Think Local

In the midst of lockdown, we rallied around corner shops, local suppliers and flexible small businesses. But, as we’re repeatedly warned of the Covid-created consequences for our local high streets and city centres, can local independents survive, asks Lara Higham?

The idea that a disease can spread rapidly across the world, triggering economic, political and social upheaval on an unprecedented scale, is so 1353. Centuries before Covid-19 first crossed over into the human population, the bacterium Y. pestis travelled along trade routes across Europe, Asia and Africa, resulting in the Second Plague pandemic, the Black Death.

This pandemic was characterised by its shocking effects on global demographics. It reduced the world population by 11%, and killed 30-60% of people in Europe. Yet, although the scale of mortality caused by the Black Death was devastating, it created a labour shortage, which empowered peasants to demand a significantly higher wage for their work. Agricultural workers paid lower rents, or purchased land outright, and could sell any surplus – generally increasing their disposable income.

Those rich before the plague saw their wealth grow. As populations rapidly declined, money was passed down within families, which allowed the greater concentration of resources needed to invest in large scale production. This pandemic is now accepted by many historians to be a catalyst in the development of our modern economy, centred around mass production, and consumer power.

Writing in The Conversation, historian Eleanor Russell, and Professor of Organisation Studies, Martin Parker, suggested that the Covid-19 pandemic could further entrench the status-quo created by the Black Death, passing even more wealth over to large corporations. At the same time, Covid-19 exposes the innate vulnerabilities of small businesses, and represents an existential threat to all that is local.

The demise of local businesses was a fear shared by SME owners across almost all OECD (Organisation for Economic Co-operation and Development) member countries; early research from the USA suggested that a third of small business owners feared they were two months or less away from permanent closure, a number which rose to 42% in Korea, and 50% in Portugal. These fears were confirmed as early as March, when a study published by universities across the USA, predicted that as many as 100,000 businesses had already shut down for good.

Many, healthy SMEs across the globe operate with less than two months of cash reserves, supported by frequent, small transactions. In some economies, such as in Italy, it is common practice to hold around two months’ cash, which can be supplemented by small loans. The length, and uncertainty of lockdown, in combination with this SME norm, makes it difficult to pay wages, rent, utilities, and the other costs of keeping a business afloat, in both the short and long term.

Resilience in a crisis

What’s more, staying competitive in difficult times can be hard. Rapid adoption of new ways of working has long been associated with resilience in a crisis. Yet some suggest that, although fortune does favour the bold, access to the cash resources, the technical talent, and the logistical capacity required for boldness, is restricted to the already fortunate.

For some, this paints an unsettling picture for the future. Commentators, like writer James Kwak, suggest that Covid-19 has ‘turbo-charged’ the already prevalent shift to online spaces – exacerbating existing worries that local ecosystems of corner shops, boutiques, cinemas, theatres, and gyms can be replicated at home. Furthermore, as this situation tends to benefit cash- and asset-rich organisations, and punishes businesses which operate with little liquidity, some predict that struggling companies may be acquired at a low price, strengthening the position of big firms, especially within the travel and technology sectors.

Since reading Kwak’s article, the idea that this medical and economic emergency could ‘turbo charge’ us into a future dominated by the impersonal, the powerful and the distant, has taken root in my mind. What’s more, the idea that Covid-19 will separate the wheat from the chaff, seems to recur in discourse, but it doesn’t seem to correlate with reality. It ignores the fact that small businesses are failing, not because they have failed to fill a need in society, to keep abreast of technological change, or to anticipate the future – but they have failed because in this very specific, and abnormal situation, they are at an inherent disadvantage. It seems unfair, and incredibly short-sighted, to condemn businesses to permanent shutdown, based on their performance in an abnormal situation – and not on the needs of people in the world after the pandemic.

It seems as though I am not the only one who is troubled by this new world. In fact, in my fear, I am joined by leaders across the globe, who responded to Covid-19 with surprising and varied policies, geared towards saving SMEs. These policies range to meet the needs of each economy – an OECD survey found that the majority of countries engaged in direct lending to SMEs, provided wage subsidies and allowed the deferral of corporate or income tax.

Getting creative

Some countries have gotten creative – in countries including Lithuania, Estonia, and Poland, hackathons have been organised to combat the societal side effects of Covid-19. Parduotuv, an online package designed for beginners to take their small business to the web in minutes, is a notable representation from Estonia, of the will which global governments have to avoid the death of local businesses. Castellino del Biferno, a stunning commune in the mountainous Molise region of Italy, responded to the crisis by minting their own ‘Ducati’ bank notes, to be spent in local shops.

