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13 Essential Facts to Understand Main Street Businesses

Nicolas Straut

Content Associate at Fundera
Nic is an associate at Fundera. He specializes in partnerships and research-driven stories to help small business owners grow and thrive in their industries.

Latest posts by Nicolas Straut (see all)

Analysts and pundits alike often contrast small, locally owned Main Street businesses to gigantic, faceless Wall Street financial firms. But competitively, their true foils are actually big-box stores including Costco, online retailers like Amazon, and large brick-and-mortar retailers like Walmart and Target. Local consumers flock to these corporate competitors because of low prices and the large selection of products available—sometimes at the expense of local businesses.

Main Street businesses, according to the Kauffman Index definition, are local, established businesses more than five years old with fewer than fifty employees. These businesses are at the heart of many communities, and with the rise of mega-retailers, many towns have organized to back their local stores. With “buy local” or “local first” campaigns,  towns like Tucson, Arizona encourage residents to keep locally owned and independent businesses thriving at the expense of deals at larger retailers.

As the following statistics make clear, Main Street businesses provide a slew of community benefits. They generate greater investment back into their local area, higher commitment from their workers, and much more. As a consumer in your own community, here’s what you should know about local businesses.

local-business-stats

1. Lots of Americans depend on their own Main Street businesses for their own—and their family’s—livelihood.  

2. Shopping at a local business is better for the environment than patronizing a big-box store.

  • 59.3% of local, independent makers say they occasionally or usually use recycled materials and 7% say they always use these materials.
  • 50% of pollution in the US is caused by industrial sources. By purchasing what you need locally, you can reduce processing and packaging, and the generation of transportation waste.

3. More money stays in your community when you shop local.

  • $68 for every $100 stays in the community when spent at a local business. When spending the same at a non-local business like a national chain, only $43 stays in your community.
  • Wages, local taxes, and donations stay in the local economy with both types of businesses. Local economies do miss out on the purchasing of local services like accounting or marketing services and the purchasing of local supplies with non-local businesses.

4. More than a quarter of small business owners are immigrants.

  • 28% of main street business owners are immigrants—a disproportionally high number when you look at both entrepreneurs and workers in general. Immigrants only make up 16% of the labor force and 18% of overall business ownership.
  • 53% of grocery stores, 45% of nail salons, 43% of liquor stores, 38% of restaurants, and 32% of both jewelry and clothing stores are owned by immigrants.
  • 48% of overall growth of US business ownership in 2000-2013 was attributed to immigrant business owners.

local-main-street-business

5. Low sales or limited cash flow is the main reason that local firms close.

  • 25% of business owners said their primary reason for closing their firm was low sales or cash flow.
  • 21.9% of respondents reported that retirement was a close second, followed by “sold the firm” at 20.3%.

6. Americans still spend more in-store.

  • 65% of Americans’ shopping budgets are still spent in-store.
  • The primary reasons that consumers still hesitate to shop online are shipping costs, the inability to try the product in advance of the purchase, difficult return processes, and concerns about privacy.

7. Online search and reviews are critical for local business success.

  • 97% of consumers searched online for a local business and 73% of searchers trust a local business more because of positive reviews.
  • 68% of consumers left a local business review when asked. If you’re a loyal customer, this is a great way to support your favorite local business. And if you’re a local business owner, don’t be afraid to ask for an honest review—your consumers will likely do it!

8. Many local businesses have a Facebook page but few use Facebook ads.

  • 65 million local businesses have a Facebook page but only 4 million are taking advantage of Facebook advertising products.
  • Far fewer have set up Instagram Business profiles: Only 5 million profiles have been created, and only 500,000 have set up ad campaigns.

9. The top reason shoppers choose local stores are unique product selection.

  • Shoppers provided the following reasons when asked why they prefer small and local retailers. They were allowed multiple answers:
    • 61% – They offer a unique product
    • 49% – I couldn’t find what I needed from traditional sources
    • 40% – I want to support the community or small businesses
    • 29% – I like to try new retailers
    • 26% – They feature a broader assortment
    • 24% – They provide an innovative shopping experience
  • By providing unique products or services, Main Street business can set themselves apart from larger competition, as shown by the top two shares of respondents.

local business stats

10. Workers are more committed to locally owned firms.

  • 56% of workers at locally owned firms have high commitment scores, while only 38.7% of workers at non-locally owned firms had similar scores.
  • High commitment includes a sense of loyalty and the demonstration of commitment to the organization. The authors of this study write that small, local businesses are “linchpins of community attachment and sustainability.” They continue that “locally owned businesses, are associated with an improved quality of life and a more robust civil society.”

11. Minnesota is the best large state for Main Street entrepreneurship…

  • The Land of 10,000 Lakes, Minnesota, ranked first for these factors:
    • its survival rate of 50.76% for firms that remained in operation through their first five years
    • the 7.75% of its population that owns a business as a primary job
    • high number of small businesses per 1,000 firms, 687.2

12. …and South Dakota is the best small state for Main Street entrepreneurship.

  • South Dakota ranked first because of:
    • its survival rate of 53.47% for firms in their first five years
    • the 10.75% of its population that owns a business as a primary job
    • high number of small businesses per 1,000 firms, 681.8

13. Pittsburgh is the best metropolitan area for main street entrepreneurship.

  • Pittsburgh is ranked first because of:
    • its high survival rate of 53.78% for firms in their first five years
    • the 5.25% of the population that owns a business as a primary job
    • and high number of small businesses per 1,000 firms: 694.2

local-business-stats

Although few consumers can shift their spending to Main Street businesses exclusively, buying a cup of coffee at the local coffee shop instead of Starbucks, or visiting a trusted garage instead of Pep Boys can be a boon to your local economy and even the environment. As the statistic on online search showed, even a positive Google or Yelp review can lead to more local business for your home community.

A great Main Street business community can’t be developed overnight—but you can work toward it through local purchasing campaigns and conscious patronage by residents. Wielding these convincing facts should certainly help.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Nicolas Straut

Content Associate at Fundera
Nic is an associate at Fundera. He specializes in partnerships and research-driven stories to help small business owners grow and thrive in their industries.

Latest posts by Nicolas Straut (see all)

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