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Why Small Businesses Are Starting to Win Again

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Re: Why Small Businesses Are Starting to Win Again

#21

Post by harryh »

jnbiche wrote: post #10
jarjoura wrote: post #6

I attribute the change to the influx and return of a strong middle class in cities. It's easier to create "mom and pop" shops when you have affluent buyers who live a block away. Suburban lifestyle meant your nearest supermarket became the obvious decision when the 5 mile drive was no shorter than a 45 minute drive. It will be interesting when services such as Postmates, Curbside, and Instacart evolve to extend these…

>return of a strong middle class in cities Where are these cities where a strong middle class has returned? Surely not in SF, where one of the area's highest paid professions (software engineer) cannot afford family housing? Certainly not elsewhere in California, where incomes among middle class Californian households fell by nearly 7% between 2009 and 2013, while income among the state’s top 20% earners grew by 1.3%…

I'm from Greenville, SC (a small city in the South) and it is BOOMING. Population has grown by a third or so in the last 10 years. There are new residential and commercial developments everywhere.

Re: Why Small Businesses Are Starting to Win Again

#22

Post by Rapzid »

syllogism wrote: post #18

This was a frustrating article, because I think it's almost right, but not quite. It's not that mass-production kills quality or "intangibles". We don't have to assume boutique products have a quality advantage. It's just that scale is most effective on price, and price sensitivity is not linear. Once products are cheap enough, price discrimination stops being decisive. > The true-differentiation strategy seems to wo…

Craft beers are "mass produced", just not in the quantities of Budweiser. They still use huge kettles, precisely controlled quantities of ingredients, etc. They also tend to use higher quantities of good, natural ingredients and the like. SO yes, mass production in and of itself doesn't necessarily drive quality.

BUT. The size of the company can. Very large companies, particularly public but not limited to such, start drifting toward the cheapest product they can get away with while maximizing profit. That's their obligation to share holders after all. I think the food industry(including beer) is particularly sensitive to this from a quality standpoint.

Re: Why Small Businesses Are Starting to Win Again

#23

Post by Rapzid »

showerst wrote: post #19
JasonCEC wrote: post #12

If anyone is interested in a start-up[1] that works with beer, shoot me an email[2]! My company builds flavor profiling and quality control tools for craft beverage producers using machine learning, sensory science, and analytical chemistry. [1] www.gastrograph.com [2] JasonCEC [at] gastrograph [dot] com -------- edit / follow-up ------- I believe that the growth in artisan firms is part of the trend towards affordab…

Minor nitpick that doesn't dispute your point: Bud is 5% abv and Natural Light is 4.2. Most craft beers aren't rocking 8+% alcohol, unless you're a big fan of imperial stouts and skullsplitter =).

Those alcohol contents are quite reasonable for the NZ craft beer scene. If you look at Garage project, recently named NZ's best brewery in certain circles(and I can attest they are fantastic), the 7-8% range is well represented: http://garageproject.co.nz/ .

Re: Why Small Businesses Are Starting to Win Again

#24

Post by AnthonyMouse »

Rapzid wrote: post #22
syllogism wrote: post #18

This was a frustrating article, because I think it's almost right, but not quite. It's not that mass-production kills quality or "intangibles". We don't have to assume boutique products have a quality advantage. It's just that scale is most effective on price, and price sensitivity is not linear. Once products are cheap enough, price discrimination stops being decisive. > The true-differentiation strategy seems to wo…

Craft beers are "mass produced", just not in the quantities of Budweiser. They still use huge kettles, precisely controlled quantities of ingredients, etc. They also tend to use higher quantities of good, natural ingredients and the like. SO yes, mass production in and of itself doesn't necessarily drive quality. BUT. The size of the company can. Very large companies, particularly public but not limited to such, star…

> Very large companies, particularly public but not limited to such, start drifting toward the cheapest product they can get away with while maximizing profit. That's their obligation to share holders after all.

This is largely a myth. Corporate executives have an obligation to shareholders, but that obligation is not to maximize quarterly profits. Short term profit maximization at all costs is generally not in the interests of shareholders. If you have a reputation for selling a quality product you can capitalize on it in the short term by selling a junk product at quality prices and huge profit margins, but in any kind of a competitive market that opens you up to exactly what you would expect. Someone else comes in with a real quality product at the same price and you lose all your business to them.

The reason corporate executives do things like that isn't because they're satisfying their obligation to the shareholders -- they're doing quite the opposite. But they do it anyway because of how they're compensated. Big bonus at the end of the year if profits are up; no repercussions if it tanks the company by the end of the decade because by then you're working somewhere else.

