What Is Main Street?
You might have heard the term Main Street thrown around in economic discussions—it's a colloquial way economists refer to America's independent small businesses collectively. The name comes from the typical principal commercial street in small towns across the country. If you're in England, you'd call it High Street instead.
In another sense, people talk about Wall Street versus Main Street, where Wall Street stands for big business and high finance. That said, those in big business and finance spend a lot of time figuring out what products, fashions, brands, and trends work or flop on Main Street.
More broadly, Main Street can mean small-town American traditions or historic business districts. In finance, it describes small and mid-sized businesses as key parts of the local economy.
Key Takeaways
- The term Main Street is used in many contexts, but it always means local.
- Local businesses, consumers, and financial services firms may be referred to as Main Street.
- The polar opposite of Main Street is Wall Street and the big financial firms and global corporations it represents.
- In London, Main Street is called High Street.
- There are numerous grants and loan opportunities for Main Street businesses.
Understanding Main Street
Main Street could be the most common street name in the United States. According to the U.S. Small Business Association, as of March 2020, there were 31.7 million small businesses forming the backbone of local Main Streets nationwide. The coronavirus pandemic hit these businesses hard, and while data wasn't fully updated by September 2021, some from that 2020 count likely didn't survive.
In the financial world, Main Street often gets cited as the opposite of Wall Street. It can describe the individual small investor versus the professional securities trader.
This setup can lead to some negative attitudes on both sides. For instance, some Wall Street traders view Main Street investors as amateurs meddling in a complex game. Meanwhile, Main Street folks might see Wall Street traders as unethical operators lacking integrity.
The reality is that both sides depend heavily on each other. Wall Street relies on individual investors for capital and fees to stay operational. Main Street needs Wall Street for returns better than what savings accounts or municipal bonds provide. Unfortunately, this interdependence doesn't eliminate the tensions between them.
Important Note
Remember, the term Main Street may refer to an independently-owned business as opposed to a global corporation.
Types of Main Street Businesses
When we describe a business as a 'Main Street' shop, it typically means a brick-and-mortar store on the main thoroughfare in a village or town. These aren't chain stores; they're independent operations offering personalized goods or services. They often serve both tourists and locals, especially in scenic spots.
Small businesses like this cover a wide range, including pharmacies, hair salons, non-chain greengrocers, clothing boutiques, coffee shops, bookstores, bakeries, and specialty stores such as toy shops.
The pandemic led to the decline of many Main Street businesses, like restaurants and bars. But as the economy rebounds in 2021, sectors like coffee shops and breweries are holding strong, with the craft industry still growing.
Main Street vs. Wall Street
Main Street can also describe a small, independent investment company rather than a globally recognized Wall Street firm. Wall Street firms usually cater to institutions and large investors with multimillion-dollar assets, while Main Street firms offer personalized financial planning and investing to local professionals and families.
Some argue that what's good for Wall Street harms Main Street, and vice versa. For example, regulations protecting Main Street investors might limit Wall Street's innovation and profits. Conversely, Wall Street's compensation and trading practices promote short-term gains and higher risks.
When Main Street and Wall Street collaborate, things can still go awry, as seen in the 2008 financial crisis. Lenders and borrowers on Main Street fueled a housing bubble that exploded on Wall Street, leading to the Great Recession. So, we need them to get along, but not too closely.
Divide Between Main Street and Wall Street
During crises, Wall Street valuations might surge while Main Street business owners struggle. Take the pandemic in March 2020: people shifted online for food, home goods, medical supplies, and entertainment. Many Main Street restaurants and stores shut down or limited operations to take-out and masked entry.
Big corporations like Walmart and Target profited from bulk buying and deliveries. Small stores couldn't keep up, especially in tourist areas or neighborhoods reliant on out-of-town visitors. Even in strong local economies, they faced tough competition from big-box stores and Amazon.
Investing in Main Street vs. Wall Street
If you want to support Main Street beyond just shopping locally, consider investing directly in smaller entrepreneurs through peer-to-peer lending and crowdfunding sites. Platforms like Mainvest focus on brick-and-mortar Main Street businesses, or Localstake lets you crowdfund small businesses.
These Main Street investments differ from Wall Street options like stocks, ETFs, or mutual funds, but the same principles apply. There's inherently more risk in small startups compared to diversified portfolios of large corporations.
Businesses like toy stores, barbershops, or local delis aren't on the stock market, but you can invest via crowdfunding or peer-to-peer lending. Meanwhile, giants like Amazon, Walmart, Apple, and Google drive stock market gains, even as local shops close.
Tip
As a small business owner, you should check out the grants listed by the National Main Street Center.
Main Street and Government Programs
There are specific government programs to support Main Street businesses. During the Covid-19 pandemic, on April 9, 2020, the Main Street Lending Program was created to provide $600 billion in loans to small-to-mid-sized nonprofits and businesses.
Main Street America
Beyond federal loans, nonprofits offer grants and loans too. Main Street America, a program of the National Main Street Center, Inc., which is under the National Trust for Historic Preservation, compiles private grants, crowdsourcing, peer-to-peer lending, and federal funding options on its website for Main Street businesses.
The Bottom Line
Small businesses are essential for Main Streets to thrive in the U.S., as strong local economies signal better quality of life, particularly in small towns. The Covid-19 pandemic was tough on them, but government loan programs offered critical support.
Thriving local economies in rural towns or urban areas create healthier communities. Investing in Main Street goes beyond finances—it's as straightforward as shopping locally to help revitalize towns and neighborhoods.
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