Independent Retailers Month Supports Small Business
Sanders hatched his Kentucky Fried Chicken empire by selling fried chicken at a gas station he ran in North Corbin, Kentucky. Ash hocked Stanley Home Products, brooms and brushes, before moving to lipstick and eyeliners, creating her own line of beauty products. Kroc was a traveling salesman before turning the McDonald’s brothers’ San Bernardino hamburger stand into the world’s largest restaurant chain. And Branson began his global conglomerate, Virgin Group, by selling mail-order records out a local church in southeast England. Of the four, only Kroc had any previous sales experience, which makes their success even more incredible.
KFC now has over 21,000 stores in 125 countries and a brand value of $13.5 billion. Mary Kay posted $3.5 billion in revenue in 2016. McDonald’s has more than 36,000 restaurants in over 100 countries. Branson has a net worth of $4.9 billion and Virgin Group controls more than 400 companies around the world.
Small is a Point of View
Small businesses are definitely not small potatoes when it comes to employment and commerce in the United States. According to the Small Business Association’s 2018 Small Business Profile, 99.9% of U.S. businesses are classified as “small” – less than 500 employees. They employ nearly 59 million people, which accounts for 47.5% of all employment in the country. Small businesses create two of every three private-sector jobs, and they account for 54% of all U.S. sales.
Small Business Saturdays, the day following the annual November Black Friday madness dedicated to raising awareness of supporting small, local businesses, was started in 2010 by credit card company, American Express, as American retailers were struggling to come out of a recession, and big-box and online shopping was rapidly gaining traction. However, Independent Retailer Month dates to 2003 when Tom Shay, principal of Profits Plus, established a week to honor local, independent commerce. Both celebrations support small business and highlight why shopping local supports communities in ways online retailers, big-box and chain stores can’t.
Buying Local Works Better
Civic Economics, a private research firm, highlights the difference in local economic impact in a comparison of a pair of independent businesses in Austin, Texas, a record store and book store, and their chain store counterparts. The study shows on average 48% of each purchase from the independent businesses were recirculated in the local economy compared to just 14% for the chain stores.
A more recent study from the National Hardware Retail Association and Independent We Stand shows that independent STIHL chainsaw dealers, along with other independent home improvement and building supply stores, recirculate 250% more dollars locally than their chain store competitors.
Regional studies abound on how supporting small business stimulates communities, and America’s heartland is at the heart of many. The South Dakota Rural Enterprise found that a dollar spent at an independent retailer is normally re-spent up to 16 times before it leaves the community. Another study done by the Indiana Main Street Program shows that only six cents of a dollar spent at a big box store remains in its community. And research done by the Institute for Local Self-Reliance found that every $100 spent at local retailers generates $45 of secondary spending, while similar investment in a chain store garners just $14.
Fear of the Amazon
Comparing local purchases to online transactions shows even greater disparity between local businesses and eCommerce when it comes to keeping money in the community. Sales through local hardware and paint dealers have a community impact seven times greater than purchases through online giants.
Another NRHA study reports that if online retailers capture just 10% of the home improvement market from independents, American communities will suffer a collective loss of $9.3 billion in economic activity. Online retailers currently represent just 2.3% of home improvement sales.
The Amazon effect on retail can be seen in almost every shopping mall in the country where anchor stores are closing at alarming rates. JC Penney closed 138 stores last year. Sears and Kmart have shuttered over 300 stores over the past 18 months, and others – RadioShack, Circuit City and Toys R Us – have gone out of business altogether. Sadly, when malls fade due to a loss of anchors, many mom-and-pop stores follow.
The Des Moines Register recently looked at how store closures in Ottumwa, Iowa affected the local economy. The heartland city has lost Target, Kmart, JCPenney, Vanity and Herberger’s, which was the last anchor standing in its Quincy Place Mall. Herberger’s closure leaves close to two-thirds of the mall shuttered and the independent retailers remaining there struggling.
“These are challenging times for retailers. … There’s a clear shift in power from the retailer to the consumer,” Mark Mathews, the National Retail Federation’s vice president of research and development, told the Register. “When I was younger, when I wanted to buy something, it was a question of what was open within driving distance. Now you can buy anything, anywhere.”
The newspaper report blames job losses in other industries more than Amazon for many of the closures. However, the impact of the online retailer has been startling. According to a study from Civic Economics, from 2014 to 2016 approximately 101,000 retail shops have been displaced and nearly 1.5 million retail jobs have been lost due to the emergence of eCommerce. Because of those losses, close to $9 billion in uncollected sales taxes were not collected and those taxes run local governments and schools. In 2017, Amazon began collecting required sales taxes on its own direct sales in all states.
While Amazon’s revenue topped $177 billion last year and large retailers have dropped like flies, many independent businesses find themselves poised to thrive where the box stores have failed. A study by Advocates for Independent Business (AIB) reports that two-thirds of independent retailers believe they are responding better than chain stores to the shift in their industry.
Survival of the Fittest
Optimistic retailers believe their businesses can offer services that customers can’t find anywhere else. In the AIB survey,
independent retailers cite four characteristics of their businesses they see as an advantage over eCommerce:
- Service: Independent retailers provide better and more personalized customer service than chain stores.
- Community: Independent merchants are more intimately involved in their communities. Online retailers don’t even factor here.
- Knowledge: Independent merchants can offer first-hand experience and advice.
- Experience: Local businesses provide more unique and intimate shopping experiences than cookie-cutter chain stores.
Independent merchants also see opportunities in the evolution of the retail industry. Large store closures such as Kmart, Sears, Macy’s and others have left voids in neighborhood markets that many local merchants are seeking to fill. The AIB survey results shows 51% of respondents see those voids, both in market demand and physical storefronts, as opportunities to expand their businesses.
Independent Merchants Build Character
There are many ways local, independent businesses help communities beyond recycling cash:
- Independent businesses give communities their unique character.
- Independent business owners are an integral part of the communities in which they live and work, and thus tend to recognize how their decisions may impact their neighbors.
- Independent business owners help to build a sense of community by providing local jobs, creating entrepreneurship and sparking innovation and business competition.
For those intrinsic reasons, the impact of shopping local generally leads to satisfying customer experiences. A Consumer Reports survey of pharmacies finds that independent shops earn top marks for customer satisfaction and are competitive on prices with their chain store competition.
The study also states: “At least 90% of shoppers at independents rated their pharmacy as Excellent or Very Good in speed and accuracy, courtesy and helpfulness, and pharmacists’ knowledge. No other type of drug store came close.”
That’s another reason why independent “buy local” campaigns are a good idea. According to the American Independent Business Alliances (AMIBA), businesses in communities with long-term “buy local and independent campaigns” reported average revenue growth of 7.4%. That’s nearly twice as much as independent businesses without such support.
Many chambers of commerce and community-specific small business associations offer campaigns to support small business. There are many resources available to independent business owners interested in starting such campaigns.
AMIBA – American Independent Business Alliance offers a guide to a campaign and a roundup of seasonal campaigns.
Association of Chamber of Commerce Executives – offers information and resources on “buy local” initiatives.
Independent We Stand – features information about the importance of “buying local.” Its sponsors include Stihl USA, Do it Best Corp. and PPG Paints.
Institute for Local Self-Reliance – offers information about the importance of local independent businesses.
National Federation of Independent Business – is an organization dedicated to providing support to small business owners.
Small Biz Survival – is a website dedicated to helping independent businesses that offers an eBook on campaigns.
Not every entrepreneur wants to become the next Harlan Sanders, but they all aim for success. And every independent merchant who succeeds helps their community prosper.