For what seems like an eternity we’ve been hearing about how successful small business is an endangered species. With the advent of big retailers, ecommerce and the death of the shopping mall, one would expect these stories to continue. One would think the successful small business would become extinct. However, according to the research, it’s clear that small business is staging a comeback and that many are actually thriving.
This is good news for everyone because when small business does well, there are more profits, more jobs and more benefits for consumers. It would seem that that the economy is not an either-or environment; it’s not all about big business at the expense of the little guy or vice versa. Rather, in the modern economy, there is a fluid balance which exists between these two entities, and it’s an interesting situation.
Dispelling the Myths
One of the most popular case studies in recent history used to highlight the rise of the corporation, at the expense of local small business, is one which examined the downfall of local bookstores. With companies such as Borders being a memory, and Barnes & Noble struggling to survive, it seemed clear that consumers had spoken. It started to appear as though companies like Amazon had won—but this wasn’t entirely true. If you looks at the numbers, independent bookstores have managed to achieve growth of around 20% since 2009, which is encouraging news, given the state of the marketplace where online retailers and electronic books are seeking increased market share.
Looking deeper, the full picture shows promise. According to a US Small Business Administration report, since 1990, small businesses (defined as any company with fewer than 500 employees) have created 8 million new jobs in the American economy. Large corporations, on the other hand, have been responsible for axing around 4 million jobs. Furthermore, the report reveals that 23 million US small businesses account for 54% of all US sales and have contributed 66% to job creation since the 1970’s. The most important take-away from this report is not that the American economy has entered a new age, but that the entrepreneurial spirit that fuels commerce is alive and well. It shows small business has the power to endure, survive and rebound from economic downturns.
The Rise of Differentiation
While it is true that many of the largest corporations operate inefficiently, they’re not going anywhere because the market will always have a demand for mass-produced products which are sold cheaply. Currently the move in business is not away from mass scale production, but toward differentiation.
True differentiation is a situation where companies can position their product as not only different from the competition, but as superior thanks to a more personal approach to smaller production operations, which allow for more attention to detail. The judgement of quality is ultimately only a decision which can be made by the consumer. But as corporations have flourished over these last few decades, the inefficiencies have opened the door to differentiation in a very big way.
Local bookstores are now offering thoughtfully curated selections and personal service to compete with the likes of Amazon. Similarly, artisanal products such as craft beers, are managing to hold their own against the big brands on the merits of taste and quality alone. Convenience can sometimes take a backseat when there’s quality on offer, and that’s where small business can get into the game.
As the saying goes, a rising tide lifts all ships. It’s not only consumers which are benefiting from differentiation, there’s a certain ‘community’ aspect to small business which allows them to capitalize on each other successes. This community aspect of the small business economy, has made it possible for coalitions and partnerships to flourish and create even more opportunities for other local businesses and consumers to benefit.
Conclusion It’s become evident that the success of small business does not come at the expense of the corporation, or despite it. Small businesses provide different products, to different people, in different ways. The true distinguishing factor here is personalization, quality of products and services which offer a unique selling proposition which consumers find attractive. So, it’s clear that US small businesses are back and are here to stay, but depending on who you ask, you may get told that they never left. What do you think, are small businesses making a come back in your eyes? Let us know in the comments!