The overarching story of retail in 2020, the pandemic year, is that the big just got bigger. The biggest categories – food and beverage stores, general merchandise stores (with the exception of department stores), building materials and supplies dealers and electronic shopping – all got bigger and the biggest retailers in each of those categories went along for the ride.
Walmart, Kroger, Costco, Home Depot, Target, Lowe’s and Amazon all grabbed market share as the government’s lockdown policies favored them over those deemed non-essential to American consumers. Small, local independent retailers ended up with the short end of the stick.
Because they were forced to, consumers’ shopping habits changed during lockdown and early signs are that shoppers will continue to favor the big retailers that they came to depend upon last year.
Amazon, for one, just reported its highest first-quarter revenues ever, not to mention it was its second best-performing quarter ever. The best happened the quarter immediately before in fourth quarter 2020. Amazon’s relentless march to retail domination, not just online retail domination, continues unchecked.
But there are early signs of hope for Main Street retailers. News from a wide variety of fronts – consumer sentiment and small business surveys and a coalition of 20 independent small business organizations taking their story to Washington legislators – suggests that the tide might be turning.
Shoppers are looking for an Amazon alternative
While Amazon is the first stop for upwards of half of online shoppers, way ahead of search engines like Google, a new study among 2,000+ U.S. consumers finds 40% say they’d like to reduce their reliance on Amazon. And the shift is most notable among younger consumers.
A survey conducted by Sitecore, a digital management software company, found that more than half of GenZ shoppers (53%) want to cut back on Amazon shopping, followed by 49% of Millenials. Further, 30% overall – 43% of GenZ and 37% of Millennials – feel guilty about shopping there.
On the other hand, GenX and Baby Boomers feel much less Amazon shoppers’ remorse. Only 36% of GenX and 25% of Boomers want to cut back on Amazon.
The reasons cited for wanting to break their Amazon addiction are low-quality goods (21%), better choices from other retailers (21%) and a desire to support other retailers (12%).
The later – desiring to find other worthy retailers to support – is something independent retailers can lean into, especially with the younger values-based shoppers, who are especially concerned with a retailer’s labor practices and overall contribution to society.
“Because the crisis was so long, consumer behavior shifted. So they turned to Amazon to deliver everything to their front door,” notes Eric Groves, CEO of Alignable, the online network for small business owners.
“As a result, we drained an enormous amount of capital out of our local economies and shifted it to Jeff Bezos and Seattle. For small businesses to recover, that shift has to come back in some part to small local businesses,” he continues.
Of course, any addiction, like smoking, drugs or Amazon shopping, are hard to break. Groves offers a solution to going cold turkey: consciously shifting some of the money spent on Amazon back home.
“Say you spend $100 to buy something on Amazon, very little stays in the local community,” he shares. “But studies have shown if you spend the same amount of money at a locally-owned business, upwards of $50 to $60 stays and circulates locally, in the form of salaries, taxes, and supplies purchased locally.”
“To maintain a vibrant local community, people need to shift some of that spending back. It doesn’t mean you can’t buy stuff on Amazon, but if you wean yourself off of it – instead of 100% of your money going there, spend 25% or 50% locally – that shift would change the economic picture entirely for small retailers decimated by the pandemic,” he continues.
Dark clouds hanging over independents are lifting
The health of small retail businesses depends on everyone in the local community pulling together and through Covid, Groves learned the health of his business depended upon helping small businesses pull together to support each other too.
At its founding in 2012, Alignable primarily focused on helping small businesses network with people in their communities to attract new customers and generate word-of-mouth referrals.
But once Covid hit, Groves found small business owners’ concerns moved beyond just marketing to survival. They turned to Alignable’s online network for answers from their peers facing similar challenges.
Supporting a network of over 6.5 million small businesses and growing over 100,000 per month virally, Groves attests, Alignable started collecting data about pandemic-induced hardships for businesses. The goal was to understand exactly what’s happened over the course of the pandemic and provide actionable insights to help with recovery. Groves compares its data collection efforts to how FEMA collects data about natural disasters, like hurricanes and tornadoes, to better respond to future events.
