Why it matters:
- More than half of consumers said they shopped more at small and locally owned businesses during the pandemic, and 40% continue to do so.
- Technology startups are seeking to make it easier for consumers to find American and locally owned businesses.
- These startups, such as USA Strong, Nearby and Cultivate, are led by high-profile tech veterans and attracting funding from big investors such as Mark Cuban.
Consumers spent heavily in support of local businesses during the COVID-19 pandemic, accelerating the “buy local” trend that had long been gaining traction across the retail landscape.
More than half of Americans—51%—sought to shop more at small and locally owned businesses during the pandemic, according to a NerdWallet survey conducted online by The Harris Poll. Consumers surveyed cited several reasons for supporting local businesses, including 53% who said they did not want to see local shops go out of business, and the sense that small, local businesses shared their values.
The research also found that the trend has staying power, with 40% of Americans saying they are still making an increased effort to shop at small and locally owned businesses.
Now technology-driven startup companies are seeking to monetize that trend with solutions that help local brands get their products in front of consumers, and in turn, help consumers find local brands. These startups have begun to attract investors who see this as a lasting trend.
USA Strong, founded by veteran fashion-industry executive Krissy Mashinsky, bills itself as a made-in-America brand and tech marketplace. It sells products verified by blockchain technology, which provides supply chain information to consumers and product transparency, thereby ensuring the products on its site are U.S. made.
Before founding USA Strong, where she is CEO, Mashinsky was president of URBN Wholesale, which includes retail brands Urban Outfitters, Anthropologie and Free People.
USA Strong in July unveiled a mobile app that gives shoppers access to usastrong.IO's 8,000 products from 180 brands made in 34 states. These include men’s and women’s fashion brands, home goods, accessories, outdoor products, food, and health and beauty care products. Every product on the app and site has been verified through USA Strong’s blockchain-driven process.
“We sell products that have been verified, that you can trust,” Mashinsky told CO—. “We are pleased to make these curated products conveniently available via the app as we continue to unite small businesses on our platform.”
[Hyper-Local Commerce and Smaller Brands Benefit From Post-Pandemic Consumer Trends]
‘Made in the USA’ drives sales: Consumers will pay more for American-made goods
Recent research from the Institute for Operational Research and the Management Sciences (INFORMS) reveals why this verification has important implication for businesses: The group found that products that were forced to remove their “made in the USA” claims saw their sales decline by up to 19.5%.
The four products studied by INFORMS were among 150 that the Federal Trade Commission found were ineligible to promote their products as being made in the U.S. because they were either not “all or virtually all” made domestically, or they had more than “negligible” foreign content.
In addition to researching the sales declines, INFORMS also conducted a separate study to determine the positive impact of “made in the USA” claims, and found that consumers were willing to pay 28% more for U.S.-made products sold through auctions on eBay.
“While the increase in sales is not sufficient to justify the economics of relocating manufacturing operations to the United States, it is enough to incentivize some firms to engage in making improper and deceptive country-of-origin claims,” said Anita Rao of the University of Chicago, who authored the report with Xinyao Kong, also of the University of Chicago.
We will get as close to you as possible, so you can support a local business that's literally two miles away from you, and you can pick that product up instead of waiting for shipping.
Harsh Khurana, founder, Cultivate
Meanwhile, the Reshoring Institute, a nonprofit firm that supports manufacturing businesses seeking to locate in the U.S., found in a recent survey that nearly 70% of consumers said they prefer American-made products, and more than 83% said they would pay up to 20% more for products made domestically.
The report concluded that American consumers prefer products that are made in the U.S. both because of a perception of quality, and because of political rhetoric from both Republicans and Democrats critical of the impact that low-cost manufacturing in other countries, especially China, has had on American jobs.
The increase in online shopping during the pandemic has also driven more awareness of overseas manufacturing, said Matt Kaness, the former CEO of retailer Modcloth, who is now an angel investor in tech startups.
“It’s in response to the pandemic, as so much consumption shifted online overnight,” he said. “And it’s also because of the impact the shutdowns had on local businesses.”
[3 Pandemic-Fueled Trends Brands Are Embracing Long-Term]
Cultivate: Helping small businesses capitalize on the ‘buy local’ trend
In addition to USA Strong, another tech startup in the “buy local” space is Cultivate, which is owned by Mark Cuban Companies. It was founded by Harsh Khurana, who launched the online shopping platform last year in the middle of the pandemic. It offers a browser extension that directs consumers to American businesses while they shop e-commerce retailers such as Amazon, and it also has partnerships with e-commerce platform providers such as Shopify, Magento and BigCommerce to allow small businesses to participate.
Cultivate drives revenues through affiliate marketing, through which it collects a small percentage of each sale from participating merchants and is free for merchants to join.
The platform is designed to support small businesses and large retailers that themselves support small American manufacturers, Khurana told CO—. It’s currently refining its site to help consumers shop in local business that are close to them geographically as well, so they can support their local communities.
“That resonates with consumers, because our users really want to help their communities,” he said, citing the impact on consumers of seeing small businesses struggle during the pandemic.
Cultivate started out by building a massive catalog of U.S.-made products, and is now moving toward helping consumers find and support local businesses in their immediate area. That functionality is currently in a beta test and is expected to launch in January or February of next year, Khurana said.
“We will get as close to you as possible, so you can support a local business that's literally two miles away from you, and you can pick that product up instead of waiting for shipping,” said Khurana.
Cultivate, he said, evaluates businesses carefully to determine how much of their product is made in the U.S., and also where their employees work. Companies whose employees spend most of their time overseas are not considered to be U.S.-based, Khurana said.
Cultivate has been growing at rate of more than 100% each quarter, Khurana said, and has more than 20,000 monthly users. It currently has more than 4,000 merchant partners. He said he is hopeful that the company will be profitable by the third quarter of next year.
Nearby: Platform for ‘empowering local businesses’ attracts $26 million in funding
Nearby is another tech startup that seeks to make it easier to shop from local merchants. Founded by CEO April Underwood, formerly director of product at Twitter and chief product officer at Slack, Nearby is “on a mission to empower local businesses and the people who love them,” the company said in a statement.
Nearby has raised a total of $26.1 million in funding, including the latest Series A round this past May, according to Crunchbase. Investors include Cowboy Ventures, Obvious Ventures and others.
The company, founded in May of last year after the start of the pandemic, launched a pilot in Oakland, California, and is expanding to other markets around the country, including Austin, Texas.
- Barbara Thau contributed to this story.
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