Local Mayors: E-Commerce & Big Box Retail Crush Small Town Business

Gladding says it’s hard for local businesses to compete with the vast inventories and superior cost margins of big-box retailers. He believes that each small retailer must carve out a specific niche in order to survive.

Terry Cosgrove, the mayor of Montross, agrees with Gladding’s assessment.

“I think the shops that are bound to survive here are going to cater to something very specific and to me that seems to be in the arts,” Cosgrove said. “You have to do more than one thing. You have to specialize in more than coffee, more than art.”

Cosgrove’s own small business, The Art of Coffee, is no exception to the rule. Holly Harman, an artist who also happens to be the first lady of Montross, co-owns the establishment with her husband. They discovered their niche when they began partnering with other artists from the Northern Neck who were interested in exhibiting and selling their work in the coffee shop.

Like Tapphannock, the small business landscape of Montross changed during the latter half of the 20th Century. Cosgrove says that some of his older constituents feel nostalgia for the downtown as it once was.

“I hear stories of people that grew up here, and maybe they’re in their eighties now, and you couldn’t find a parking space in downtown Montross on a Friday night. There was shopping and there were bowling alleys and movie theaters. I think those things have just kind of gone by the wayside. It’s a shame. I wish we had some of those options,” Cosgrove said.

Michael Shuman, one of the architects of the 2012 JOBS Act and the author of books such as Local Dollars, Local Sense and The Local Economy Solution, believes that the threats facing small town retail are growing. He says that Amazon, in particular, has already dealt considerable damage to small rural economies and will continue to eviscerate downtowns if nothing changes.

“On one hand, Amazon does provide cost effective goods to many people much of the time, but it has destroyed vast numbers of retail establishments across the country,” Shuman said.

The Institute for Local Self-Reliance reported that in 2015 Amazon’s growing market share caused 22,000 main street businesses to close.

Shuman says it’s no secret that the destruction of small retail establishments in favor of big-box stores and E-commerce has devastated local economies.

In rural communities, there used to be somewhat stable economies, and they’ve been completely turned upside down by the loss of local retail, Shuman said.

Shuman believes that Amazon funnels money out of small communities, which erodes their tax bases. When consumers shop online, they aren’t paying the local sales tax that goes towards funding services such as schools, roads, rescue squads, fire departments, and law enforcement.

“The vast majority of expenditures are not occurring in the jurisdiction of the town, so there is zero tax revenue that comes from it,” said Shuman, in reference to the effects of E-commerce. “The current system of collecting some tax revenue from the Amazons of the world nationally and then redistributing that to the states and hoping they redistribute that to the cities, it doesn’t work very well.”

The Federal Reserve Bank of Atlanta published a study in 2013 supporting Shuman’s beliefs. The study found that the percent of employment provided by locally-owned businesses has a significant positive effect on county income and employment growth.

Shuman says it isn’t enough to tell people to shop locally. He believes that people also need to invest locally. That’s why he was a proponent of the 2012 JOBS Act, which was intended to encourage the funding of small businesses through equity crowdfunding.

“Getting more people to move their money from Wall Street into a wide range of local businesses, local property, local projects, local people — that is what we can really do to make the difference here.”