The State of Local Businesses in America: An Underdog Story

If you’ve been in a shopping district in any city in America recently, you’ve probably seen signs displaying some form of the “Shop Local” message. The message is certainly not new, but it’s taken on new importance. After seeing local favorites face closures and struggle to compete with e-commerce giants like Amazon, people are rooting for the businesses next door. 

Consumers want to and do support small and local retail. A survey by Sitecore found that 40% of American shoppers want to cut back on their Amazon shopping. Among the largest reasons for this was a desire to shop at other retailers. 2020 saw e-commerce gain a significant percentage of all retail sales, but that growth has slowed since

Online shipping, though, still has a slight lead when it comes to consumer preferences. Shopping in-store is now only preferred by 48% of customers. This shrinking group is justified in its choice. Shopping in-store has a ton of benefits. It allows you to actually inspect and verify the quality of what you buy. It also helps customers avoid the expensive shipping costs, waits, and delays that will always come with delivery. 

At the end of the day, though, the retail market is changing. E-commerce now makes up a sizable portion of it that will likely only continue to grow. Online shopping is fast, easy, and can be done anywhere.

Preferences and benefits aside, online shopping with big marketplaces has an image problem. Consumer perceptions of big warehouses used by big companies like Amazon have been shaped by waves of news stories as well as a growing push toward unionization in the industry. Furthermore, the prevalence of online scammers has had an impact on the way consumers think about shopping online. Around a third of consumers don’t even exclusively trust online businesses. Despite its convenience, consumers have trust issues with online shopping that doesn’t seem to be present with in-store shopping. 

Small and local businesses, however, do not face this same image problem. They are trusted and viewed as vital parts of local economies. It seems reasonable then that they could benefit from the increased visibility and convenience e-commerce provides without facing the same kind of trust problems online-only stores and Amazon do. Integrating e-commerce into their business model can help traditionally brick-and-mortar-only small businesses to grow and survive. Furthermore, consumers trust retailers with both physical stores and online stores more than all other types of retailers.

Savvy businesspeople have caught onto this. A number of tech companies are looking to bridge the gap between shopping online and shopping locally. Locally is a website that helps customers to check the inventories of retailers in their area and place orders for pickup or delivery. Other companies like Shop Where I Live, aim to create online marketplaces that can help small businesses benefit from the growing shift toward e-commerce. They have found success across the country from Nevada to Staten Island.

As more companies like these crop up, local, small, and independent businesses that have traditionally been brick-and-mortar, mom-and-pop-type shops will harness the convenience of online shopping.

That’s not to say that some of them have not already. According to Arrowhead, “68% of SMB [small and medium businesses] owners claim e-commerce positively impacts sales.” It is now common to see local favorites commanding a sizable portion of their sales from their own online stores. 

Despite all the talk on the impact of online shopping on retail, physical stores, big and small, are doing well. The retail market as a whole is huge in the U.S., accounting for 18.7% of our GDP  in 2020. 

Though large chains certainly have a strong presence in this market, small retail is nothing to laugh at. Small retail stores with less than 50 employees comprise 98.6% of all retail companies in America. Furthermore, along with medium retailers, they hire around 40% of all retail employees. 

This comes out to around 20 million people. That’s 20 million people working in businesses like your favorite local specialty or general store. That’s 20 million people in our communities, people we know. Supporting small retail is supporting your neighbors.

It also helps support your community as a whole, including you. A policy brief out of Michigan State University found that around 73 cents of every dollar spent at locally owned businesses stays in the community it was spent in. That’s 30 cents more than the dollars spent at businesses not owned locally.

With retail making up a significant portion of people’s spending, that mere 30 cents more of every dollar goes back into the community to pay for local products, wages, taxes, and more. You can never support just one local business. Supporting one local business can have a ripple effect that benefits large portions of your community.

There are other, more intangible, reasons to support local businesses, though. For one, it’s a way to keep yourself and your community in a more vibrant and unique local culture. Just think of how much people enjoy talking about local favorites or spending time in shopping districts when they travel. Having more local businesses helps create a unique and vibrant culture in any city.

Despite all the good it does for the community and the value it provides to customers, it still faces threats from e-commerce and big-box stores. There are a number of ways consumers and businesses can work together to keep local favorites alive – without having to drive to Main Street.

I’ve already mentioned shopping locally online. You don’t have to go to Main Street to explore the shopping scene in your city anymore. A number of small retail stores have their own online storefronts or presences on marketplaces, like the ones built by Shop Where I Live.

Additionally, local businesses often can be found and supported at community events. Here in Louisville, the Louisville Independent Business Alliance hosts a Buy Local Fair in July, where businesses can set up booths and connect with new customers.

At the end of the day, the retail market is changing. However, that doesn’t mean that small retail has to lose any presence. Small retail stores offer a lot, and consumers can support them in a growing number of ways. If at all possible, I encourage you to get in touch with your city by finding out what your local businesses have to offer.

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