Saving Main Street Page 2
Initially, COVID seemed as if it might deliver a temporary blow to businesses large and small—a lousy March and an equally bad April. A few weeks would pass, we’d flatten the curve, and everything would return more or less to normal. “I’d love to have it open by Easter, OK?” Donald Trump said during a Fox News town hall at the end of March. Yet five days later, even Trump, who minimized COVID, acknowledged that the country was looking at a lockdown of indeterminate length.
A coronavirus does not discriminate. Large businesses as well as small would suffer through a shutdown. But unlike their larger cousins, independents tended to have almost no financial buffer, and therefore were more fragile and vulnerable during a downturn. A 2019 study by JPMorgan Chase looked at more than 750,000 small businesses in a cross section of US cities. Half had two weeks or less of cash on hand to cover their bills. The average white business owner had just nineteen days of reserves. Black owners had even less: twelve days of cash in the bank. Added to the worries of many who cared about the fate of the country’s small businesses was the concern that the man in the White House was not up to the immense challenges presented by a once-in-a-century global pandemic.
Pundits warned of the carnage to come. Sifting through data from the first two months of the pandemic, the Hamilton Project, an economic policy initiative inside the Brookings Institution, declared COVID-19 “the greatest existential threat to American small business in memory.” That spring, some were predicting that one out of every four small businesses would permanently close because of the pandemic. Others put that figure at one in three—or higher if the pandemic stretched into the fall and beyond, as epidemiologists were warning. Those hearing directly from small business owners received an even more pessimistic assessment of their chances. Only 30 percent of restaurateurs thought they could survive if the pandemic lasted four months, according to an April 2020 study by the National Bureau of Economic Research. Only 15 percent saw their operations surviving if it stretched for more than six months. Local chambers of commerce and trade associations around the country surveyed their people. Rural, urban, suburbs, exurbs—it made no difference: more than half the local businesses in almost any poll taken in the spring of 2020 said they were at risk of closing permanently.
Most of the country’s brand-name chains and other corporate giants would survive. Generally, they had months of cash reserves and options for raising money should they need it. Even giant retailers that declared bankruptcy in the first months of the pandemic (JCPenney, Neiman Marcus, Brooks Brothers, Ann Taylor, Lane Bryant) arranged the financing they needed to continue operations. For some small businesses, an understanding landlord or mortgage banker was the only thing that stood between them and solvency. By the end of March, revenue at salons like Vilma’s and barbershops was down more than 80 percent. One month into the pandemic, clothing and apparel sales were down more than 90 percent, according to an electronic payment firm used by sixty thousand small businesses across the US. Credit card transactions at bars and restaurants across the country were down 43 percent, though that included the transaction volumes at pizza places, Asian restaurants, and others that prepared foods well suited to delivery. Sit-down restaurants like TJ’s saw a much steeper drop in their business.
Olive Garden, Applebee’s, and Supercuts would be fine. So, too, would the big-box retailers that were permitted to remain open because they sold groceries, pharmaceuticals, hardware supplies, or other essential items. The concern among those advocating on behalf of small business was that COVID would prove a giant opportunity for the economy’s bigger players to expand market share. Every abandoned storefront meant a potential spot for another Chick-fil-A, Panda Express, Foot Locker, or Payless. “These are times when the strong can get stronger,” the CEO of Nike told a group of financial analysts several months into the pandemic. That was no doubt the mind-set at a long list of retail and restaurant chains for which expansion seemed a constant, even if their top executives were circumspect enough not to articulate that during earnings calls.
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The travails and risks of running a small business are well-known to me and a core part of my childhood. My father was a small businessman his entire adult life. He was just eighteen and a Jewish immigrant from England (a year younger than Vilma when she arrived in New York City) when he and his father set up a business importing bolts of cloth from Savile Row for making men’s suits. A decade later, he was running a small manufacturing plant that he’d opened with a partner. That morphed into a pet food company and ultimately a half-dozen pet stores called Pet Pavilion that he owned and operated with my two brothers.
The election of Ronald Reagan in 1980 eventually torpedoed his manufacturing business (they sold mainly to universities and research centers, and Reagan slashed the dollars the government devoted to scientific research). A larger company that bought the pet food business betrayed my father and his partner, offsetting what otherwise would have been a healthy payout. Venture capital played a central role in the demise of Pet Pavilion (he and my brothers didn’t have deep-pocketed investors, and a competitor did), though ultimately the business was done in by the recession that helped elect Bill Clinton president in 1992. Pet Pavilion was falling apart when my father died of a heart attack at age sixty-four. In every way that mattered, he was a success, providing well for his family and living a very comfortable life. But always it was hard, and never quite generated the payout he was seeking. My front-row seat on the ups and downs of my father’s various businesses gave me the utmost respect for any small operator who survives the treacherous waters they must navigate.
