Are SC SMBs Upbeat About Their Future?

What happens when the overall country is growing but, like South Carolina, you (as a state) are lagging not just the nation but the region? You get some disgruntled business owners – and, ergo, voters – headed into an important Republican primary on Saturday.

That’s what looks to be the case headed into the weekend, where issues of what is known as “crony capitalism” may be top of mind coming into the ballot booth. The 10,000-foot nationwide view may be a sanguine one, while the more granular information is decidedly less rosy. Consider the fact that through the end of 2015, our proprietary Store Front Business Index showed growth through the vagaries of stock market volatility, and also worries over global growth in China and elsewhere. The overall tracker, with insight into the trends seen across 3.4 million businesses nationwide, showed some growth overall, with some divergent trends in the South.

The growth in new establishments, nationwide, has been on a slowing path, though still decent, at 2 percent in the latest period. That should be a continuing trend into 2016, at roughly the same pace. Yet the South is projected to grow faster than that, at 3 percent going forward. The region itself has seen, in historical terms, the greatest boost in its growth not from physical locations, but rather wages, which were up 4 percent in the latest period, and then actual job creation, as measured by employees, up 3.5 percent.

And yet … The high-level data does not dovetail with results seen in South Carolina, our focus for this weekend headed into primary action. The latest data culled by PYMNTS and CAN Capital, though lagging, at second quarter’s end of 2015, shows growth, but underwhelming growth, as represented by any postings over 100 (100 represents a base year and base measurement). The readings show that the overall Index posted a 112.9 reading in the second quarter of the year, with comparable readings in the southern U.S. of 111, and bringing up the rear, South Carolina at 109.5. In the latter case, the growth is actually higher on a percentage basis from a year ago, at more than 4 percent, but that comes off an admittedly low reading of 104 in 2014.

So what does that all mean? The state itself has been — and still is — a launching pad for foreign companies establishing manufacturing operations abroad. But whereas once textiles and apparel firms reigned, now it is higher tech industries that hold sway, perhaps most notably automotive manufacturing. That has actually been a drag on net employment trends as the job growth has been taking place in industries demanding at least college degrees in a state where less than half the adult population has attained that level of education. With more than 8 percent of the state’s jobs tied to exports, it’s also a key issue and will remain so into the general election.

Not surprising, then, that the contest on the Republican side of the aisle on Saturday may be one that centers on blue collar vs. white collar sentiment in a state where, as The Wall Street Journal reported earlier in the week, the median household income is 16 percent below the national average.

Though the white collar jobs are the ones that would, of course, pay relatively more than might be seen in other employment subsets, it must be noted that the net addition of those jobs in South Carolina have not been enough to offset a steady, decades-long erosion in traditional textiles and other mills. With 50,000 jobs in less remunerative, and therefore likely less attractive, jobs lost between 2001 and 2014, compared to 5,500 added in aerospace and other higher tech fields over the same period, the numbers point to a net impact, at least in the sense of those gainfully employed (and armed with buying power, which might translate into store front creation and prosperity) in those sectors as a negative one.

However the voting shapes up Saturday, consider the debate far from finished.

Merchants’ Eye View: South Carolina

As always, there is the story the numbers tell and the stories the people tell. And so PYMNTS went on the road again like Willie Nelson, to seek out the stories from the ground in South Carolina to get the view from the Store Front business owner.

So from Columbia to Charleston, we stopped and asked the hoteliers, restaurant owners, beauticians, gun salesmen, auto mechanics, barkeeps and haberdashers (yup, we found one — this is the South, after all) about how their businesses have performed over the last few years.

Some things were repeats of lessons learned on the road in New Hampshire: access to capital isn’t what it was a decade ago and that slowed their growth and led to some very tough business choices. But South Carolina is also very much doing its own thing.

Businesses and their owners here have a noticeably brighter outlook than their counterparts in New England. Some of that, of course, can be written off to regional differences. New Englanders are not known for being effusively sunny, whereas the South is on the whole a pretty chipper place to live and work.

Some of it can be attributed to the specific settings in which we spoke to these merchants. It was 22 degrees and sleeting in New Hampshire during the run-up to their primaries. It was sunny and in the 60s and 70s in South Carolina.

But some of it is the environment itself. In South Carolina, the business owners are mostly thinking about how to grow and stay competitive while the demographic picture facing them is rapidly shifting around them.

Want a closer look?

South Carolina: Everything You Ever Needed To Know About Store Front Businesses In The Palmetto State

All in, we spoke to 51 business and asked them the same five questions:

1. How would you rate the health of your business this year versus last year? Better, worse or no change?

2. What is the biggest threat to the health of your business?

3. What advice would you give to the Presidential candidates on how to help store front businesses compete?

4. What is the role of mobile and technology in driving your business?

5. Where do you see your business a year from now?

And this is what we learned.

Mostly Doing Better On The Coast, Things Are Looking A Lot More Mixed Inland

The majority of the folks we spoke to — 63 percent (32 businesses) — said that all-in, things were looking better today than they did a year ago. About 22 percent (11 businesses) said things were about the same, while only 16 percent (8 businesses) said things were worse.

However, about half of the businesses we spoke to were in Charleston or the greater Charleston area — and all 24 fell into the “things were better” camp.

