Setting The Record Straight: Small Businesses Use Tech To Compete And Grow
The latest Institute for Local Self-Reliance event overlooked the fact that small businesses have long found a valuable and reliable partner in innovative tech companies, overcoming profound challenges and unlocking shared innovation and growth. As discussions of the House Judiciary Antitrust Subcommittee Democratic staff report return to the fore, it’s important to keep in mind:
—Affordable digital tools are powering a faster, more resilient recovery and leveling the playing field for small businesses.
—A “Glass-Steagall for the internet” would harm small businesses and lacks any rationale.
—Overbearing recommendations by the House Judiciary Antitrust Subcommittee Democratic staff report could wreak havoc on American small businesses and the broader economy.
Affordable digital tools are powering a faster, more resilient recovery and leveling the playing field for small businesses.
Small businesses are taking advantage of internet services to grow, finds a survey by Chase Ink.
—35% of small businesses owners stated that the pandemic would have forced their business to close without online sales. 44% of business owners who sell products and services online have seen a boost in their online sales since 2019.
—For small business owners who use paid search advertising, 52% have seen new customers, 39% have had new leads/inquiries, and 36% have experienced increased recognition of their business.
Affordable access to digital tools enables small and local businesses to improve performance and resilience, reminds Jim Dorkins, owner of Doc Goodbeard in Denver, CO. “I use Google Analytics to understand website traffic and see which ads perform the best, and Xero is my digital accounting platform. My company is successful because of e-commerce tools. During COVID-19, these tools are a digital safety net that enable small businesses like mine to survive despite lockdowns and quarantines. If these tools didn’t exist, and if this old dog hadn’t learned new digital tricks, we would be wiped out. Thousands of Colorado businesses are in the same position, facing bankruptcy or closing altogether if we lose access to digital tools or if prices increase substantially.”
Low-cost digital marketing tools empower small businesses to compete directly with large corporations, notes the Digital Advertising Network. “Traditional marketing plans require a high amount of budget to achieve advanced business growth, and it is not easy to compete with larger corporations that can afford any marketing expense. Startups and small businesses need a lower cost with a higher rate of return. This is possible only with digital marketing because it undertakes any size business to be noticed and grow in any location worldwide.The digital world allows you to create an online store and an online platform to interact with your clients regardless of where you and your clients are.”
Scaled technology products help local businesses stand out and reach more customers. As Bryan Caplan, CEO of Bryan Caplan Marketing, points out, “Google My Business is a free tool that allows small business owners (and nonprofits) to promote their business information on Google Search and Maps. With Google My Business, you can connect with your customers, post updates to your business profile, and see how customers are interacting with your business on Google.”
A wide array of online sales channels enable small-to-medium-sized businesses (SMBs) to better reach consumers with products and services.
—A International Data Corp survey of 350 SMBs finds that “81% of the firms selling on Amazon use more than one digital sales channel, and 90% consider Amazon an online sales channel, technology partner or business enabler.”
—eMarketer data shows that nearly half (47%) of merchants on Amazon also sell on a personal website and over one-third (35%) sell additionally on Walmart’s site. It is noteworthy that nearly a quarter also depend on brick-and-mortar stores for sales.
A “Glass-Steagall for the internet” would harm small businesses and lacks any rationale.
Breaking up innovative tech companies would make small businesses worse off, eliminating “the gains that many small businesses have enjoyed for nearly a decade,” reminds Jake Ward, President of the Connected Commerce Council. “Forcibly breaking apart digital platforms will eliminate the gains that many small businesses have enjoyed for nearly a decade. The competition debate cannot just be about the ‘big’ in Big Tech, as these platforms’ size and scale are precisely what enables them to provide small businesses with high-quality tools and services at affordable prices. The debate about Big Tech must include Main Street and the millions of small businesses that are the backbone of our economy and will drive our economic recovery.”
Prohibiting tech companies from providing products and services on their marketplace could result in higher prices and limited options for small businesses, explains Jennifer Huddleston of the American Action Forum. “But such a shift would set up barriers in the current market and focus on the impact of these platforms’ behavior on competitors rather than consumers, and the easiest way to see this impact is by examining a closer analogy: brick-and-mortar retail. The result could actually harm consumers by raising prices and limiting service options for small business rather than improving competition and better protecting consumers.”
Implementing “a Glass-Steagall for the internet” does not make sense because there is no real analogy between the banking and tech sectors, highlights Alec Stapp of the Progressive Policy Institute. “Tech companies don’t have explicit government guarantees (FDIC) or implicit government guarantees (Fannie Mae and Freddie Mac). Tech companies don’t create money (banks create the majority of the money in our economy in the form of bank deposits). And while tech companies create a lot of value for consumers, they’re not systemically important in the same way financial institutions are. If one Big Tech company fails, it will not bring the economy crashing down with it.”
Overbearing recommendations by the House Judiciary Antitrust Subcommittee Democratic staff report could wreak havoc on American small businesses and the broader economy.
Government overreach in the tech ecosystem could hurt the competitiveness of small businesses, notes Nancy Vargas, CEO of DH2 Limo. “Before policymakers overreact and over-regulate, and before they force tech companies to change how they operate, everyone should take stock of how their technology helps small businesses. If the government over-regulates and commands the way digital platforms operate, it will likely mean higher prices and less effective business tools for my company, and declining service that is more costly for my clients. Without open and available use of these platforms, my small business will lose a considerable competitive edge.”
The Democratic House Judiciary antitrust report’s recommendations will negatively affect businesses beyond the tech sector, highlights Lawrence J. Spiwak of the Phoenix Center for Advanced Legal & Economic Public Policy. “Many are hailing the report’s recommended legislative changes as a blow against ‘Big Tech.’ Perhaps. But its recommendations will have consequences far beyond the tech industry. Our antitrust laws do not apply just to four companies; the Sherman Act, the Clayton Act and the Federal Trade Commission Act apply across the entire economy. Accordingly, given the multitude of economic flaws and due process problems contained in the report, every business—not just Big Tech—should be worried if Congress attempts to enact these recommended legislative changes.”
Companies’ use of private labels increases the value of the overall market by creating more demand, highlights Sam Bowman and Geoffrey Manne of the International Center for Law & Economics. “[P]latforms’ incentives are to maximise the value of their whole ecosystem, which includes both the core platform and the services they attach to it. Platforms that preference their own products frequently end up increasing the value of the market overall by growing the total share of users of a particular product, and those that preference inferior products end up hurting the attractiveness to users of their ‘core’ product, weakening themselves to competition from rivals.”
Antitrust laws need to focus squarely on issues of competition and steer clear of politicization, reminds Maureen Ohlhausen, former Commissioner of the Federal Trade Commission. “Antitrust law is not designed for, nor intended to, correct a ‘problem’ in the market wholly divorced from the competitive process. In other words, concerns over fairness, consumer privacy, or the protection of small business should be addressed by regulatory actions or consumer protection laws, not antitrust. Using antitrust law to address non-competition factors, which may reduce competition or conflict with each other, reduces certainty and increases the risk of antitrust being used for industrial policy or political purposes.”