Third sector organisations have responded with equal fervour. Strict travel restrictions have ensured that Thailand’s borders remain shut to overseas visitors. This has presented a threat for the entrepreneurs across the country, who have built sustainable businesses, and boosted the local economy using traditional craftmanship, cuisine, and wildlife, to attract tourists. Yet, ethical tourism companies, such as Local Alike, which connect sightseers and businesses, have radically adjusted their ways of working to support their entrepreneurial partners.

Organisations like these, which have an established online presence, digital marketing talent, and the desire to see their beneficial partnerships continue, have offered a lifeline for business, shifting their entire purpose to rethinking how tourism can exist without tourists. Products, from bucket hats with matching cloth bags in beautiful earthy tones, community-produced dried snacks, and in-season mangosteen, were previously sold directly to tourists, but have been repackaged by Local Alike, to be sold locally on social media.

Rising to the challenge

In the UK, a similar response has been seen. Since August 2016, Khalia Ismain’s Jamii, a ground-breaking discovery platform, has helped consumers to connect with Black-owned independents from across the UK. The Jamii discount card offers up to 40% off each purchase, when shopping with partners – who range from a web designers Welland Porter, to luxury wellness brand Reign x Shine – amplifying the visibility of local entrepreneurs, and incentivising patrons to return to businesses, and spend.

When I spoke to Khalia to discuss how Covid-19 has impacted her partners, she told a story which was very familiar to me. “Covid-19 was a huge risk to all businesses”, she explained. “Most businesses only have cash reserves for around three months, and nobody knew how long the lockdown was going to be, really.” But Khalia also noted how some businesses responded with enthusiasm to the challenge of lockdown, whilst others needed support.

In the spirit of collaboration which Jamii represents (Jamii means ‘community’ in Swahili), Khalia reached out to experts in her network, and launched a series Instagram Live events which covered key Covid-19 survival topics, including virtual events management, social media marketing, and finance. On Thursdays, Jamii’s live streams invited Black entrepreneurs, to share their success with its 26,500 Instagram followers. “We asked them ‘What’s your story?’, and ‘What have you learned?’”, Khalia shared, “and people are happy to share their ideas.”

The power of collaboration has also driven innovation in Liverpool. Back in 2019, Liverpool City Region Metropolitan Mayor, Steve Rotheram, allocated a £5 million fund to the development of socially-trading organisations – local businesses which seek to benefit the community. This project was due to be delivered over 2020, by a newly-formed collective of socially-trading organisations, Kindred. But when the UK entered the beginning of the lockdown, these plans were accelerated, and the collective responded rapidly to provide tailored business support, and funding, to socially-trading organisations.

The very existence of these policies and activities gives some hint already to the value which local business can bring to the economy. Although society seems to be dominated by globalisation, big box stores, and online mega-corporations, we still live in a small world – where 90% of businesses, and 50% of employers are classed as SMEs, globally. It’s important to note that local businesses aren’t good by default – entrepreneurs in the community can be guilty of almost all the unethical business practices which large businesses partake in. Yet, local business done right, delivers a range of unique benefits, which can’t be replicated by other models.

Use it or lose it

Most people are convinced of the niche value of shopping local. An American Express poll from 2011 revealed that a huge 93% of shoppers believed that it was important to support the local businesses that they value, with 87% and 83% believing that local businesses contribute positively to the community, and the national economy respectively. For consumers, local businesses can reflect a level of familiarity which can’t be replicated by an algorithm – shopkeepers might know their customers by name, but they might also make recommendations, or even modify their stock based on what the community needs.

In the USA, 11% of people shop at independent grocery stores, where increased availability and lower price of fresh fruits and vegetables in poorer neighbourhoods can help to combat the obesity, and food desert crisis, a driver of health inequality in the US and beyond.

Many shoppers are also conscious of the ‘multiplier effect’ of local business, where money spent in the neighbourhood is recirculated through the community much more than money spent in chain stores. More importantly, for many people, local clusters of successful small businesses don’t just make for a prettier commute, they offer a chance for people to foster entrepreneurship, economic development and local employment in their own communities.

Black Pound Day in the UK, created to support Black-owned businesses, is a powerful example of how consumers have taken matters into their own hands to shape a more equitable future. Whether it’s working to close a £3.2 billion racial pay gap, rallying against the climate crisis, or breathing life and opportunity into a neglected neighbourhood, customers are realising that they can drive change, one transaction at a time.

With such a drive from different players, there’s no surprise then that we have seen some small businesses thrive in 2020. In this economic crisis, the ‘use it or lose it’ reality of small business seems to have finally hit consumers – recent research from Barclaycard shows that, in April, shopping in local shops such as butchers, bakeries, and greengrocers rose by 38%, while all other spending fell. Businesses themselves have adapted, and even expanded during lockdown. Contrary to early predictions that small businesses would struggle to fill the needs posed by the crisis, some believe that small businesses have a greater amount of flexibility, in their purpose, and a connection to the community needed to hone in on a new opportunity.