Business owners were generally receptive in the spring of 2020 when I asked to spend time with them. Only in time did I realize that by hanging out with small businesses, I was writing about the broader pandemic. Some, like Joe Lech of Lech’s Pharmacy, were essential workers who did not have the luxury of closing their doors even if there were times when Joe, who was in his early sixties, wished he could. Small businesses were on the front lines of the mask wars. They enforced, or did not enforce, the rules requiring a face covering, just as they were the arbiters of social distancing rules. Eventually, there was also the question of vaccinations. Whether they require employees to get vaccinated was not an inconsequential question for a business owner in the food or hair-cutting business.
Oddly, disasters had become something of a specialty of mine. Water still covered most of New Orleans after Hurricane Katrina in 2005 when my then-employer, the New York Times, dispatched me there to find a small business hit particularly hard by the flooding and episodically chronicle its struggle to rebuild. For the next decade, I followed Liberty Bank, which was down to around seventy-five employees after Katrina yet rebuilt itself into one of the country’s largest black-owned banks. My portfolio expanded to include the rebuilding of the entire city, where six months after the collapse of the levees, twenty-one thous
and of New Orleans’s twenty-two thousand businesses were still shuttered. Every homeowner I was talking with found that the decision of whether to rebuild depended in part on the future of small businesses in their drowned-out neighborhoods. Was it prudent to rebuild with no guarantee that the grocery store was coming back, or the pharmacy, or a dry cleaner or gas station? Small businesses didn’t determine the fate of a community but New Orleans after Katrina showed that they were central to people’s perception of what it meant to live in a place. A few years later, I was writing about the 2008 housing crisis that caused nearly ten million foreclosures in the US alone. I spent part of my time in distressed communities where those merchants of misery that thrive when times are hard (payday lenders, rent-to-own stores, pawnbrokers) had set up shop. Mom-and-pop businesses struggling at the start of the recession invariably went out of business. The payday lenders or pawnbrokers moved in, or maybe one of the big wireless carriers. Otherwise, it was likely that storefront sat empty for a long time.
A dark vision of empty storefronts in her town haunted Glenda Shoemaker, who owns a gift and card shop in Tunkhannock, a town of 1,700 in a rural stretch of Pennsylvania called the Endless Mountains. In April of 2020, sitting alone in her store, Glenda contemplated not only the death of her business, which her mother had started more than thirty years earlier, but also her town and countless ones like it. COVID, she feared, might mean “the end of the American way of life. Small town America will be over as we know it.”
It was hard to argue her point. One-quarter or one-third fewer small businesses would have a profound effect on a place, whether a small town, a big city, or a locale of any size in between. A small business die-off of that magnitude would further hollow out Main Streets and retail strips across the country already diminished by the big-box retailers and other chains. The center of gravity in communities would shift even further to a mall anchored by a Lowe’s or a Target or a Best Buy. COVID-19 had the potential to change the geography of commerce in the country. Stores and restaurants on Main Streets with character and charm would close; locales would lose what Jane Jacobs in The Death and Life of Great American Cities called “the ballet of the good city sidewalk.” Invariably, people would end up eating and shopping on strips that have the generic feel of a service road off the interstate. COVID-19 had the potential to decimate local economies. More dollars going to some faraway corporate office meant less cash recycling through a community. It also threatened a broader economic slowdown. In every community where I spent time, I found people who had been working hard to revive their faded Main Streets, battered and diminished from years of competing with corporate giants. The pandemic added a tragic element to that fight, and an urgency. “If we all close,” Glenda said, “what’s left for people except the Walmart, a dollar store, or the internet?”
“Diversity” was my watchword when seeking out businesses with which to spend time. That included the type of business, of course, along with the age, gender, and race of the business owners. Geographic diversity was also important and, in these hyperpartisan, fractious times, also political affiliation. I live in New York City, which at the start of the pandemic was home to more than two hundred thousand small businesses. There was no shortage of interesting micro-enterprises from which to choose. But New York hardly seemed typical, as the country’s largest city and one of its most expensive. Here, the dominant issue is the exorbitant rent and crazy cost of living. Nigel was my dry cleaner downstairs, but the landlord raised his monthly rent from $8,500 to $13,000 for a tiny hole-in-the-wall barely big enough for a counter and hook to hang a customer’s clean clothes. He shuttered his shop, and a local franchise that specialized in low-priced pastries, sandwiches, and coffee drinks moved in. The restaurant I look at from my work window, the Consulate, pays more than $20,000 a month for its space.
I found my small manufacturer in New York: Sol Cacao, a chocolate maker based in an industrial stretch of the Bronx. Otherwise, the businesses that serve as the focal point of this book are in northeastern Pennsylvania, specifically three counties: Luzerne (Hazleton), Lackawanna (Old Forge and Scranton), and Wyoming (Tunkhannock). Pennsylvania meant looking at small businesses away from the coasts and offered a nice cross section of settings. I liked that northeastern Pennsylvania had neither a major metropolis (I had my own hometown) nor sprawling suburbs but instead something less familiar—what James and Deborah Fallows, in their 2018 book and the HBO documentary Our Towns, describe as “small or smaller places” that rarely get noticed unless the media is there to report on something bad. The alpha city in the region, Scranton, may punch above its weight in pop culture, but, with a population of seventy-seven thousand, it’s hardly a big city. Hazleton, home to Vilma’s salon, was a once-grand city whose population had shrunk to thirty thousand and where many small businesses were suffering because of the lack of workers occupying the office buildings along Broad Street. To the west, in Tunkhannock, I found Glenda Shoemaker and also a small group of independent pharmacists fighting to keep their stores open in places where, without them, people would have to drive as many as fifty miles just to pick up a medicine.
