Running a small business in San Francisco these days can feel exactly like that: running, all the time, desperate to outpace the headlines that seem every week to bemoan the fate of another beloved local establishment.
The Bay Area Council Economic Institute says that between 2020 and 2022, more than 20,000 SF small businesses shuttered. Cushman & Wakefield predicts that SF retail vacancies will be at an all-time high of nearly 8 percent this year.
The Bureau of Labor Statistics estimates that retail jobs in SF are down more than 20 percent compared to early 2020.
Small business owners blame a lot of factors: crime, inflation, taxes, and of course COVID. In recent months, transportation projects and the specter of new development have taken heat.
San Francisco talks a good game about the importance of small businesses. Tax reform passed with ease two weeks ago; it was marketed to voters as saving small business. A bill to blunt new development that threatens ‘legacy’ neighborhood businesses sailed through City Hall last month.
City Hall has tried all sorts of tricks, but there’s also something few San Franciscans seem willing to do: Shop online less.
“The idea that we can have absolutely anything cheaply and tomorrow, with free shipping, is truly detrimental to local businesses,” says Autumn Adamme, owner of Dark Garden, a corset boutique in Hayes Valley.
You can’t out-Amazon Amazon
Amazon is now the second largest retailer in the world. American shoppers have gotten so used to its lower prices, huge selection, and frictionless returns that economists have given a phenomenon its own name: “the Amazon effect.”
It’s when local retailers adopt extreme means to keep up with the online giant, slashing prices or swelling inventories to unreasonable levels, effectively sabotaging their own business models.
“It is impossible to ‘out‐Amazon’ Amazon. They have scale, technology, capital, and experience that is hard to compete with,” supply chain management consultants ChainLink warned in 2018.
With finely-honed algorithms that encourage compulsive, repetitive buying, and the instant gratification of one-click purchases, it’s hard to justify a walk to the local hardware store or art supply shop, even in dense commerce-rich neighborhoods.
“Here in the Richmond you don’t have to go anywhere — you can just walk down the block,” says Nico Schwieterman, owner of the Fleet Wood boutique on Clement Street.
In 2023, the SF Chamber of Commerce estimated that foot traffic for SF businesses was down 33 percent since 2019.
Last time I was asked to rate my disdain for Jeff Bezos on a scale of 1 to 10, I think I said 37.
Nico Schwieterman, owner of the Fleet Wood boutique
“We’ve been dealing with the Amazon effect for years, and it comes and goes in waves,” says Terry Asten Bennett, fifth-generation owner of Cliff’s Variety on Castro. “But it really drove people during the pandemic, and for a lot of people it became addictive.”
Local economists don’t have data about how much online shopping San Franciscans do, but San Francisco State University economics chair Mike Barr says consumer preferences are killing mom-and-pop shops: “Consumers like you and me, who are too busy to look for items in multiple places … decided that small businesses are inconvenient.”
“Last time I was asked to rate my disdain for Jeff Bezos on a scale of 1 to 10, I think I said 37,” says Schwieterman.
In 2023, when Cole Hardware on Ninth Street closed after more than 60 years, owner Rick Karp pointed the finger squarely at Amazon.
(That anger led an affordable housing nonprofit, Todco, to spend nearly $500,000 to put an Amazon tax on SF’s 2022 ballot, but it was so incompetently written it would have taxed small businesses instead.)
The state of California is suing Amazon in San Francisco Superior Court, alleging unfair business practices that drive up prices on other e-commerce platforms. In reports about the suit, Amazon has denied all wrongdoing. The company did not respond to requests for comment.
Amazon touts itself as a friend to small business, offering grants and educational resources to small business owners. It also boasts about local shops that sell their merchandise through the site.
Last year, when Amazon sponsored the SF Chamber of Commerce’s Small Business Week, SF entrepreneurs balked. The owners of Green Apple Books called it “incredibly poor taste.” The Chamber did not return requests for comment.
We [heart] small business
San Franciscans love their mom-and-pop shops — at least conceptually. One pandemic-era survey by the San Francisco Foundation found that financial relief for small businesses was the Bay Area’s No. 1 priority, topping support for public transport, eviction protections, and homeless relief.
In a February 2024 Chamber of Commerce poll, 84 percent of San Franciscans supported more incentives to help small businesses stay or move downtown.
