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HdL Companies Assists Small Businesses with Shop Local Campaigns Case Study.pdf [267.2Kb]
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HdL Helps the Cities of Lemon Grove and Upland Use ARPA Funds to Grow Their Business Communities and Keep Local Dollars Local

Executive Summary

Municipalities face multiple challenges in their efforts to increase economic development and support their business communities. HdL helped the Cities of Lemon Grove and Upland utilize federal relief funding to promote Shop Local campaigns and foster small business recovery. To date, each City has generated more than $350,000 in local tax dollars through custom, digital gift card programs. 

The Challenge: Keep Local Dollars Local

Sales tax revenue and consumer behavior go hand in hand, and while total sales tax revenues have increased beyond pre-pandemic levels, small businesses continue to struggle to reach pre-pandemic cash flow and revenue margins. In addition, e-commerce continues to overtake brick-and-mortar spending and economic factors continue to pinch wallets. Cities are seeking innovative ways to help their local businesses and economies fully recover and maintain consistent revenue growth. HdL assisted the Cities of Lemon Grove and Upland to support their small businesses and keep local dollars local. 

Background

The City of Lemon Grove & Small Business Assistance Programs

Lemon GroveThe City of Lemon Grove, a suburb of San Diego and home to 26,000 residents, is known for having the “Best Climate on Earth.” The City is committed to providing its community with smoke and alcohol-free parks and hosts quarterly community clean-up events. Their small-town charm and community pride exemplify the devotion of the City. 

The City awarded small grants (up to $10,000) to assist local businesses that struggled during and after the pandemic. “The challenge was ensuring the mom-and-pops survived. They were the ones that were closing. Our initial business grants focused on small women- or minority-owned businesses that were not franchised, and we still lost about 15%. We're just trying to keep Lemon Grove small business focused,” said Lydia Romero, City Manager for the City of Lemon Grove.

The City wanted to go a step further and implement a small business assistance program to help their business community fully recover and create a sustainable local economy. 

The City of Upland & ARPA Fund Restrictions

downtown uplandThe City of Upland is another city known for its commitment to community growth. Adjacent to Los Angeles County, its central location and population size of nearly 80,000 make it a prime retail and business hub for all sectors of the economy. The City partners with the Inland Empire’s Small Business Development Center to offer one-on-one consulting, marketing webinars, and grant programs to aid in the success of its local businesses. The numerous resources are a testament to the City’s dedication to being “The City of Gracious Living,” the City’s motto.

While the American Rescue Plan Act (ARPA) relief funds helped agencies nationwide recover from the negative economic effects of COVID-19, uses for the funds were restricted and not each use was a good fit for every agency. After calculating actual revenue loss (according to the U.S. Treasury’s formula outlined in the Final Rule) and identifying the portion of ARPA funds that could be used for any governmental purpose, the City of Upland weighed their options. Establishing a citywide broadband infrastructure network couldn’t be achieved with ARPA dollars alone. A water infrastructure project was appealing, but the City believed the money could be better utilized elsewhere. “We were able to be selective and determine how best to use the restricted funds,” said Stephen Parker, Assistant City Manager for the City of Upland. 

Analysis

As HdL assisted local government agencies with ARPA legislation and regulated usage of funds, it was evident that a sustainable business community was a top priority. Grants and loans helped pay back taxes, rent, and bills, but they didn’t help bring in new and consistent revenue. To remedy this, HdL partnered with Yiftee, a digital gift card service provider, to engage communities in Shop Local campaigns. 

Shop Local campaigns increase resident visibility and create a sense of community pride, benefiting both the business community and the General Fund. HdL identified the Cities of Lemon Grove and Upland as candidates for such a campaign. Both Cities wanted to revive their local economies, had untouched ARPA funding, and a downtown with a variety of small and diverse local restaurants and retail businesses - the ideal participants for a community gift card program. 

Solution

In addition to using ARPA funds for small business recovery through loans or grants, municipalities can help local businesses by generating consumer demand for goods and services through incentivized support. A Shop Local Gift Card program accomplishes this by encouraging residents to shop at participating merchants with city-matched funds.  

Shop Local, Shop Lemon Grove

On November 1, 2022, the City of Lemon Grove’s City Council voted to allocate $150,000 in ARPA funds to match residents’ purchases of “Shop Local Lemon Grove” gift cards, essentially a Buy One, Get One bonus offer. “The pitch to the Council was that grants don’t help if a business doesn’t have market viability. The gift cards will get people in the doors and show them what these businesses have to offer, and then it is the responsibility of the businesses to create repeat customers,” said Romero. 

The program is only open to small, independently owned, local storefronts. Corporate chains and multi-franchised businesses can not apply. This keeps the focus on the unique, local vendors that make each city different. “Early adopters of the program, like Lemon Grove Yoga and Massage and Onyx Moto, were really pleased with the results, and those folks helped spread the word along with the East County Chamber of Commerce. We have 33 active vendors and participation continues to grow,” Romero reported. 

HdL advises rolling out the program in phases 1) to monitor initial success and 2) to create demand before funds run out. The City has successfully launched and completed two phases. The first phase ($150,000) sold out in two months over the holiday season. The City allocated an additional $125,000 in ARPA funds in January and sold out in April. To date, a total of $407,860 in “Shop Local, Shop Lemon Grove” gift cards have been purchased and $323,570 have been redeemed for a redemption rate of 79%. The City’s net revenues from October through December were 6.1% higher YOY and higher than pre-pandemic Q4 figures. Returns were positive across most sales tax categories, even as economic pressures influenced buying decisions. 