It's important to make the distinction because the shareholders are the ones who have the power to do something about it. "Obligation to the shareholders" makes it sound like the shareholders are the beneficiaries, but they're just as much victims as the customers. Making that mistake is how they become the victims.

Re: Why Small Businesses Are Starting to Win Again

#25

Post by pm90 »

mcook08 wrote: post #5

One overlooked factor is the modern consumer being desensitized to advertising. This created huge advantages in the last 50 years but modern consumers see so much advertising that they are largely immune to it.

Good point! Having been exposed to a bombardment of advertisements since early in life, personally I don't think I'm influenced very much by them now (although that's up for debate).

Also, the TV is largely being replaced by Netflix and such, so the exposure to TV advertising is also falling in absolute numbers.

Re: Why Small Businesses Are Starting to Win Again

#26

Post by stalcottsmith »

It is argued that one implication of Coase's Theorem[1] is that firm size is inversely proportional to transaction costs. If transaction costs are falling due to Internet enabled communication, this may contribute to reversing the tide of centralization.

[1] https://en.wikipedia.org/wiki/Coase_theorem

Re: Why Small Businesses Are Starting to Win Again

#27

Post by yuhong »

AnthonyMouse wrote: post #24
Rapzid wrote: post #22

Earlier quoted context omitted.

Craft beers are "mass produced", just not in the quantities of Budweiser. They still use huge kettles, precisely controlled quantities of ingredients, etc. They also tend to use higher quantities of good, natural ingredients and the like. SO yes, mass production in and of itself doesn't necessarily drive quality. BUT. The size of the company can. Very large companies, particularly public but not limited to such, star…

> Very large companies, particularly public but not limited to such, start drifting toward the cheapest product they can get away with while maximizing profit. That's their obligation to share holders after all. This is largely a myth. Corporate executives have an obligation to shareholders, but that obligation is not to maximize quarterly profits. Short term profit maximization at all costs is generally not in the i…

I wonder why they are so common though.

Re: Why Small Businesses Are Starting to Win Again

#28

Post by allendoerfer »

Ironically in the paragraph about "true differentiation" the author mentioned Lamborghini cars, a brand of the ninth biggest company on earth with 600k employees. Other niche brands they own are Bentley, Bugatti, and Ducati.

I would argue that these are indeed differentiated. It does not matter whether production processes or internals are unified or not as long as the consumer experience of the end product is.

Small businesses profit from mass production as they can build a consumer ending frontend around standard technologies and products they can leverage for all their internals.

Re: Why Small Businesses Are Starting to Win Again

#29

Post by blumkvist »

morgante wrote: post #8
netcan wrote: post #7

Earlier quoted context omitted.

I think the big part is affluence full stop. “Discretionary” spending tends to go to go to small businesses in larger proportions while big corporations get the non discretionary stuff. Niche products like those mentioned. Services (cleaning restaurants). Entertainments services. Those all lend well to smaller businesses. More rich people. More niche products and fun services. A middle class family spend most of thei…

> I think the big part is affluence full stop. I don't know about that. Most luxury spending I see goes towards huge brands (fashion labels, air travel, etc.), whereas necessities can go to small businesses. I'd probably never buy my clothes at a random boutique, but I might pick up a lightbulb at the corner hardware store.

I think you misunderstand what a small business is. A corner hardware store is a micro company. For most intents and purposes a small business is between 10 and 50 employees and/or between 10 and 50 million in annual revenue. In the US the Small Business Administration will classify most of the companies under 500 employees as a small business.

Re: Why Small Businesses Are Starting to Win Again

#30

Post by XorNot »

cheriot wrote: post #13
bhauer wrote: post #11

Earlier quoted context omitted.

I think it is this, precisely. And I think legislatively we should clear the way for small business by reducing the burden of regulation and oppressive bureaucracy.

I hear people talk about the "burden of regulation" a lot, but outside of breweries and distilleries, what are the regulations that are so burdensome? Things like building codes and inspections or are you think of things at the federal level?

Voting this up. Too often this is political code for "handouts to big business" by the way of environmental sundry exemptions, tax exemptions, immigration exemptions (hello H1B issue) and the like, none of which actual small business can take any advantage of (and which the people running said businesses would probably be close enough to the immediate effects of to find distasteful in a lot of cases).

I would like to hear some concrete examples of what people think needs to be changed.

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