Modern Times: Why would anyone run a small business today?

In the early 1990s, an independent garden centre went bankrupt. The business had been in the family for many years, but it had struggled to compete with larger retailers and the centre had not adjusted its business model soon enough. The owner of the business, conceding after a prolonged battle to stay afloat, asked her son to take up the fight for small businesses in the future.

Small businesses are carefully woven into the fabric of our communities. South Australia has a small business economy, which remains an important aspect of the state’s character. When you are served at a family-owned small business, it is obvious how much the proprietors care about the product. Interactions are more intimate as small businesses rely on service to differentiate themselves from the anonymous experience of buying goods at an automatic check-out.

If South Australia is a small business economy, then I share with my neighbours in Rosewater and adjoining Alberton the ultimate small business community. The local café, The Pear, bears the local accent. The local hairdresser, Maurici Brothers, is situated in the old train station and has been cutting hair from local heads since 1955. The Alberton Hotel has been in the Brien family for more than 70 years. Starbucks, McDonalds or JustCuts are mercifully absent.

When small businesses thrive, the community benefits. But why would anyone be moved to own one? Small businesses are underdogs in a perpetual scrap with better resourced chain stores, which benefit from name recognition, collective marketing, and supply-side economies of scale. For small business owners, the margins are narrow, the hours long.

Larger retailers can seduce wholesalers with volume before driving down the price. The scale on which they operate allows for bulk purchasing from wholesalers, which reduces prices and brings great competitive advantage. This may benefit consumers in respect to the cost of goods and services but diminishes consumer choice as smaller retailers are forced out of the market. The consequent impact on the fabric of our communities is real.

Further deregulation of shopping hours will make the odds of survival even longer. It will force families that own small businesses to work longer hours during the week, as well as weekends and public holidays, just to stay in the fight against larger, better-resourced competitors. Further deregulation will serve larger retailers and ultimately result in less competition. Who, really, would wish for a perpetual struggle for survival?

Modern life increases the speed and mobility of goods and invites greater opportunities for trade. For Australian businesses offering premium goods and services, there are large markets with increasingly affluent consumers within proximity. Trade agreements offer improved access in some sectors — but it is not easy for small businesses producing desirable goods such as honey, olive oil, fine meats or seafood or premium snacks find the time and resources necessary to access these markets.

Even medium-sized businesses that succeed in the Australian marketplace need to navigate seas made rough by different certification and regulatory regimes, as well as the need to develop trusted relationships and ultimately market products to increasingly sophisticated consumers confronted with a plethora of choices. The correct policy settings and support would make market access possible and encourage investment when the scale of production needs to be increased to meet demand. Governments should create policy settings that make these opportunities possible.

The death of family-owned small businesses will accelerate the sprint towards monochrome communities, with shops as predictable and devoid of character as the modern houses in which we live. Something urgently needs to be done to support family businesses, and the dreams on which they are built.

@AndrewHunter__