Americans are well-versed in the pain caused by two years of economic disruption. Despite the ups and downs of the COVID-19 economy, a record number of people are embracing entrepreneurship. This surprising market reality gives President Biden and Congress an opportunity to promote growth in the face of continuing uncertainty. Instead, they have used competition and innovation as a cover to penalize the very business practices they claim to promote.
Biden is operating under the premise that markets are closed and a few big companies monopolize key sectors. That is the rationale behind his Executive Order on Competition along with proposed legislation in Congress targeting “big tech.”
The data behind new business creation tell a different story. According to the Census Bureau, 5.4 million people filed new business applications in 2021, an increase of 53 percent from 2019 and the most of any year on record. These applications are across all major industries, reflecting a dynamic and competitive environment that presents new opportunities for entrepreneurs.
But the business application is only the first step in starting a business, and only a fraction of those applying will launch. That is why it is critical that government policy encourages new businesses to fully form, not to dissuade these entrepreneurs through costly regulatory barriers. Out of the 430,411 business applications filed in January 2022, it is estimated that only 7.3 percent of these businesses will actually form within a year and 9.4 percent will form within two years, according to the Census Bureau.
A new survey of pandemic startups conducted by SBE Council identified the critical importance of new technologies that allow entrepreneurs to reach new customers. Businesses can easily sell products on various online channels (their website, a marketplace, on social media, and through apps to name a few) and reach consumers far beyond a brick-and-mortar location. And most consumers have increased their use of digital tools to enhance, not replace, their physical shopping trips. However, this survey also came with a warning: 61 percent are worried that government actions targeting technology companies will undercut their access to consumers, drive their costs higher and harm their operations.
Two new studies by Deloitte found that consumers prefer a mix of options that allow them to combine offline and online shopping seamlessly. One study notes that 55 percent of respondents who started their most recent shopping trip online ultimately made their purchase in-store.
Moreover, though the pandemic accelerated digital purchases, in-person shopping is hardly dead. Many consumers prefer in-person shopping for most or all of their shopping, and 90 percent of shoppers who spent more research time in-store end up purchasing in-store. The study also found that in their recent outings, 72 percent of shoppers visited more than one retailer, 42 percent shopped at two, and 30 percent shopped three or more retailers.
Small businesses are also using their physical store to support online sales, with 61 percent of small businesses offering “buy online, pick up in-store” and 50 percent offering curbside pickup. Moreover, 46 percent of consumers will pay more to pick up an item in-store five minutes from home rather than wait for two-day delivery.
Congress has not grasped the reality that consumers are benefitting from more choice and convenience than ever before. Legislation such as the “American Innovation and Choice Online Act” would replace what consumers want and like with what politicians and government regulators think would work better. The bill, for example, proposes different sets of rules for online marketplaces above a certain size versus traditional retailers, even though our strong and dynamic retail sector is largely driven by the blending of technology and digital tools to enhance the in-store shopping experience.
The digital tools and platforms entrepreneurs are using have vastly lowered barriers to entry while increasing access to consumers. Lawmakers should not only recognize but also promote this exciting retail dynamic on Main Street. If Congress and Biden administration regulators move forward with punitive, misguided policies aimed at “big tech” that actually hurt consumers and business owners, they could take down the dreams of many entrepreneurs who are using digital tools to effectively compete with big players across many industry sectors.