Countless other locales might have served as the setting for a book about small businesses confronting COVID. “Its Main Street is the continuation of Main Streets everywhere,” the writer and social critic Sinclair Lewis wrote about the fictional burgh of Gopher Prairie, Minnesota, in Main Street, published in 1920. “The story would be the same in Ohio or Montana, in Kansas or Kentucky or Illinois, and not very differently would it be told . . . in the Carolina hills.” The plight of Cusumano’s in Old Forge was not much different from that of an upscale eatery in almost any other town. The same could be said of Vilma’s Hair Salon, or Lech’s Pharmacy, or Glenda Shoemaker’s gift and card shop in Tunkhannock. But heading into an election year, battleground Pennsylvania promised something else. Only California, Texas, New York, and Florida offered more electoral votes than Pennsylvania, a state Donald Trump had won in 2016 by just forty-four thousand votes—a margin of less than 1 percent. Trump captured 70 percent of the vote in the various counties that make up the Endless Mountains, and Luzerne (Hazleton) and Lackawanna (Scranton) had seen the two largest swings to Trump among Pennsylvania’s counties. Luzerne was a so-called boomerang county—one of 206 in the US that twice had gone for Obama but flipped to Trump in 2016. Joe Biden was Joe from Scranton, of course, and Trump even stepped into my narrative when he showed up in Old Forge to give a speech at the big sprawling lumber and kitchen supply warehouse in town. Already I had been talking with TJ Cusumano for several months when, following the speech, the Beast—the heavily armored, oversized limousine that the Secret Service flies around to ferry a president—parked on Main Street, directly in front of Cusumano’s. Trump, though, was not stopping for a meal at a high-end Italian restaurant but instead walked into the popular pizza restaurant across the street, run by a reliably Republican set of families. Trump picked up several trays of Old Forge pizza—a unique (and quite delicious) rectangular version with a spongier, lighter crust—for the Air Force One ride back to Washington.
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A note about “small business,” a term that has become so elastic as to be rendered nearly meaningless. The federal government preposterously defines a small business as one with as many as 499 employees, which by any measure would be a medium-sized enterprise if we didn’t live in a time of mega-businesses with tens of thousands of employees, if not head counts in the hundreds of thousands. (Walmart employed 2.2 million people at the start of 2021, Amazon 1.3 million, and Lowe’s 300,000.) Academics and think tankers came up with the term “microbusinesses” because our modern-day economy demanded a new extra-small size designation to preserve this idea of smaller mom-and-pop operations. The businesses I approached had two, five, or ten but never more than two dozen employees.
Hypocrisy is a big part of the story of small businesses in America. They are heroes in the American narrative: rugged individuals who strike out o
n their own rather than work for someone else. That small businesses are essential to the health of the US economy is one of the few things elected officials can agree upon. Job growth in the US is fueled almost entirely by small businesses and not larger ones, which as a group tend to shed as many jobs as they create. On the left, right, and in the center, politicians repeat the same line: “Small business is the backbone of America.” Yet even as they offer those words, they implement policies that favor the large, powerful, and well-connected at the expense of the bantam-weight enterprises they supposedly believe are essential. There’s a Small Business Administration, but the SBA is the government’s smallest cabinet-level agency—by a lot—with an annual operating budget smaller than what the Department of Defense spends in a day. Much of its money ends up in the coffers of businesses with hundreds of employees, if not sometimes enterprises in excess of five hundred people. Even the Paycheck Protection Program, the very rescue plan Congress in the spring of 2020 created to help small businesses survive the pandemic, was rigged in favor of the large and dominant. A long list of larger entities (most famously, Shake Shack and Ruth’s Chris) capitalized on a loophole that had been written into the original legislation, causing the funds to vanish before most small operators could access money that the government had ostensibly set aside for them. The money was replenished and the rules changed, but even then the PPP favored these larger small businesses to the detriment of microbusinesses with only a few employees—those often facing the greatest need—and especially those owned by women and people of color.
Yet it’s not just the politicians who speak out of both sides of the mouth. Almost all of us are living the same contradictions in relation to small businesses. No matter how much we might cherish this notion of the mom-and-pop shop or family-owned restaurant, the data is unmistakable: with each passing year, we spend a greater share of our dollars with corporate giants. We recognize that small businesses animate our towns and cities. That cute little shop or old-fashioned drugstore or charming family-run restaurant lends a locale personality. Yet we’re too busy, so we log on to shop or drive to the parking lot of some retail colossus in search of cheaper prices. We may all agree that independently owned businesses help make up the fabric of our communities, but then people patronize a LensCrafters (part of a $10-billion-a-year conglomerate) or log on to Warby Parker ($394 million in revenues in 2020). We get a bargain cut at a hair-clipping chain or buy cut-rate flowers at a giant supermarket.