“We’ve collected over 600,000 poll responses from our network to understand the impacts to their businesses financially and their outlook for their businesses,” he explains. “The data has been useful, not just to our members, but also to legislative bodies. We’ve even been funneling data to Harvard Business School so they can study this crisis.”
Unlike natural disasters which have an immediate and swift impact, even if a long recovery, the Covid disaster has extended over a year and only now is Alignable’s data showing signs the recovery is in process.
In its survey conducted at the end of March, small businesses that reported “significant impacts” dropped below the 40% line for the first time since the onset of the pandemic.
While some 75% of businesses still report negative impacts, there was a marked shift from businesses reporting “significant” impacts (38%) to one step below it (28%). “That is the big story this month,” Groves reports.
Chief among small businesses’ ongoing concerns is that government may re-close businesses, as well as the rising cost of supplies, which saw a spike in the latest survey.
Previously, retail businesses were more concerned about getting the inventory they needed to meet demand, but Groves anticipates that inflation worries will become a key indicator as retailers move out of crisis and into recovery mode.
On a positive note, some 98% of small businesses polled expect to return to pre-Covid employment levels by August 2021. Of course, lots can happen between now and then, but if people keep getting vaccinated and infections decline, small businesses remain hopeful.
“As we watched, the business sentiment closely tied to local case-count levels,” Groves shares. “So that gives us a little bit of concern in places where levels may start to rise back up. The businesses at risk most are those that depend upon person-to-person contact which local retailers surely do.”
Taking the small-business story to Washington
As tough as the pandemic and Great Recession before it has been for small independent retailers, they only exacerbated trends that were already squeezing them out and favoring the “big guys.”
In 1982, small retailers with under 100 employees accounted for more than half of U.S. retail spending. But their share of retail sales fell to only one-quarter by 2017, according to the Census Department. Further the number of small retailers fell by more than half in the same time period, from 1.2 million to 600,000.
The Institute for Local Self-Reliance (ILSR) studied the trends and identified the rise of “monopoly power” as the culprit, along with an “array of policies that put them [small businesses] at a disadvantage.”
In response, the ILSR formed a coalition called Small Business Rising to tell the story to legislators and policy makers in Washington. Some 20 national and local independent business organizations representing the interests of more than 60,000 independent businesses have joined, including the American Booksellers Association, American Independent Business Alliance, Main Street Alliance, National Grocers Association and others.
Citing Amazon’s “stranglehold” on the online market and Walmart’s ability “to muscle special discounts from suppliers that aren’t available to local grocers,” the Small Business Coalition aims to show how vital small businesses are to the future of the country.
“The decline of small business is fueling inequality by cutting off a long-standing pathway to the middle class, eliminating a crucial source of new jobs, and further concentrating wealth in the hands of the few,” ILSR’s co-director Stacy Mitchell claims.
The need has become more pressing now with the pandemic and the government’s shutdown mandates that favored the already big retailers, while crushing the lifeblood of small independents:
“Obstacles to success in normal times — a consolidated banking system that withholds credit, a financier-driven real estate market that drives up rents, the predatory fees charged by digital gatekeepers like Amazon and Uber Eats — have become lethal in the context of Covid-19. So far, the federal response has been to provide trillions of dollars in support to large corporations, while leaving small businesses to scramble for limited, hard-to-use relief loans,” she shared.
Keep talking the talk and walking the walk
Small independent retailers need to keep the “shop small, shop local” message going so that it spreads throughout their communities, to their local civic leaders, city and state governments and onto the federal level.
More exposure of predatory practices by big retailers, like Amazon, and governmental policies that favored the majors while slighting the minors, can only help raise consumer awareness of how important shifting some of their dollars to local businesses can be to help not just their businesses but their communities at large.
The Sitecore survey shows consumers, most especially the young values-driven shoppers, are looking for a better, more worthy retail alternative to support with their dollars. The 12% chink in Amazon’s armor revealed in that survey of shoppers desiring to support other retailers can grow as local businesses band together to carry their message further, all the while continuing to deliver high-quality products and neighborly customer services that will keep customers coming back again.