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Why Small Businesses Matter

10 Top Myths about Small Retailers and Why They’re Wrong (+ 2 More)

Small retailers are much more than they appear. When you hear the phrase “small retailer,” you might think of a mom-and-pop market on a rural road.  Or a musty art gallery in a touristy seaside town.  Or even a shoe repair shop run by a single harried guy who has to do everything at once, and does none of it well.  

You might even think of hand-to-mouth, barely surviving businesses that can’t manage money well and are staffed entirely by family members. No technology savvy, no ability to compete with Amazon, and no understanding of the broader entrepreneurial world. 

But these ideas are myths

Here’s the truth. Small businesses make up the bulk of the economy, employ 61 million people, create most new jobs, and make up over 40% of GDP in the United States!

Read on for all the details…

1. Small Businesses are Dying

MYTH: Walmart and Amazon own retail and small businesses are dying.

TRUTH: Small businesses make up 99.9% of all businesses in the country! That’s according to the 2022 Small Business Profile Report released by the U.S. Small Business Administration’s Office of Advocacy, which tells us that there are currently 33.2 million small businesses in the US.  

And this number keeps growing! 

Prior to COVID, the total number of small businesses in the US increased by roughly half a million per year. Since the start of COVID, that total increase has doubled to one million per year (see this report by Oberlo for more sweet data). 

To give you some comparison, the total number of small businesses is increasing each year at the same pace as the housing industry. Since 2011, around 1.2 million new homes have been built each year.

And what happened during COVID? You might have thought that small businesses were another victim of COVID-19. But that’s another myth! There have been record numbers of new small businesses opening – as a reaction to the pandemic. In fact, small businesses – including small retailers – continue to grow.  

2. Not Many People Work at Small Businesses

MYTH: Small businesses can’t afford to employ anyone beyond family, and they don’t pay reasonable wages. 

TRUTH: Small businesses in this country employ 61.7 million people – that’s almost half the total full-time workforce in the US. Most Americans’ first-time jobs are with small businesses.

Far from being family-only affairs, small businesses are the means by which 1 in 2 workers initially enter the workforce and where many of them continue working.

2019 census data shows that 15.3 million US workers are employed in the small business retail industry. The workers earn $455 billion annually with the average employee earning $30,000 a year (this is on par with national wage data for workers in the retail industry).

3. The US Economy Depends on Big Businesses

MYTH: Big businesses account for most of the country’s economic activity and GDP, while small businesses’ contributions are nominal.

TRUTH: Small businesses are responsible for 44% of the country’s economic activity and contribute 43.5% of the total Gross Domestic Product (GDP). GDP is “the market value of the goods and services produced by labor and property located in the United States.” Simply put, the GDP is an indication of how well the country’s economy is doing.

As early as 2014, small retail businesses contributed $848.7 billion, or 41.6%, of the U.S. retail industry’s GDP. And they’ve kept growing ever since! By comparison, Amazon’s GDP was $469 billion in 2021, proving that small businesses are a force to be reckoned with.

So rather than struggling or scraping by, small businesses are thriving and contributing to the nation’s overall economic health at nearly the same level as large corporations.  Bear in mind that small businesses do this while not receiving the same tax breaks and federal bailouts available to large businesses.

4. Big Businesses are Responsible for Most New Technology and Patents

MYTH: Big businesses provide all innovation in the US economy, and small retailers just copy Amazon’s innovations.  

TRUTH: Per employee, 16x more patents come from small businesses than big businesses. Most of those patents are coming from small technology startup companies with less than 5 employees.

A patent is a legal claim by an inventor that protects their invention from being made, sold, used, or imported by anyone other than those the inventor has granted permission to. It’s a means for protecting intellectual property, which includes actual physical inventions but also ideas.

For example, Archibald Sisters is an example of a thriving downtown business that creates unique value and owns its own intellectual property, in the form of proprietary perfumes, gifts, and other items that they exclusively produce or source from small suppliers in the Pacific Northwest. They own their IP, and you should too!

Clearly, the numbers show that small businesses are where most of today’s creativity and innovation come from. In fact, big businesses often buy technology created by small businesses and build off of what they acquire.

Small Business Impact on Communities

Drilling down to the community level, there are a number of positive effects small businesses have on local communities.

5. There Aren’t Many Jobs in Small Businesses

MYTH: It’s hard to find jobs with small businesses because there aren’t many and they don’t hire very often.

TRUTH: Small businesses create ⅔ of all new jobs. For the past 25 years, 2 out of every 3 new jobs have come from the small business sector. The more successful they are, the more likely small businesses are to hire locally.

A recent study by the US Small Business Administration shows there’s a high demand for workers in small businesses. The highest demand comes from businesses with fewer than 10 employees. There’s never been a better time to work for a small business in your area.

Since opening its first gift store in 1989, Compass Rose in Olympia Washington has prospered and grown. Their success has created three more locations within 20 years. Each new store has meant new jobs!

The more community residents support local businesses, the greater the opportunities for employment with those small businesses. Definitely a win-win for both sides!

6. Taxes and Investing in the Community Comes from Big Businesses

MYTH: Large businesses are better for a community because of the taxes and money the business puts back into the community.

