My dog needs a new collar. Last weekend, I decided to get him a new one, and I decided to do it locally. There are two independent pet shops within walking distance. Both shops are amazing, with loving attendants who have a passion for pets and the service they provide. I found good quality collars in both, both went for almost $30.
I haven’t bought one yet. I may end up buying the pricier one out of principle, but there are alternatives online for $2.99 and at a nearby big box store for $4.99. The higher price is just one of many things to consider. At Proud Places we have continuously advocated for small businesses and local shopping. For that advocacy to have more impact, we need to stop and ask some uncomfortable questions to find out what are both the de jure, and de facto barriers for affordability, that make shopping online and national chains more convenient.
For a family living on a single income, accruing student debt and in one of the hottest real estate markets for people escaping New York City, purchases need to be carefully considered. We would love to be able to patronize more local stores, eat in more local restaurants and shop for all our groceries at the local farmers market.
The reality is that being able to do that is a privilege, for both buyers and sellers, that we need to check. If everyone in town could spend $50 in a local shop, they would be saved. But for everyone in town to be able to afford that, we need to make those $50 count for families of lesser means. The example pits local shops with online and national retailers, but it could just as easily be about farmers markets and chain supermarkets.
My work with local businesses has spanned almost 2 decades. Most of those years were spent abroad, where conditions require that businesses be very open to innovation in order to survive. In some cases bringing other businesses to share the store’s floor, often packing up to do pop-ups in other cities and sometimes adding very different lines of business to their original offer. Most times, what proved to be successful was to sell more small items to lots of people at more affordable prices.
Specialty shopping in independent stores is usually exclusive. For doors to remain open, every sale must count and margins need to be larger, so items tend to be on the higher end of the quality spectrum. Stores that fit this profile usually cater to small audiences on the higher quintiles of income.
Those segments are more willing to pay for the privilege of goods made by the hands of artisans or master craftsmen, with elaborate packaging and elegant presentation. It’s not so much that those stores are just expensive, but that they are selling more exclusive, pricier items.
Almost every part of that side of the spectrum will require high specialization, so wage controls do not greatly impact its final costs. The most noticeable impact of such controls is on the lower price range. Shopkeeping requires few skills but artificially high wages, among other non-scalable costs that greatly increase overhead and decrease profit margins for smaller, local operations. Regular items need to be priced higher in order to cover the overhead. The cost difference is a de facto barrier for families on a budget, who prefer to drive to discount big box stores on the outskirts of town. It is also a barrier for local shop owners looking for affordable providers.
Sourcing and selling locally is naturally more expensive. Back in 1958, an economist by the name of Leonard E. Read wrote an essay wondering what it would take for one person to produce a humble pencil. From mining the graphite in South Asia to designing the woodworking tools that process the cedar wood, making one little pencil locally would prove almost impossible and very, very expensive.
Businesses that rely on local supply chains, like the cheesemonger who milks the cows right outside town and makes the cheese, the cobbler who purchases the hide from the local tannery, or the butcher who owns the livestock where it all comes from, cater to a small geographic area are rare and usually classified as essential.
Most local shops are just the local outlets in a larger ecosystem where specialization, division of labor and innovation have made otherwise luxury items available to billions of people around the world. They sell items designed in Germany, built in China, and distributed nationally from a warehouse in South Dakota, to a small audience.
They may struggle to fit within this model, not for lack of support, but because of the cost structure that forces them to be more expensive than the alternative. They sell locally, but the business is global. Naturally, online and big box retailers with thousands of stores and warehouses where revenue per employee is around $200,000, will be able to offer deeper discounts.
The trade-off is that in order to extend the availability to that many people, production and sales must be massive. This might be, I’m afraid, an argument in favor of big boxes, as much as I hate to see them guzzle up land and take hard earned local tax dollars back to their HQ. And a respite for my dog, who can choose between a “local” $30 collar or its $4.99 counterpart; both made in China.
So now what?
Small local businesses can be an alternative to families that cannot afford the higher price points that are normally offered. It takes hard work and creativity, but the odds can be offset. Here are three ways that small businesses can offset the scale shift, plug into their global networks and carry on as beloved local spots that the entire community can enjoy.
Possibly not the most sensitive thing to say to a struggling small business, but “grow” is the first advice. Growing doesn’t mean going into (more) debt or investing whatever little cash you have in physical improvements or a second store. It means you should work hard to be more efficient, add channels to communicate with and sell to existing and new customers, increase points of sale and add revenue streams.
The connected, digital world has created thousands of free tools and channels that business owners can take advantage of. Most do not require physical growth and large investments. There are indecently expensive delivery options for restaurants that require different business models and may not be suitable for most, and there are free platforms with great functionality and spectacular reach.
I won’t endorse any here but you get the idea. The larger the volume of sales, the easier it can be to lower margins, automate certain tasks and broaden the reach of your offer so more families can opt to shop local in a convenient, affordable way.
Operating in a local environment requires some creative thinking to make up for the difficulty of competing with online businesses and big boxes that serve localities, but operate at a global scale. Adding value to everyday products can elevate their appeal. One great way to do this is by third party partnerships with other local shops.
Businesses can get together with book shops to recommend accompanying readings or with local wine shops to find great pairings for each purchase. Alliances with local chefs, tour guides or musicians who can create bundled products with an added service, or with local designers or manufacturers who can create great packaging or add elements to enhance the products.
This would extend your reach with the addition of new networks and benefit from compounded marketing efforts. Broadening reach means more customers. This will make overhead costs a smaller part of each dollar in sales and lower priced items can be offered for more families to access.
Experience has become a buzzword. Almost every business owner tries to set one up in their store by bringing props and offering a great time to everyone who comes in. Many fail to deliver. Too many times there are more curious visitors than paying customers, making the sustainability of the experience a bit difficult.
Providing a real experience may require a beyond-the-store effort. Think of a local fishing store where enthusiasts can come and have a drink, talk about their interests and maybe try out the latest rod. That can be a free service.
The real experience starts at a higher level, with a club that offers outings or masterclasses and discounts at a higher price point. The top tier would offer a complete experience in a private stream with top of the line equipment and an overnight stay with a custom dinner designed by a celebrity chef. The different tiers of service at various price points would essentially subsidize the most basic: a local small storefront that offers basic products at accessible prices.
All these strategies aim at expanding the comfort zone of small businesses. That effort might be worth it if they would decrease the impact of overhead costs and offer customers like my dog a more affordable collar. Thousands of families that now rely on big box and online shopping would then see local shops as an affordable alternative.
This year has taken a large toll on all of us. The ideas above are not necessarily for everyone, but they may serve as a starting point to discuss innovative ways of making small businesses affordable to families of all incomes. Any work that can be done for local shopping to become affordable for more families will start a win-win cycle where local folks spend to keep doors open and the open doors keep nurturing their communities.