“Charleston is definitely different than the rest of the state,” Pet Couture  manager Joel McMillan explained. “I mean this is very touristy and is going all year round, so we do really well — the Harris Teeter, I mean all the shops around here in the marina area and in the Northside. But I came here from Spartanburg, and that’s just not what it is when you’re inland in South Carolina.”

When the Charleston figures are separated out entirely, the picture changes — only 29 percent of Store Front business say they are doing better than they were a year ago (the same percentage that said things are getting worse), while 42 percent of Store Front businesses reported no change at all. All 8 Store Fronts that reported a worse outcome over the last year, on the other hand, were inland and quite far from the shore or the various resort communities that line the roads between Columbia and Charleston.

“The town’s getting smaller as we’re just seeing more people either move to the cities, or out of state. I had been planning on retiring anyway – but this will probably be my last summer, because if it weren’t for folks coming in from off the highway, I wouldn’t be open,” noted Ariana Toutenokitous, proprietress of Ariana’s Diner in South Carolina.

“Course,” she noted with a smile, “I ‘spose I’ve been saying it’s my last summer for a while. Never have gotten around to closing.”

More Taxes, Mo’ Problems

When asked about the biggest worry they face as business owners, the entrepreneurial Store Front business class of South Carolina spoke with a unity of voice that is otherwise unheard of in a state where a presidential primary is currently underway.

100 percent of Store Front businesses we spoke with immediately jumped to taxation as their main worry.

“When my margin is less than 5 percent, a 2 percent tax increase will literally put me out of business. I don’t think anyone gets that when they talk about small tax increases,” said James Monroe, owner of East Hook Automotive.

The state’s changing demographics were also referenced heavily by 62 percent of the Store Front businesses we spoke to, mostly mentioned in two contexts.

The first was the rapid influx of retirees (particularly in the coastal regions) who are often more affluent than average. Store Front business owners spoke of this development as something of a mixed blessing. Affluent coastal residents with disposable incomes tend to spend more and more often. They also tend to draw tourists to the area, as relatives come and visit these people.

“You’re here now. Would you spend Easter in Boston if you had a reason to come to Charleston?” Marriott Residence Inn manager Nick Grohl asked. “It’s school vacation up where you are, and I know that because the entire population of Maine is here visiting their grandparents. Ten years ago, we just didn’t see this as much.”

But that same demographic shift is pushing younger, less affluent types out, and, as several Store Front business owners noted, into their neighbor North Carolina’s waiting arms, because there are more opportunities for more types of work.”

“If you don’t work Boeing or yourself around here, jobs are hard. And I can’t keep people with only part-time work with the rents going up,” local restaurateur Danny Doyle told us.

“Gentrification isn’t just for New York City,” another local restaurateur answered rather acidly.

The last big worry was a familiar favorite, good old access to capital — a concern for 55 percent of the Store Front businesses we spoke with and 100 percent of the restaurants.

“The bank I worked with for years doesn’t exist any more, and the bank that acquired them just wasn’t as interested in working with me,” said George Anderson, owner of Nell’s Diner in Allendale, South Carolina. Anderson was a customer of Allendale county bank, which officially went out of business in 2013. He noted he was eventually able to get a loan when he needed to do renovation, but a process that had once taken a few days took him months.

Advice For The New President Going Forward

The various presidential candidates have their eyes on South Carolina these days — a fact made unmistakable by the plethora of signs on lawns, the lost looking campaign workers wandering the streets and the unending stream of attack ads on the airwaves.

But by and large, South Carolina Store Front business owners had little to say about politics to us — with almost three-quarters (72 percent) declining to answer the question, politely noting they really didn’t follow politics.

However, the few who did answer were mostly just interested in a little more interest, preferably in years elections aren’t going on.

“We’re open all year, seven days a week. It would be nice if politicians could remember that more often than every four years,” said Ezekial Davidson, of Dontral’s in Charleston.

Mobile’s Growing Role

Because we are who we are, we had to ask about mobile and what, if any, plans they had for the technology.

The enthusiasm was less than overwhelming.

Only 15 percent of Store Front businesses identified mobile as being important to their business — and excitedly noted that they were looking forward to using it more in the future. About 30 percent, on the other hand, have some limited interaction with mobile; Groupon was a particularly popular tool used to acquire new customers.

However, the majority of the Store Front business owners we spoke to (55 percent) said no, and that honestly they really weren’t interested in looking into it in the future. One diner owner responded by simply showing us his flip phone. He did note he added Wi-Fi recently, but only because his kids told him he had to.

However, the winning answer actually came from an employee of aforementioned haberdashery.

“I saw someone use Apple Pay with their Watch at Whole Foods,” he said. “It was like magic and now I want it, mostly because it is like magic.”

When asked if he thought it was coming soon to their shop, his response was less enthusiastic.

“Somehow I doubt it,” he said.

What’s Next

The Store Front businesses we spoke to really weren’t sure where they will be a year from now.

“I mean open would be good. And extremely profitable. I won’t say I see myself as the world’s first food truck billionaire, but I won’t say I don’t see that happening either. Gotta dream big right?” noted Michael Alvarez as he handed us a fried chicken taco.

And while few were outright predicting billionaire status, the mood on the ground in Charleston was pretty upbeat. Things had been hard especially inland and the demographics are shifting around them, but Store Front businesses in South Carolina are more or less looking forward to growth.

And the end of all those negative political campaign ads.

For detailed PYMNTS Store Front IndexTM results, including how South Carolina compares to other Store Front businesses in the U.S. click here.