, and cash mobs in general, is that they don’t necessarily impact total consumer spending, explained Bill Dunkelberg, chief economist for the National Federation of Independent Business (NFIB).

“What they want to do is pick people who they want to help,” Mr. Dunkelberg said. “They take their spending there, and take it away from where they might be spending otherwise. The point is, we measure total consumer spending as part of GDP [gross domestic product]. We don’t care where you spend it on the macro level, we just add up the total cash receipts.”

From his perspective, whether you spend $10 at the local Rite Aid, or at a mom and pop pharmacy around the block is more an emotional distinction than an economic one. “A retail store is a retail store,” he said. “They both rent space, hire local people, pay for utilities and water bills and taxes.”

In February , the NFIB’s small business optimism index rose ever so slightly. The 0.4-point increase marked the sixth consecutive month of improvement, although the index remains lower than its levels a year ago.

“Obviously, we fell off the horse,” Dunkelberg said. “We’ve got back up and we’re saddled again – but it’s not clear where we're headed. I’m not sure many business owners are going to count on cash mobs as a way to help their business along.”

Back in Cleveland, Samtoy is quick to  distinguish himself from advocates like Milchen and Hudyncia, while also disputing the more pessimistic observations of Dunkelberg.

“We’re focused on the merchant, or middle man side,” Samtoy explained. “I’m fine with the buy local movement. I’ve met the chicken who makes my eggs. But it’s not something we're super focused on. It’s not that I’m against big business. I am in favor of the businesses in our communities who are making those communities distinctive or unique.”

The potential macro effect of the cash mobs on the economy begins at the micro level, he said. “Wal-Mart started as a dime store in Bentonville, Ark. It was people in Arkansas who started shopping there, and supporting their local business. It started from these humble local roots. Same as General Motors, or Apple or Microsoft. They didn’t start out huge, they grew.”

A group of 40 people spending $20 each may not have an immediate macro effect, that’s true, Samtoy said. And it’s hard to predict how long the movement will continue. But ultimately Samtoy believes the overall effect may prove to be substantial: “It's not going to happen overnight, but long term I think it's going to have benefits that we can't predict right now.”

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