“These beliefs are rooted in cultural values that prize and praise ‘rugged individuals’, ‘the little guy’, ‘the average Joe’, [and] the ‘straight shooter,’” as Tara Lynn Gray, director of the California Office of the Small Business Advocate, wrote last year.
Small business ownership is an obligatory reference for flag-waving American politicians and a lynchpin of the traditional American dream. Gallup polling consistently finds small businesses are the most trusted institutions in the country.
Some Stanford research suggests that in-person shopping can improve your mood, while online shopping may be both addictive and depressing.
Skip the click
Merchants see Amazon as a threat, but it’s not the only one. A 2022 Small Business Commission survey cited “increased costs of doing business” and “dirty and smelly streets” as merchants’ leading problems. “Lack of customers” came in a close third.
Merchants might argue that City Hall is working at cross purposes with them with new bike lanes, long construction projects, and street and crime conditions.
But officials are also keenly attuned to the travails of small businesses, which are always at or near the top of the political agenda. Their efforts to help have had limited effect.
To counter the devastation of the pandemic shutdown, Mayor London Breed directed tens of millions of dollars into grants and loans in 2020 and 2021 and boasted of additional tens of millions in “fee and tax deferrals.” They only covered about 4 percent of the city’s 93,000 small businesses.
In 2020, city voters approved the Save Our Small Businesses measure, but it only helped open a new business or expand outdoor and novel uses of existing businesses under anti-COVID measures.
In 2023, the Office of Small Business started waiving some fees for new businesses in their first year. More than 8,500 have taken advantage.
With office vacancy at a record 36 percent, downtown merchants have been hit especially hard. Sales are down 30 percent compared with pre-COVID levels.
More recently, Breed’s Vacant to Vibrant pop-up program has filled a few empty storefronts, and open-air events – concerts, Oktoberfest, and more – help here and there. But nothing has replaced the constant flow of workers. The 2.75 million or so recorded visits in September is still down 50 percent from 2019.
SF Office of Small Business spokesperson Michelle Reynolds noted the city has also offered marketing campaigns for local businesses that emphasize in-person experience. One video series, “Skip the Click,” doesn’t mince words about the pitfalls of e-commerce. (This video stars Yuki the dog ordering the wrong size sweater online and getting helpful service at a shop.)
For what it’s worth, after five months, the videos have only a few hundred views between them on YouTube — and just a handful of likes on Instagram.
Johnny Travis, owner of the State of Flux clothing store on Valencia Street, and Santiago Esparza, owner of Urban Scout on 24th Street, both say the ads were a positive gesture but don’t think they led to much new sales. (Travis thinks the city should work to attract more tourists to save local businesses.)
‘Expensive enough as it is’
The problems fluctuate by neighborhood. In the second quarter of 2024, sales tax revenue in some neighborhoods, including Bernal Heights, Excelsior, the Sunset, and Russian Hill, had bounced back to 2017 revenue levels. A few others, like Mission Bay, Portola, and Oceanview, exceeded those levels. But Bayview, Japantown, the Tenderloin and others were still down 20, 40, even more than 60 percent.
Mayor-elect Daniel Lurie’s campaign emphasized small business recovery through the lens of fighting drugs, street crime, and City Hall corruption, rather than subsidies and grants.
A Lurie spokesperson says the administration will employ a wider variety of business solutions but was “unable” to provide more detail.
Lurie is promising more housing, which means more customers in key business corridors. But that density will take years to add – with political minefields in the way. Lurie could also be working with a Board of Supervisors that’s more amenable to cut red tape.
In a 2023 blog post, Sup. Joel Engardio said individual San Franciscans shouldn’t have to be superheroes who swoop in to save small businesses. Their challenges, wrote Engardio, were systemic, and he called for less red tape and fewer taxes.
But Engardio missed a chance to make this point: Each San Franciscan can make a small difference, like shopping in person more often, and it could add up to something bigger.
It’s a delicate request, to be sure. Ben Bleiman, a small business advocate who owns several bars, puts it bluntly: “The city’s fucking expensive enough as it is, to ask people to pay 40 percent more for something — some people can afford it, many can’t.”
But when it’s possible to spend a little more, and walk, bus, or drive to a local shop, says Bleiman, “connecting that act with your sense of community” can make all the difference.
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