The Retailpocalypse Doesn’t Have to Be Scary for Local Businesses
Things have been pretty bleak for Big Retail recently. In April, analysts reported nearly 6,000 store closures in the first few months of 2019—eclipsing the number for all of the previous year—and revealed that foot traffic at popular malls was steadily declining from an August 2018 peak.
These headlines suggest it’s Amazon’s world and we’re all just living in it, but there’s more to the story. For local businesses, in particular, there’s ample reason to be optimistic that the retail apocalypse doesn’t have to spell end times. In fact, exactly the opposite could be true.
Let’s walk through a few of the reasons for optimism.
Local search is exploding
In the pre-mobile era, big retailers benefited from consumers’ relative lack of visibility into local shopping options. After all, they had bigger advertising budgets, and strolling the city mall is more fun than sifting through the Yellow Pages.
Today, we’re seeing a spectacular shift in consumer behavior as local search goes mainstream. Consider these stats:
- One third of mobile searches are related to location, and location-based searches are growing 50% faster than overall searches.
- Local searches using proxies for “near me” (substituting a zip code, for example) are growing exponentially, suggesting savvier searchers.
- Foot traffic to brick-and-mortar retail shops is down, but the value of every visit has tripled.
It’s never been easier for consumers who are in a spending mood to discover, research, and locate nearby businesses. This is great news for local commerce, and we’re still in the early innings.
Review sites are a massive untapped opportunity
Business owners love to hate on sites like Yelp, and some of the criticisms are warranted. But, as we’ve written before, online reviews are a huge positive as long as the platforms keep the best interests of local businesses in mind.
Online review sites are one of the many free advertising options proliferating for local businesses in the digital age. It costs nothing to claim listings on review sites like Google, Yelp, and TripAdvisor, and these sites are the first stop for people looking to dine out, get a haircut, book a dental visit, or find a one-of-a-kind summer dress at a boutique clothing spot.
There’s tremendous upside here. Our data science team analyzed the online profiles of more than 200,000 local businesses and found that about a quarter had claimed none of their listings, only half had claimed at least one, and a mere 8% had claimed three or more. We layered on transaction data and found that businesses that claim no listings earn 24% less in average annual revenue, whereas businesses that claim three or more make 36% more.
People are searching online right now for all kinds of local goods and services, and those queries are pulling up business profiles on review sites. As more businesses take control of their online presence, local commerce will flourish.
Consumers are rooting for small businesses
Here’s the thing: The average American isn’t shedding tears when news breaks of another big-box retailer going under. However, that same American probably feels a twinge of angst when a Starbucks opens across the street from a mom-and-pop cafe.
People want local businesses to win. Research firm Gallup routinely takes a survey of Americans’ confidence in key institutions, and it’s no surprise that small businesses rank high on the list and big businesses rank low. This positive sentiment is playing out in key retail markets, as more and more consumers are opting to spend their dollars with independent enterprises vs. national chains.
Consumer tastes are also shifting in favor of local businesses. Two decades after the term “experience economy” entered the lexicon, conditions are finally ripe for people to choose to spend locally by default. There’s a reason 90% of global sales still happen in physical stores, even as e-commerce gains traction. Today’s consumers crave unique over predictable, and that gives local businesses an advantage big companies and online retailers can’t replicate.
Case in point: the McDonald’s foray into custom burgers. This huge strategic move by the world’s most prolific hawker of hamburgers is evidence that big brands see the trend. But the made-to-order burger flop suggests that local businesses still have the “custom” market cornered. People go to McDonald’s for convenience, not customization.
It can be true that consumers both love Amazon for its scale and convenience and also love the ambiance and personal attention they get at a family-run shop on Main Street. The retailpocalypse may claim more national brands, but the conditions are right for e-commerce and local retail to thrive together in the digital economy.