The Changing Landscape of Business
Before the current recession it was fairly easy to go into business and stay profitable in business (and actually stay in business) due to the amount of money flowing within our economy. Since 2006/2007 that situation has changed dramatically. In my business, (ceramic tile and stone business) our market has dropped 39% overall. In markets like Georgia it is bad, but unfortunately, it is even worse in some other markets. I just saw a report this past week that said in Georgia the ceramic tile and stone business lost 33.6% of our contractor businesses and another 31% of our dealer/distributor businesses.
Think for a moment about the food industry, how many restaurants have come and gone in the past few years? Many of those had excellent food taste and great service, yet they are gone. That is a business that has a very low cost of entry and raw materials are very inexpensive yet making a profit is almost impossible in these times between labor costs, energy costs, and the loss of disposable income for the potential customers. In most home goods the technology improvements have absolutely killed all the profit margins for businesses. Folks find something they like, want, or need and then shop the Internet to get to the absolute bottom price, usually doesn't include shipping costs, and the local business that started the process either has to make no money on selling their inventory or they lose the sale - either way they lose.
So what is the answer? Folks a lot smarter than I am will have to come back with thoughts on that but I can tell you that I'm thankful that (A) I'm not in the retail business today, (B) I have a good job and available income to spend on my families wants/needs, and (C) most days I seem more likely to spend just slightly more to purchase something locally and maybe pay very slightly more, but seem to feel in my mind that I receive MUCH more value for my money then shipping it off via the Internet. I find myself using the local hardware store more today than ever before because when I consider the very small price difference I find the value of the education I receive from the folks working at the hardware store to teach me about the product I'm considering is worth far more than the price I'm paying. Same with my insurance and my bank - local agent/branch seems to be worth it to me. Am I alone in this?
Please do some comparison shopping this week and let me know your thoughts on this issue.
Steve
Robert J. Nebel
10:47 pm on Monday, September 17, 2012
I agree that shopping locally is important. Shop at the local hardware store. Dine at the neighborhood restaurants. Definitely work with an insurance agent close to your house. If you are able, join a local credit union. Speaking of lending, that has become quite difficult for businesses these days.
Josh Austin
2:30 pm on Tuesday, September 18, 2012
How are you all defining shopping locally? What is a "local" hardware store? Is it still shopping locally if the products are manufactured overseas and then sold at a "local" hardware store?
I think the example is spot on for service industries like banking, but I'm confused about how it applies to retail. Technically, paying more for the same product at a local shop is capital destruction on a small scale, and we are all worse off because you did it.
Now if you are getting technical support from the local shop and not from the big box store, you aren't really buying the same product anymore. For the commercial contractor who doesn't need the "how to" lesson, how is it better to pay more and drive his margins even lower?
(As an aside, many people would consider a certain big box store a local company, given how many people they employ in the Atlanta metro area.)
Steve Rausch
2:52 pm on Tuesday, September 18, 2012
1. The overall concept of local certainly has different meanings in different areas, in a community like Peachtree Corners local could mean metro Atlanta area versus shopping on the world wide web. It could also mean just our city of PC and maybe Norcross.
2. Where the products are manufacturered has far deeper reaching meanings no matter what type of a shopping outlet you are using. Small retail stores that are local usually buy from wholesalers and they buy from the same folks as the big box type stores, so with some products it is almost impossible to get products that aren't made overseas. Try to find a plated screw from anywhere but overseas - almost impossible because our federal government has over regulated that industry out of business.
3. I don't agree at all with your point on the technical support, that is right in MY wheelhouse daily as I am involved in technical support for USG and believe me many "Professional" contractors, both commercial as well as residential, need the technical support when they purchase products. Almost without exception every segment of the ceramic tile and stone business has changed in the past 5 years and someone HAS to keep the installers up on the new characteristics and working features of the updated products. The big box type stores many times just don't have the time or ability to train all their part time help on all of the thousands of items they sell. More shortly.
Steve Rausch
2:58 pm on Tuesday, September 18, 2012
As for driving margins lower, how much does it cost that contractor when they install something wrong, it fails, and all must be torn out? All because they didn't get trained on the newest systems.
4. As for your final point, on that big box company HQ here in Atlanta, when you consider a company that 100% of their employees are in your community versus a company that has employees scattered around the country or globe, I believe it becomes cleared what my meaning of local was in this article. Use a "local" car dealer as an example, maybe the folks in that dealership are living locally but no cars are produced locally any more.
I wasn't avocating stopping all shopping at any store but a local store, but certainly I feel strongly that we should CONSIDER the local resource FIRST. Same as the Patch versus the AJC or USA Today!
Thanks for sharing your thoughts.
Steve
Josh Austin
3:29 pm on Tuesday, September 18, 2012
Ok, I'm still trying to clarify this in my mind...
It sounds like you prefer to shop at the local store when the employees there are more knowledgeable than the big box retailer. So could you say that your argument is to "shop where you get the most value for your money"?
If so, what does the business being "local" have to do with it? And don't people already pretty much do that?
Steve Rausch
4:53 pm on Tuesday, September 18, 2012
Josh it sounds like you want to debate the term "Local" as being wrong in my blog. I want folks to consider supporting local business first. I suggested that value is more than just the lowest price, which is usually found by shopping on the internet. My post was started by the changing landscape of business today, and I believe that is a large part of our current economic problems. Many folks are shopping what they find and like locally via the internet and even if they do purchase it at a local firm they want that firm to lower their price to match the internet vendor who has no real overhead costs at all.
Finally if people really pretty much do that already as you suggest then why do so many "Local" businesses go away? In my opinion value is far more than just price.
Steve
Josh Austin
5:23 pm on Tuesday, September 18, 2012
I think we agree that it's tacky to use a local brick and mortar business as a showroom for an online retailer. Further, I agree that value is more than the lowest price.
I think that many smaller local businesses are going under because they don't offer enough value. Local retailers that offer valuable expertise or luxury products are much more likely to survive than mom-and-pops that get undercut by Amazon or Walmart.
My motivation for engaging in the discussion is to challenge the notion that supporting a business because it is local or has been around a long time, is a good idea. Stereotypically, this comes out as a fight about whether or not to allow a Walmart to be built, in order to protect some scenic main street shops.
We need to keep in mind that for many well-to-do people, the nostalgic value of local businesses is worth more than the money they could save at Walmart or Aldi (or Amazon), but for the most vulnerable people in our society it's critical that we don't block access to the lowest price goods in order to preserve the businesses of favored locals. We can significantly harm the quality of life for those on the margins in our community.
Local businesses (like all others) will need to adapt to the way our world is changing or they will go under in the churn. They don't need "support" simply because they are "local".