Leakage (retail)

Retail leakage occurs when local people spend a larger amount of money on goods than local businesses report in sales, usually due to people traveling to a neighboring town to buy goods. Retail sales leakage occurs when there is unsatisfied demand within the trading area and that the locality should provide extra stores spaces for such type of businesses. After all, retail leakage does not necessarily translate into opportunity. For instance, there could be tough competition in a nearby locality that leads the market for same type of product. Many small - to medium-sized communities experience leakage of retail expenditures as local citizens drive to neighboring towns to shop at national retail chains (e.g. Tesco, Asda) or eat at national restaurant chains (e.g. Slug and Lettuce, Harvester). Attracting such national retail chain stores and restaurants to a community can prevent this type of expenditure leakage and create local jobs.^[1]

The economic definition of leakage is a situation in which income exits an economy instead of staying within. In retail, leakage refers to consumers spending money outside the local market. For instance, crossing a border to buy goods instead of making the same purchase from local shops. Alternatively a retail leakage can be referred to as a 'negative' Retail Trade Gap or a Surplus factor. Contradictorily a retail surplus means that the locality's trade area is securing the local market and attracting non-local customers.^[2]