Community card HdL Companies Yiftee

Discover Upland

After reading how the City of “Lemon Grove Used Federal Relief Funds to Offer Residents Double Gift Card Values at Local Businesses,” the City of Upland proposed its own program and received City Council approval in time to campaign before the 2022 holiday season. “This was the ‘better use of funds’ we were looking for - where you're able to benefit your local, small businesses and put extra money in the pockets of residents right before the holiday season. It was a no-brainer,” said Parker. 

Despite only having two weeks to go live, recruit local businesses, and advertise the program in time to help holiday shoppers, the City and HdL launched the program in December with $100,000 available for bonus gift cards.  Every dollar was utilized within two weeks. The City’s net revenues from October through December were 12.1% higher YOY. After the first of the year, the City started a second phase with an additional $120,000 available for bonus gift cards.

To date, a total of $365,480 in “Discover Upland” gift cards have been purchased and $316,960 have been redeemed for a redemption rate of 87%.

How To

Agencies can establish their own criteria for a Shop Local digital gift card program and make it unique to their community. HdL provides overall administration and works with city staff in structuring and designing the program including spending limits, design parameters, targeting business participants, marketing, and monitoring sales and usages. The program can be achieved in three simple steps… 

Step 1: Establish a method to incentivize the purchase of Shop Local Digital Gift Cards. 
  • Fund a matching bonus gift card for each gift card purchased.
  • Offset the eDelivery fees normally paid for by customers.
Step 2: Recruit small, independently owned, local businesses to be recipients of digital gift cards.

“It’s been an easy lift for the City. HdL ensured the businesses were dialed in and understood the technology is as easy as it gets,” Romero reported. At the time of purchase, the resident provides their digital gift card via confirmed email (or print out). The vendor manually enters the unique card number into the business’ POS or terminal system as a credit card. As this is a 100% digital, eco-friendly option, there is no physical card to swipe. “I like that our small shops can participate without the hassle or expense of creating and managing their own unique card,” added Romero.

"We love the gift card program," said Tanya Valadez, CEO & Founder of Elevated Coffee & Confections, a Lemon Grove coffee shop known for their vegan desserts. “We see about five to ten customers a day that use the card and are very satisfied with it. Even my regulars come in more frequently because they have extra money to spend. I have found that many customers are passionate about growth in Lemon Grove and it warms my heart to see the City coming up with ways to support us. I bought a $150 card for myself and used it at Lemon Grove Yoga and Massage. I used the additional card to treat my employees to massages! As a small business owner, it was wonderful to reward my employees and do so at a cost that was within my budget while also supporting another local business.”

The City of Upland, with 59 participants, also found the recruitment process to be easy. “It takes no effort whatsoever to get businesses on board, but I know we wouldn't have seen the same success if we didn't have the Chamber and HdL promoting the program,” said Parker. HdL has successfully implemented numerous Shop Local campaigns and knows what types of businesses work best in the program. Service providers like hair salons and auto repair shops make ideal participants. They were among those hit the hardest during the pandemic, so they are eager and grateful for the support. 

Step 3: Advertise the program to residents.

To start, explain the program and its benefits along with a list of participating businesses on the City website and social media channels. HdL also assists agencies with the creation of a landing page through Yiftee (the digital gift card service provider). “We advertised on an electronic billboard, and that's driving a lot of interest from the greater region,” said Romero. “We printed business cards and left them near the cashiers of participating merchants. The businesses proudly advertising a window cling and actively spreading the word to customers are the ones seeing the biggest return,” added Parker.

Lemon Grove shop local banner

Jerry Fraize, the owner of Pedego, an electric bike shop in Upland, emailed everyone on his distribution list as soon as the Chamber announced the program. The store had instant results. “Full families - dad, mom, daughter, and son - each had their own card, and it made it easier for people to purchase higher-end products. When the City launched the second installment, we sent another email suggesting clients use it for service tune-ups. We were surprised at how many people listened and are still showing up daily. We hope the City continues the program!” commented Fraize. 

“One of our top three businesses is an auto repair shop. I would not have thought that an auto repair shop would beat out our restaurants, but it goes to prove that the program works. Folks check the list to see where else they can use their funds and learn about merchants they weren’t aware of before. With just a single click, we’ve generated brand awareness and repeat customers,” added Parker. 

After the program is launched, custom reports are used to monitor the quantity and value of cards purchased, as well as redemption reports which showcase the value and distribution of gift cards redeemed at each participating merchant. The redemption reports also help identify businesses that may need assistance in marketing the digital gift card program. 

Discover Upland

Next Steps

The City of Lemon Grove is in phase three and allocated another $69,500 in ARPA funds for a 50% BOGO. “I like the viability of the program and, I think it's one we can continue to promote and our businesses can buy into even if there isn't a BOGO offered. It really supports the mom and pops that are without business representation in the community. It’s a win for the City, a win for the shops, and a win for folks using the gift cards,” stated Romero.

“A gift card program is an excellent tool that, under the right circumstances, can be a linchpin for developing and unifying your small business community. It’s added a lot of value,” said Parker. After the first phase sold out faster than expected, the City of Upland reduced the amount of cards that could be purchased per person in the second phase. “We’ll continue to do so through 2023 so that we’ll host two holiday seasons in a row with extra shopping funds. People are familiar with the Discover Upland gift card now. They continue to discover and patronize new favorites. We’re beyond happy that what we initially viewed as restrictions resulted in unlimited opportunities that benefited the whole City,” Parker concluded. 

HdL has helped numerous agencies, big and small, successfully implement Shop Local campaigns. Regardless of population, demographics, or location, a digital gift card program can encourage the growth and sustainability of local economies nationwide. HdL can help your agency utilize ARPA dollars (before the December 31, 2024 deadline) to fund a Shop Local program and help your business community recover.

Downloaded this case study in PDF format above.

 

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