80% of Disposable Income Is Spent Within 20 Miles of Home – Or Is It?

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This column was prompted by an email from Street Fight CEO Laura Rich. She was trying to identify the original source of a statistic I cited in a report. That statistic was the following: “Roughly 80% of U.S. disposable income is spent within 10 to 20 miles of home.”

It’s a powerful figure – but where does it come from? And is it real?

In the world of digital marketing and tech writing, data are often thrown around casually or used for marketing purposes. Indeed, most of the “research” coming out these days has more to do with marketing than research. As a result, many published stats lack context or are selectively presented to suit particular marketing objectives.

This is also true in local. One example is an often-quoted statistic: “97% of consumers use the Internet to research products or services in their local area.” I see it cited at least bi-monthly in articles and press releases. It’s compelling but it’s also inaccurate. It was likely generated through an online consumer survey. And it was published by one of the leading local analyst firms – so there’s authority behind it.

Internet penetration in the US isn’t 100%. It’s somewhere between 70% and 77%, according to the US Census Bureau and comScore. While it’s very possible that 90% (of the 70% – 77% of online adults) do conduct internet research before buying locally, the statistic as presented — there’s no other way to say it — is wrong.

My “80% buy close to home” statistic may also be wrong in a similar way, though logically and anecdotally it seems right. Most people do seem to spend most of their money close to home. The stat also appears to be validated by other consumer data: 95% of all US retail sales happen locally (see graphic above).

After receiving Laura’s email, I reviewed the report in which the 80% statistic originally appeared (2011). Regrettably, I had not sourced the stat. I had simply said that 80% of consumers spend most of their income within 10–20 miles of their home.

Upon reflection I couldn’t remember whether I was merely repeating something I had seen multiple times and internalized, or whether there was actually a source. My failure to cite an original source (which might be the Census Bureau) was sloppy.

Then I went down a kind of rabbit hole searching for a primary source. I spent days looking for one and I never found it.

Instead I discovered scores of articles and secondary sources citing or using the 80% figure, generally without any meaningful attribution. Some quoted other articles, some quoted individuals. I also found several variations such as: “75% of consumer spending occurs within 15 miles [of home].”

Ironically, some of the more recent articles I found cited me (or the Internet2go.net blog I write) as a source. Others casually referred to the U.S. Census Bureau but without dates or enough detail to verify the accuracy of the reference.

Many “geoscenti” have uncritically accepted some of these foundational local statistics because they’re so widely cited and repeated. As a result they’ve acquired the status of “common knowledge.”

But are these numbers ultimately traceable to a real, credible source? It’s not really clear.

By looking at multiple surveys, as well as consumer spending data from the Census Bureau and Bureau of Labor Statistics, we can probably reconstruct empirical support for a “10-20 miles” spending claim. I’m sure we could.

However my guess is that the original, primary source never existed. Someone probably made an observation or extrapolated from some isolated consumer survey data a number of years ago. Though probably based on flimsy data it made for a powerful local marketing slogan.

Over time, the “majority of consumer spending happens close to home” mantra was so often repeated as fact it took on the force of truth.

If you’re thinking I’m now taking some sort of “contrarian” position to diminish the importance of local, I’m not.

The “research online buy offline” phenomenon is much more important than e-commerce — to the tune of trillions vs. billions of dollars. The traditional vs. e-commerce chart above tells only part of the story. The multi-billion dollar services economy, for example, is almost 100% local. But that’s another article.

My basic point here is that the data and statistics we rely upon daily in our discussions should be treated more thoughtfully and understood in proper context. We should all be a bit more conscious and careful about the numbers we use and how we use them. And that definitely includes me as well.

Greg Sterling is the founding principal of Sterling Market Intelligence (SMI), a consulting and research firm focused on the Internet’s influence on offline consumer purchase behavior. He also is a Senior Analyst for Local Mobile Search, an advisory service from Opus Research tracking the evolution of the mobile Internet.