Urban developers regularly wax eloquent over the importance of local small businesses.  But ultimately, businesses depend on customer support. So, in what markets do customers routinely support small businesses? Getting data that reflects on this question is often very difficult. A new source of “big data” on consumer spending patterns comes from the JPMorganChase Institute, which uses anonymized credit and debit card data from more than 16 billion transactions by the bank’s 50 million customers to measure consumer spending patterns across the United States.  Their “Local Consumer Commerce Index” index reports detailed data on spending patterns in 15 major metropolitan areas across the country.

Small Business (Flickr: La Citta Vita)
Small Business (Flickr: La Citta Vita)

The company’s proprietary credit and debit card data aren’t complete or perfect, of course. To the extent there are demographic variations in the bank’s market share in different metropolitan areas, or different patterns of credit and debit card use compared to cash purchases (or checks) these data won’t be completely representative. But they do represent a sizable sample of consumer spending and JPMI analysis show that they are roughly congruent with government measures of retail sales activity. The data cover many daily purchases of a wide range of non-durable goods and services; it’s likely that they under-report purchases of major durables, like cars and appliances, which are frequently financed through bank- or store-credit, rather than purchased with credit or debit cards.

The Institute is now publishing a monthly analysis of its index data that looks at changes in retail sales by metro market, by age, by income group, and by major product category (restaurants, fuel, etc). The report also estimates how much people spend in their home metropolitan area, as opposed to purchases in other metropolitan areas.

The Institute also classifies purchases according to size of business. We mined these data–which the Institute makes freely available here–to examine what fraction of consumer spending in each covered metropolitan market goes to “small” businesses.  The JPMC Institute classifies as “large” all those firms who have a market share of 8 percent or greater in a particular product category, and then divides the remaining businesses into “medium” and “small” establishments.

So what do these data tell us about where consumers are most likely to patronize smaller businesses?

First, there’s considerable variation among metropolitan areas.  Overall, small businesses account for about 32.6 percent of retail sales, according to the Institute’s estimates.  In New York City (think bodegas and boutiques) small establishments account for 36 percent of sales.  In Columbus, the comparable figure is 23 percent.  Here are the data for the 15 metropolitan areas covered in the JPMorgan Chase Institute’s study:

Second, the Institute reports that its own tabulations of retail spending data show that people who live in urban centers spend a larger fraction of their retail dollar at smaller businesses than those who live in suburbs.  They conclude: “central cities uniformly have more spending at small and medium enterprises than do their surrounding metropolitan areas.”  Their data show that purchases at small and medium sized firms are 10 to 15 percentage points  percent higher in central cities than in their surrounding suburbs.

The JPMC Institute data are an interesting and useful new window into consumer spending patterns. You can learn more about the data, and read the insights from the Institute’s analysts in their report that describes the methodology and key findings:  https://www.jpmorganchase.com/corporate/institute/document/jpmc-institute-local-commerce-report.pdf.