TRUTH: Small businesses invest in their communities at a higher rate than big businesses. A Forbes article stated that for every $100 spent at small businesses, an impressive $68 goes back into the community. In comparison, only half as much is reinvested in communities by large chain stores.

The sales and property taxes that small businesses pay financially support local government entities, city infrastructure, first responders, and schools.

Supporting small businesses also supports the surrounding community. Olympia, Washington saw this was true when they rolled out an initial Spark-powered program from SnowShoe. “Olympia residents and visitors alike are enthusiastic supporters of local business,” said Olympia Mayor Cheryl Selby. “SnowShoe’s new program adds a fun gamification experience to buying local, and it offers us a way to thank people for coming downtown and encourage them to come again.”

7. Communities Need Big Businesses for a Thriving Local Economy

MYTH: Big businesses create supply chains and drive the local economy.

TRUTH: Supply chain partnerships with other small businesses create a cycle of commerce and support. Small businesses coming together to host community events, sharing retail space, or carrying products for one another also fosters a supportive and collaborative small business environment.

Illustrating how small businesses support one another, small gelato producer Sophie’s Scoops partners with other local businesses to source ingredients for their made-on-site gelatos. 

Healthy and prosperous small businesses lead to other healthy and prosperous small businesses.

8. Big Businesses Reflect Diversity

MYTH: Big corporations statistically reflect the diversity and demographics of the community.

TRUTH: Small businesses tend to be a more accurate reflection of the population’s diversity since many small business owners include women, veterans, and people of color. They also provide opportunities for financial success to women and minorities who otherwise tend to face barriers to higher-paying salaries within big businesses.

Through small businesses, the American dream of being financially independent and successful is realized by more members of the population than working for large corporations.

9. Big Businesses Meet All the Needs of Shoppers

MYTH: Big businesses can meet the needs of shoppers better than small businesses because they have bigger budgets and marketing teams.

TRUTH: Small businesses meet the needs of specific niches within the community that big businesses overlook – a business offering a dog-friendly co-working and workshare space, for example.

The personality of a community comes through in the small businesses that serve the community. A great example of a small retailer that communicates their own very unique experience is Chi, Trees and Oils in Rochester, Wisconsin. This great team led by founder Jessie Vyvyan creates a unique value proposition and clearly serves their community’s needs. 

10. Big Businesses are How Local Economies Bounce Back 

MYTH: Big businesses are what save struggling retail districts.

TRUTH: Small businesses are the driving force of downtown revitalization efforts in cities across the country. When Tanya Maney, the Executive Director Wisconsin’s Explore Waterford organization, talks about the community’s newly revamped retail district she says: “You can spend the whole day in downtown Waterford on Main Street. We have cafés, flower shops, mercantiles, gift shops, a great bookstore and antique shops, among other quaint businesses adorning downtown.”

You can’t help but notice that it’s not big-box stores being invited to set up shop in historic old towns or waterfront districts!

Bonus Myths to Debunk About Small Businesses

That’s our top 10 – but we have two BONUS Myths to debunk for you!

11. Big Business Products and Services are Superior

MYTH: The best products and services come from big businesses. 

TRUTH: Small businesses offer shoppers locally made products and highly personalized services they won’t find in chain stores or when shopping online.

When you visit a small business, you can see a product in person to get a sense of its quality and workmanship. Or you can have a face-to-face conversation with someone about a service you’d like to receive. 

Scrolling online and clicking to enlarge images to see details simply can’t compare to browsing in a store and suddenly coming across that perfect item that you can touch, smell, and see for yourself.

If you happen to visit Encore Chocolates and Teas you’ll be invited to sample the products, which means you’re guaranteed to find something you’ll love and take home with you that day.

Having the ability to be up close and personal with a small business means the shopper can have higher confidence in the products and services they’re buying than those sold through big businesses.

Small businesses also know that satisfied shoppers are the best marketing tool there is, so they’re motivated to stand behind the quality of their services and products. When was the last time a big-box store cared if you were a happy shopper or not?

12. Big Businesses Provide a Quality Shopper Experience

MYTH: Big businesses have everything shoppers need.

TRUTH: Small businesses are probably best known for the unique experience they offer a shopper. Going to a small business isn’t just about a transaction for goods or services – it’s about the other things that go along with the product or service you buy. The atmosphere, culture, and personality of the business and how those shape and affect your experience as a shopper. 

 As Chi, Trees & Oils owner, Jessie Vyvyan describes it, “It’s almost like I’m treating them like royalty, and they are royalty because they’re allowing me to live out my dreams.”

Ultimately, it’s about how you’re treated and how it makes you feel when you visit a small business. An excellent shopper experience is something small business owners strive for because they value the loyalty of the people who support them.

Small Businesses Matter Because People Matter

Small businesses are all about people – the people who create the small businesses, the people who work in the businesses, the people in the communities surrounding the businesses, and the people the businesses serve.

As we can see, small businesses are the lifeblood of the U.S. economy and vital at every level. We support small business retailers through technology that creates meaningful relationships between merchants and shoppers.

To learn more about how we build shopper loyalty with small businesses, sign up here to get started.