Why Local is Better for Businesses and Institutions

Make/Grow Local is a business-to-business (aka B2B) online platform, connecting local makers and growers with businesses and institutions looking to buy food or other products products from their area. So, this begs the question, how do these businesses and institutions benefit from sourcing locally?

Supporting the Local Economy
By supporting local growers and makers, businesses are putting their money back into the local economy. As a result, the area is economically enriched. The American Independent Business Alliance describes this effect:

On average, 48 percent of each purchase at local independent businesses was recirculated locally, compared to less than 14 percent of purchases at chain stores.”

Over time, this impact can improve quality of life in the community, create a more business-friendly environment, and even bring economic benefit back into the business that sourced locally in the first place.

Local Products are More Environmentally Friendly
Sourcing local products are an easy way for a business to be greener. Shorter distances for deliveries means less energy and fewer resources are used to transport products. For that reason, food products are fresher and taste better too. Additionally, these smaller, local farms are often more sustainable and have more environmentally friendly growing practices.

Take Advantage of Unique Products
Nearly every location has some products, food or otherwise, that make it unique. For example, Maine has blueberries, apples, potatoes, lobster, and more. Incorporating foods native to the area fosters a stronger sense of area identity for locals and tourists alike.

Local Products are More Socially Responsible
Buying local strongly integrates a business with the community. It can create a sense of goodwill with producers, employees, potential customers, local lawmakers, and the public at large. Improved goodwill is valuable to any type of business or institution.

The benefits for businesses buying locally are numerous, and extend beyond even those mentioned here. Make/Grow Local gives businesses and institutions the opportunity to grow their business and their goodwill and along with their community. Whether restaurant, university, hospital, corporation, or other type of business, Make/Grow Local could connect your company with the area producers you need to make local sourcing work for your business. To learn more about how to get involved in our marketplace, contact us today.

The local movement needs to avoid a platform monopsony

Word of the day: monopsony.

Our mission is to guide the local-made, local-grown movement away from potential online platform monopolies and monopsonies. It’s what happens when an “aggregator” platform grows to dominate the market, thus removing agency and control from the sellers and the buyers.  With Make/Grow Local founded as a non-profit, run by and for the community, this can’t happen.

With other ecommerce platform vendors, it’s what they actually hope happens. Choose wisely!

From wikipedia, Monopsony: In economics, a monopsony (from Ancient Greek μόνος (mónos) “single” + ὀψωνία (opsōnía) “purchase”) is a market structure in which only one buyer interacts with many would-be sellers of a particular product. In microeconomic theory of monopsony, a single entity is assumed to have market power over terms of offer to its sellers, as the only purchaser of a good or service, much in the same manner that a monopolist can influence the price for its buyers in a monopoly, in which only one seller faces many buyers.

At first, today’s online platforms seem great, because they offers a better user experience than individual scattered marketplaces, and don’t the best rise to the top, benefitting all parties?

This monopoly, though, is a lot different than the monopolies of yesteryear: aggregators aren’t limiting consumer choice by controlling supply (like oil) or distribution (like railroads) or infrastructure (like telephone wires); rather, consumers are self-selecting onto the Aggregator’s platform because it’s a better experience.  [Source: Stratechery article on monopolies and monopsonies.]

What happens next, however is the problem: the platform that wins will set the terms of engagement for both buyers and sellers; it owns the middle, and can set prices, change the rules, and exercise unwanted power over the market.

One more implication of aggregation-based monopolies is that once competitors die the aggregators become monopsonies — i.e. the only buyer for modularized suppliers. And this, by extension, turns the virtuous cycle on its head: instead of more consumers leading to more suppliers, a dominant hold over suppliers means that consumers can never leave, rendering a superior user experience less important than a monopoly that looks an awful lot like the ones our antitrust laws were designed to eliminate.

We’ve seen this with every commercial platform, from HomeAway to Elance Uber to Amazon to AirBnB: drive the competition out of business with “free” or low-cost, then raise prices and monetize everything and reap billions of dollars as the next “unicorn” business.

So, to our Maine community of growers and makers, and our kindred local growers in other states: be careful about the platform you choose to sell your B2B goods through… choose the only nonprofit, community-owned ecommerce solution that was built for you.

A lesson about free and freemium

Why was Make/Grow Local founded as a nonprofit? Because “free” doesn’t stay free in a market economy (aka capitalism).

Unless a platform is owned by the participants and communities, the funding forces that created the commercial platform will one day expect large returns on their investments. They do this by “monetizing” their captive audience, once it gains marketshare/traction and possible dominance. The loss leader (the free service) wins participants, and then when they are dependent and can’t easily leave, the fees begin (or increase).

As an example of how this monetization is inevitable, an essay on no-longer free online learning courses studies the trend:

Massive Open Online Courses used to be 100% free. But they didn’t stay that way. As MOOC providers focussed on finding a business model, they started putting certain aspects of the experience behind a paywall, hoping to get more people to pay. MOOCs went from “free” to “free to audit.” This shift to a freemium model — with more and more chances to up-sell — seems to be working for the providers. The top three services earned more than $100 million combined last year.

So in the race between various solutions in the marketplace now, Makers and Growers (and Buyers) should carefully consider in what basket they place all their eggs.