The life style westerners have enjoyed these last few
decades is unique in human history.
Never before has every fruit and vegetable been available in our stores
throughout the year. In no previous age have the merchants catered to the whims
of the populace rather than to the whims of just a select few. We have shared in the riches of a century of
cheap, portable energy. It’s been great.
But I fear the party may be coming to a close. With supply at a plateau and demand from
developing nations climbing, soon we are going to be in an international
bidding war for oil.
The energy supply is going to get vastly more expensive as
supply fails to keep up with demand.
That will put an upward pressure on transportation costs, making
distance from supplier to seller to consumer a far more significant
factor. The big internet retailers are
dependent on that cheap energy to get their goods from centralized depots to
consumer’s front doors. Costs also
depend on volume, which will decline as spending falls, and result in more and
more jobs lost in the inevitable demand destruction.
As the cost of transport gets more expensive, the
traditional model of local retailers serving the community will come back to
the fore. When it costs the consumer
more to ship from out of state, despite the tax advantages internet retailers
enjoy, expect to see more people searching for what they want back on the Main
street.
Communities are defined by how far you can travel in a
reasonable time. Not that long ago, it took as long to travel from village to
village as it does today to travel continents –all because of cheap
energy. As long-distance travel becomes
less of an everyday activity, our interests will, for the most part, become
more localized. Localization is both a symptom and a solution to the
predicament of declining energy supplies.
Now before I extol the virtues of adopting the ‘buy local’
lifestyle, I’d first like to talk about those internet retailers. When I buy
from a local business, a reasonable portion of that money continues to
circulate around my community. Even the
big box retailers contribute some money back to the community though the wages
spent locally by their employees.
The business community has always shared a symbiotic
relationship with the consumer. The
health of our community is dependent on the ‘velocity of money’ –the transactions
from person to person that earns us our daily bread. Our employees live and work in the community
that supports our businesses, and the lives of our employees are intertwined
with our customers. We enjoy a symbiosis
that goes back to the earliest days of barter and the marketplace.
The large, internet-only retailers, in an ecological sense,
are parasites. They contribute little or
nothing back to the local communities beyond the wages of the occasional
delivery driver. They suck money out of local economies into the stock market.
In a world of digital money, we may not see that green river flowing out of our
communities and into those nebulous ‘markets’.
If I could believe in the paradigm of infinite growth, I would not find
this a bad thing. Our pensions, our 401K
funds, and our other investments rely on the markets.
But in a world constrained by energy limits, where the
impact of oil shocks threatens economic security, there is competition between
the needs of Main Street and the desires of the giant conglomerates who are
able to take advantage of energy to grow to a size that can push smaller, local
retailers out of the marketplace.
In many ways it is a private sector reflection of the
political decisions of the last few years to protect ‘Wall Street’ rather than
‘Main Street’. The concentration of wealth in giant corporations like Amazon,
the growth of giant multinational corporations, all reflect the growth of big
government.
Power often concentrates in an individual, politically, that
may be in the form of a President or a King. In business, it may take the form
of the legal fiction of a corporate person.
It represents the oldest form of social order, monarchy. Today, we see
the scale that is possible when there is an almost unlimited amount of energy
available.
When we talk about our communities being drained of money,
how can we define community? At a city
level? At a county level? How about at a state level?
How about you, the consumer, deciding what constitutes your
community?
Actually, you already have.
You, and everyone in your community for the last century or more, have
defined what community is by your shopping patterns. It’s how far you are willing to travel to
purchase the goods and services you need.
That model has existed for centuries, people shopping where they live
and work. We almost lost that model of
local people spending money in local shops, the drive for lowest possible price
before any cost threw a lot of small businesses under the bus. Again, this is a result of cheap energy that
subsidizes the cost of doing business for companies with no investment locally.
Luckily, we still have a legacy of the older shopping
patterns before the parasites came along.
It’s called a telephone directory. Businesses buy advertising in
directories that serve their customers. The majority of businesses in your
local directory only advertise in that one directory – you, not the million on
the internet, are their market. The Yellow Pages have been in a symbiotic relationship with
you since your parents started shopping for your nursery.
The changing energy costs will affect our industry as much
as every other. As transportation costs rise, I expect directories to fragment;
a rural directory today that may have three medium-sized communities within its
pages, may in the future, be replaced by three smaller directories. If the consumer travels less frequently to
shop, then the value of advertising over a wider area will drop.
The Yellow Pages is all about competition. They show
businesses competing for the money moving through their local community. Yellow Pages shows merchants side by side, letting
the consumer choose with whom they wish to speak.. At the same time, we advise businesses on how
best to convey their strengths through their advertising. As such, local
directories are a reflection of the health of the community; a strong, vibrant
business community is a healthy customer base for Yellow Pages companies. We
only succeed when our local communities succeed.
In the aftermath of the Great Recession, it is far too easy
to open the Better Book and blame our woes on our competitor down the
street. Yet if that were so, what
explains the blight in our communities?
If we lost our revenue to our local competitors, the money would still
be circulating between paycheck and till receipts. We’d tighten our belts as our customers did
likewise, and adjust to the ever-evolving marketplace. Some uncompetitive
businesses would not survive, and a new equilibrium would be achieved. Businesses have gone through this cycle a
myriad of times.
Shoppers are not tightening their belts. Instead they are changing their shopping
habits. The online retailers have the advantage of not having to support the
local community. They employ no one locally.
They often avoid taxes by incorporating elsewhere. They appear to
provide great value to the consumer who feels the pressure in his or her pocket
because there is less money flowing though the community. Yes, it’s the same
argument used against big-box stores; except even if those stores were to
become the only game in town, it would reach some equilibrium within the
community it served. Not so with the
internet corporations.
The relationship between consumer and merchant, on a local
scale, is always symbiotic. Not so for the internet parasites. They survive by
feeding off local communities and profit by giving nothing back.
Next post, I will suggest ideas on how local companies can
survive until the inevitable increase of energy costs levels the playing field
and brings the focus back where it belongs, in our communities.
