I met up with a friend the other night who owns an up-and-coming handbag company in Brooklyn, New York. I asked her how she thought the little boutiques and restaurants lining our Carroll Gardens neighborhood could possibly survive the economic downturn, selling their wares of overpriced skinny jeans, hipster jewels, and mixologized cocktails. Her response: In this economy, she said, we have to support the local businesses that we want to see stick around.
Rather than try out some new restaurant, she said she’s going to keep returning to her favorite two or three local joints to help keep them in business during these hard times. And those shops? Well, the shakeout will depend on who best serves their customers. The snooty salespeople who wreak indifference will most likely find their customer base equally indifferent, while those who can forge a bond will hopefully experience the benefits. The “experience economy” that we at Fast Company have been writing about for years will become more critical than ever to small business owners’ survival.
However, the bigger picture looks terrifying for small business owners, who don’t have the margins or scale to slash prices. It seems that every time the Dow drops and new apocalyptic unemployment numbers are released, the only retailer who seems to be benefiting is Wal-Mart, its U.S. revenue was up 8% in February. Of course that means the more consumers decide to spend their few dollars at big box chains, the less likely their favorite local businesses will survive. During a recession, it seems, our consumer choices are more critical than ever.
Of course all this is further complicated by the “paradox of thrift.” As consumers scale back their spending and try to save during tough times, the less money there is flowing into companies, the more likely they are to lay off folks, and the more folks who are laid off, the less money there is to be cycled back into the economy. As the BBC put it, the recession becomes a vicious “self-reinforcing” black hole.
But it’s not all doom and gloom. If there’s any call to action in all of this, I would advise prioritizing which local businesses you want to see stick around in your neighborhood. In those rare moments of splurgeful “buying up,” make sure you opt to buy local. Hopefully, by the time we see the light at the end of the economic tunnel, small businesses–like my friend’s handbag company West/Feren–will still be chugging along, and you can take pride in knowing you helped them along in their existence.