A large national survey has found that public support for independent businesses led to brisk sales and a sharp increase in hiring in 2015, but biased policies and other obstacles are limiting their success.
by Olivia LaVecchia
Independent businesses experienced healthy sales growth in 2015, buoyed by their strong community ties and growing public awareness of the benefits of locally owned businesses, according to a large national survey released today. (Download the full report.)
The Independent Business Survey, which is conducted by the Institute for Local Self-Reliance in partnership with the Advocates for Independent Business and is now in its 9th year, gathered data from over 3,200 independent businesses. The respondents reported brisk sales in 2015, with revenue growing an average of 6.6 percent. Among independent retailers, who comprised just under half of survey respondents, revenue increased 4.7 percent in 2015, including a 3.1 percent gain during the holiday season. These figures contrast sharply with the performance of many national retail chains, and overall holiday retail sales, which rose just 1.6 percent in December according to the U.S. Department of Commerce.
This growth led to a significant increase in hiring. Overall employment at the independent businesses surveyed expanded by 5.6 percent in 2015, with more than 30 percent of respondents reporting the addition of at least one employee.
Local First initiatives are part of what’s strengthening independent businesses, the survey found. Two-thirds of respondents in cities with an active Local First, or “buy local,” campaign said that the initiative is having a noticeable positive impact on their business, citing benefits such as new customers and increased loyalty among existing customers.
About one-third of businesses in Local First cities also said that the initiative had led them to become more engaged in advocating on public policy issues, and 44 percent said that the campaign had made elected officials more aware and supportive of independent businesses.
That’s significant because the survey also found that independent businesses are facing a number of challenges, many related to public policy.
One obstacle is a lack of credit for businesses seeking to grow. The survey found that one in three independent businesses that applied for a bank loan in the last two years failed to secure one. That figure was 54 percent among minority-owned businesses, and 41 percent among young firms, whose expansion has historically been a key source of net job growth.
Competition from large internet companies is also a top challenge, particularly for independent retailers, 70 percent of whom ranked it as very significant to their business. Another leading obstacle is the fact that large competitors can use their market power to secure better pricing and terms from suppliers. On the policy side of these challenges, majorities of the businesses surveyed said they would support legislation to cap the dollar value of the economic development tax breaks that companies are eligible to receive, and that they think regulators should more vigorously enforce antitrust laws against dominant companies.
The rising cost of commercial rent is another difficulty facing many independent businesses. Among retailers who lease their locations, 59 percent reported being worried about the increasing cost of rent. The steep swipe fees set by credit card companies are also a challenge. A large majority of retailers favored government action to cap credit card swipe fees, as the E.U., Australia, and other countries have done.
“While these obstacles are certainly formidable, independent businesses have seen a remarkable increase in public awareness and support in recent years,” said Stacy Mitchell, co-director of the Institute for Local Self-Reliance. “In our survey, many expressed a determination to build on the momentum of the ‘buy local’ movement to press for policies that will give small, local businesses a better opportunity to compete and thrive.”
Several national business groups offered reactions to the survey’s findings:
“Despite a number of challenges facing independent businesses, the ninth annual ILSR survey again demonstrates that locally owned Main Street businesses are resilient, growing, and successful,” said American Booksellers Association CEO Oren Teicher. “The innovation and hard work of entrepreneurs are paying off in businesses that are outperforming their chain competitors, fueling job creation, and ensuring that unique, livable communities continue to thrive. There are certainly challenges ahead, and it’s the responsibility of lawmakers to take steps to enact policies that will promote fair play, localism, and smart growth.”
“Once again it’s been shown that buy local campaigns can indeed improve a small business’ bottom line,” noted Bill Brunelle, co-founder of Independent We Stand.
“While the survey shows a number of positive trends for small businesses, especially the impact of buy local programs, independent retailers are under more financial pressure than ever before, due to increasingly thin margins,” said Todd Grant, executive director of the National Bicycle Dealers Association. “In light of the significant value these local entrepreneurs bring to both their communities and their industries, we believe they need an opportunity to compete and that suppliers in particular need to step up to ensure pricing parity across channels.”
“TriMega continues to keep our foot on the gas as it relates to buy local initiatives. The work of educating consumers, fellow business and public entities about the value of local-first efforts is not a one-time event,” said TriMega Executive Vice President Michael Morris. “Rather, it is an ongoing focus designed to heighten awareness, spur more thoughtful buying decisions, and ultimately strengthen communities through local support.”
Olivia LaVecchia is a Research Associate with ILSR’s Community-Scaled Economy Initiative. A former reporter, her work has won recognition locally and nationally, including the 2014 “Media for a Just Society” award for newspaper writing.