Well, it is that time of year again. The holiday shopping season has officially begun, and with an obvious bang. Anyone who is old enough to remember Christmas shopping prior to the Black Friday and Cyber Monday craze also remembers that the traditional shopping season did not start until the after Thanksgiving. With the holidays being so commercialized now, and big box retailers and ecommerce retailers alike competing for more of your business, it is not surprising that in recent years we have seen Christmas sales begin in October. Mix in the low gas prices and higher consumer confidence to fuel the fire of holiday shopping and the big box stores, websites and even shipping companies are riding this blaze of glory all the way to the bank. 2015 was obviously and amazing year for holiday sales, which is good for Wall Street and good for our economy.
Here is something that you may not know, however. Traditionally, while big box sellers are gobbling up the revenues from holiday shoppers, small, local, independent businesses had a tendency to suffer. It is extremely difficult for small businesses to compete with large corporate owned stores and websites. Not only because of the huge pricing discounts, but mostly because of the advertising and sometimes product availability. For example, if you are a small business owner and you own a toy store in some town that also has a Wal-Mart, Target and Toys-R-Us then you face three main challenges. These challenges are exclusive to the holiday season; they are just amplified, making the competition even tougher.
- Pricing: Big boxes are aggressively discounting popular items. Because of the increased revenue during those months, they can live on a lower profit margin. Additionally, they can make up their margin on accessory items like batteries and chargers. To make matters worse, they buy the products at a lower cost because of their volume and buying power.
- Advertising: Oddly enough, this challenge is more impactful than the pricing issue. Simply put, small businesses tend to be over shadowed by larger corporations because of the amount of advertising that they do. You see them on television, they show up in your mail, you hear them on your radio and now they pop up on your computer, phone and tablet. It is even worse if they have your email address. Here is an interesting thought: Fifteen years ago, we were complaining about junk mail and junk faxes. Ten years ago, we were all complaining about spam in our email. Today, digital advertising is tailor made just for you based on your searches. If you go to your favorite search engine and search for an item, like a laptop for example, then ads for that same laptop are going to show up when you visit other websites. All of this is designed to get you, as the consumer, into their stores and onto their websites and to keep you there longer. The big boxes are not competing with small businesses; they are competing with each other. The suffering small business is just collateral damage.
- Product Availability: This is the time of year when the hot in-demand items are in short supply. Manufacturers produce a limited quantity of a product based on their forecasts. Distributors distribute the product that they do have to their top customers, and the smaller customers get what is left over. For this past shopping weekend, the hot items were Star Wars toys. Just as expected, the demand exceeded the supply. Not everyone carried the products, and those that did sold out. So where does that leave you as the toy storeowner if you cannot get the products that people are looking for? Again, it is just collateral damage. You cannot sell a product if you do not have it, or even if you have it and no one knows that you have it in stock.
In 2010, to help small businesses combat the Black Friday chaos; American Express began what is known as “Small Business Saturday”. There was an entire campaign, which was prominently featured in advertising and social media. Due to its success, in 2011 the U.S. Senate officially recognized Small Business Saturday. Now, after its 6th year, Small Business Saturday has again proven to be a jewel in the crown of happy business owners. Customer traffic at the participating merchants grew by 8% over last year to 93 million people, according to American Express. You may think that is marginal, but it is actually phenomenal when you put it into perspective. According to a statement released by American Express and the National Federation of Independent Businesses, U.S. consumers who knew about Small Business Saturday spent $16.2 billion at independent retailers and restaurants on the day, a 14 percent increase from $14.3 billion in 2014.
The greatest impact of shopping small is not the revenue for the merchants. The greatest impact of shopping small is what it does for a community. When you shop small, you are not helping corporate executives get bonuses or buy another vacation home. You are helping the local little league team, whose jerseys are sponsored by the local shop owner. You are helping a little girl get braces and a little boy to get his medication. You are helping an average Joe to get out of debt. You are helping your community in ways you could not even imagine. Yes, shopping small does have a big impact! No one is boycotting the big boxes and no one is saying they should not be here. The big boxes are good for Wall Street, which matters to anyone with a retirement account. The greater implication, however, is this; you do not live on Wall Street and you probably do not know anyone who does. If you have $2 to spend, why not spend at least one of them in your own neighborhood? Just a thought…