Paradigm Shift – Mom & Pop America vs Online Retail

OK, everybody knows that online shopping has decimated traditional bricks and mortar retail, accelerated by the pandemic, where going out to shop was often considered an unreasonable risk. Formerly high-traffic malls lay vacant and rotting. Indeed, among small retailers, they are experiencing the mom-and-pop equivalent of living from paycheck to paycheck. It’s a plague that has shut down vast swaths of stores, big and small, in our major cities. Want to spend some quiet, alone time in San Francisco? Head on down to Union Square, once rife with chichi retailers, now an accumulation of empty store fronts and vacant department stores. Even with high vacancy office towers, SF is hardly dead, but hybrid and remote work have redefined commercial real estate across the country.

Driving down upscale Wilshire Boulevard as it passes through Beverly Hills, I witnessesed what has been growing for the last few years, highlighted by increasingly vacated local businesses and littered with an avalanche of “for lease” signs on vacant store fronts and office buildings, now averaging several such signs per chichi block. And many of these signs are post-pandemic. Even as wages have never been higher and unemployment is at very tolerable levels, too many Americans still feel squeezed by rising prices (some caused by these higher wages), a trebling of interest rates, new escalation in prices at the pump and a general discomfort at unpredictable changes that make us all nervous.

Rising retail crime, a mega-increase in anti-immigrant sentiments plus the proliferation of guns have not helped either. Add a completely dysfunctional Congress and a vituperative election cycle which have hardly assuaged most Americans… as income inequality seems only to get worse. The litany of mainstream strikes is the clearest evidence of this malaise. Everything, it seems, is making the cost of doing business soar, particularly for small businesses that have limited means of raising their prices.

Despite vacancy rates, rents are hardly moderating, since landlords are facing their own set of price increases, not the least of which is the cost of insurance. This is such a serious issue that the Senate has been holding hearings on this crisis, clearly mounted as climate change disasters have increased the scope of insurance disasters, almost exponentially in so many states. A September 7th report from CNBC highlights the Senate inquiry:

“‘We have seen our property and casualty insurance costs (increase) 400% in six years,’ said Michelle Norris, executive vice president of external affairs and strategic initiatives for National Church Residences, a nationwide affordable senior housing organization.’ … ‘Even developers and owners with very large portfolios, like ours, have little bargaining power in today’s industry,’ Norris added in her testimony before the Senate Banking Committee.

“Some insurers have stopped adding new policies in states like Florida, California and others that have been heavily affected by climate-related events, making disaster recovery harder for people in those regions and reinsurance more difficult to attain, according to experts.”

One of the most iconic cities – marked by generations of immigrants redefining neighborhoods with standalone restaurants, retail and specialty shops – is New York City. But the Big Apple is hardly exempt from this macrotrend decimating small businesses. Writing for the September 20th, FastCompany.com, Elissaveta M. Brandon, focuses on the impact of this mega-transition in America’s largest city: “Mom-and-pop shops—be it boutiques, bakeries, delis, butchers—serve as a compass in any city. With their bright neon signs and ever-so-distinct personalities, they define neighborhoods and offer a glimpse into the people who live there. Little Italy is dotted with Italian restaurants because at its peak in 1910, it was home to more than 10,000 Italian immigrants. Reynold’s Irish bar in Washington Heights closed in 2015, but it’s a reminder that the now predominantly Hispanic neighborhood was once an enclave for the Irish after the Great Potato Famine.

“Mom-and-pop shops are cornerstones every community, but they are dying under the pressure of rising rents and giant online stores like Amazon. This isn’t news to anyone, of course. Small businesses have been dying for decades. This isn’t news to anyone, of course. Small businesses have been dying for decades. But for husband-and-wife photographer duo James and Karla Murray, there is still joy and hope to be found.

“The Murrays have been documenting the life and death of mom-and-pop shops in New York City for more than 20 years. Their first book on the subject was published in 2008, and since then more than 80% of the stores they featured in that book have vanished. Since they published their follow-up book in 2015, almost half of the stores featured in that book closed…

“Data on small businesses is notoriously scarce, but according to the Chamber of Commerce, 8% of small businesses today fail within their first year, and about 65% by their tenth year in business. The pandemic certainly didn’t help. According to The New York Times, almost one in three small businesses in the country couldn’t survive for more than three months without additional capital or a change in business conditions in 2022.”

The character of so many cities and towns is reflected in these neighborhood shops and restaurants… is slowly dying. Perhaps, this is a reflection of income inequality at a retail level. Or maybe it is a tale of so many older owners, unable to grasp how to market and grow in the era of social media and online shopping. Those small businesses that have embraced these trends tend to survive at a greater rate than those who have not. But seriously, how many of those retailers are sufficiently unique to prosper in this digital era. They better learn. We are losing some of most wonderful part of our lettuce bowl of diverse America.

I’m Peter Dekom, and this vector of pushing small businesses out to be replaced by homogenized big retailers with a fierce online presence diminishes the cultural wonder that makes America so extraordinary.