By Kate Catlin, Venture for America Class of 2013
How Internet Companies Could Potentially be Good for Your Favorite Local Boutique Instead of Just Ruining Neighborhoods, Society and Everything
I've consulted Google for advice on everything from toothaches to breaking up with boyfriends. I knew all the best local running routes within a month of living in Detroit thanks to MapMyRun. I brake before upcoming highway speed patrols with tip-offs from Waze. Yelp tells me what to order at a seemingly-sketchy sushi joint and Groupon gets me 50% off the bill.
As often as we lament the effect the Internet has had on our social skills, we reap the benefits. We're hyper-linked (pun intended) to each other in ways that offer wisdom and purchasing power greater than we ever could have had alone. That $8 Groupon discount I got on sushi? That, folks, is the power of connectivity.
Unfortunately, this is not always good for local small businesses. Increasing globalization means large chains can push down prices to absurd levels. Then Google Shopping allows me to compare prices at several different chains and buy the cheapest option of the already cheap options, pushing the margin down even more.
We're coming closer and closer to the economics concept called "perfect competition" (which should only be hypothetical) in which prices get driven down so low that no businesses make any money on anything, they just break even. How could the "little guy" ever possibly compete?
Get ready for the silver lining: Small businesses no longer have to "go it alone" either.
The same forces of connectivity that are driving prices down could help small businesses achieve "economies of scale" and better compete. In one sentence, economies of scale could be described as making all your production cheaper by doing it in massive numbers. While no small business owner can achieve this on their own, they can if they work together. There are 170,000 small businesses where I live in Michigan alone. Together, they're bigger than the big box retailers.
Traditionally, these partnerships came through local business associations. This has had mixed results - you can pay your membership dues, but it's still up to you to attend the networking events and handshake your way to victory. That takes time. The Internet can offer a more efficient way. A few websites have sprung up to facilitate specific interactions like bulk ordering, delivery truck sharing or tool rental. They're already saving those small businesses involved thousands, and this is only the start.
I'm starting my own project called Assemble, which aims for horizontal solutions rather than vertical ones. Small businesses will be able to connect over all the above options and more: finding buddies for cross-promotional marketing and a call-in to talk to when they're unsure. You can see more and buy a good from a supportive Detroit local business here. While in the beginning we'll start with a low-tech Craigslist-style website, the end goal is that small businesses have all the power of a big business through a plethora of magical SMB union possibilities automated by software.
Tech companies and internet retailers have been accused of destroying the neighborhood (see here and here). It's true that increased competition puts pressure on today's local spots. Yet tech has the potential to create opportunity for all, from the kid who teaches himself to code and creates a career to the small business who uses connections to get ahead. The tools bubbling up to support the little guys will inevitably benefit more than they cost, and it's exciting to see it all come to fruition.
Assemble is a Venture for America Innovation Fund project. The Innovation Fund gives aspiring entrepreneurs the opportunity to launch their business ideas and projects. To support the growth of small businesses, visit Assemble here.