Politics Foreign Affairs Culture Fellows Program

Saving the Russian Main Street

While Big Tech is killing American small businesses, Russia has resisted.

It’s easy to forget that cities like Penza, near Russia’s Volga river, even exist at all. More than 400 miles southeast of Moscow, it is best known for its singing cuckoo clock and the country’s first ever Stalin Centre, complete with a golden bust of the communist dictator.

And yet half a million people call the city home, around the same number as Atlanta or Sacramento. Neighbors chat with each other, newlyweds search for apartments, kids play together in the street, and families head out to the woods on the weekends to pick mushrooms and swim in the lakes. Out of the eye of much of the world, whole lives are lived here.

Penza’s once thriving high street has fallen into a chasm—just a literal chasm, with municipal authorities digging a colossal trench through the middle of the road as a precursor to pedestrianizing it altogether.

The businesses have stayed open: a Japanese-themed bookshop, independent shoe stores, even an English-language tuition agency. Customers skirt haphazardly around the unfenced abyss. “What if someone falls in?” I asked one local. “Better not to,” was the reply. Russia is not, it must be said, a nation of lawsuits and health and safety appraisals.

Not every city has been as resilient. In Europe and across the Atlantic, many towns have seen their central streets and local enterprises fall off the precipice in recent years over far less obvious challenges. Community after community has watched as its usual string of hardware stores, groceries, butchers, and other small businesses were replaced by bookmakers, vape shops, or, more likely, nothing at all.

The phenomenon is so familiar that, in the U.S., it has come to be known as the death of Main Street. The most quintessential part of American small town life, the family-run businesses and the quirky local characters behind their tills, has packed up and rolled down its shutters in recent years. With it went the heart of more than a few communities, now almost indistinguishable from each other.

Even in larger cities, where you might hope passing trade would save the mom-and-pop store, small shops have struggled to escape the same fate. Emily Talen, a professor of urbanism at the University of Chicago, conducted a survey of each and every one of 46,311 blocks in the northwestern city, in search of the classic American Main Street. Looking for a walkable district with independent retailers and cafes, she found depressingly few spots that fit the bill. “Are we suddenly just going to wake up to cities that don’t have these things anymore?” Talen asked. “Are we ok with that?”

It appears the answer is yes. Covid-19 has only intensified the pressures on those kinds of companies. Research shows that nearly 7.5 million small businesses across the U.S. have shut their doors since the start of the pandemic, and data from review site Yelp showed that 60 percent of those that suspended work during lockdowns will never reopen. These figures are catastrophic, but they represent merely the acceleration of a problem that was already getting out of hand.

The coronavirus hasn’t been tough on everyone. At the beginning of the year, online retailer Amazon posted profit increases of a colossal 200 percent, with hundreds of billions of dollars moving through its platform as more people than ever decided to spend their cash online. While some companies depend on customers turning up to take a table or spotting something in the window as they walk past, Amazon does best when you are sitting on your sofa. They’re betting those habits won’t change when the pandemic is finally consigned to the history books, anticipating that the golden age for home delivery and online streaming is only just beginning.

Other firms have found a niche during the pandemic, but few have found one as wide as Amazon. The lure of the brown cardboard package, it seems, is too much to resist. The tech giant’s founder, Jeff Bezos, has described the company’s mission as “to sell everything” to almost everyone.

Almost everyone, however, doesn’t seem to include the residents of Penza.

Amazon operates in 14 of the 20 largest global economies, but the world’s largest country by area is effectively off limits to the online retailer. While there have been mooted launches in Russia for many years, the business has always stopped short of actually announcing an entry into the market. Some analysts have chalked this up to Russia’s “authoritarian, nationalist regime” and “tensions with the U.S.” 

This seems at best an incomplete diagnosis, given that McDonald’s, the golden arches that signal American cultural dominance across the world, just announced it would break ground on its 800th Russian branch. Even with the omnipresent threat of nuclear war between the two nations, you can buy the same hamburger in Moscow as you can in Michigan. Russia even has its own unique selection of local menu items, ranging from battered prawns to “village fries” topped with barbecue sauce and bacon bits. The bread lines and anti-capitalist rhetoric of the Cold War are long gone, it’s safe to say.

If Russians will stump up for Big Macs, why not home delivery? Well, many already are placing orders online. WildBerries, owned by Russian entrepreneur Tatyana Bakalchuk, is often billed as the country’s own Amazon. It is getting more and more popular all the time. In 2019 alone, the platform’s turnover grew by 88 percent, bringing its revenue up to $3 billion. Customers are said to have made an average of 750,000 daily transactions, more than twice the total in the previous year. Rivalling Western alternatives, the service is able to dispatch everything from school equipment to sports gear and home furnishings within hours.

Other companies, virtually unknown outside Russia, include, Ozon, market capitalization $13 billion, and Lamoda, a Moscow-headquartered fashion seller that has financial backing from a German conglomerate. But those waiting in for deliveries will be in for a shock—by and large, these companies don’t deliver to the doorstep. In the vast expanse of Russia, with its notoriously bad postal service and confusing layouts, finding Apartment 4, Building 36, Door 7, 28 Lenin Street, would be a logistical nightmare for even the most committed mail worker.

Instead, firms like WildBerries and Ozon maintain a network of branded stores and pickup points in cities and towns across the country. Collecting a package is, therefore, not significantly easier than running into a small business. There’s little point placing an order for anything you can already buy locally. Convenience may not be king, but there’s still a role for Main Street. 

Likewise, despite being the biggest e-commerce site in the country, Wildberries’ market share is only around 14 percent of all online shopping. Amazon, by contrast, dominates the U.S. landscape with close to 40 percent of all transactions made through its service. As a result, no one giant has a stranglehold on all transactions, and internet retailers are just one part of a competitive marketplace, both online and off.

Amazon’s scale has allowed it to lock out its competitors. The company’s Prime service, offering fast, free delivery for a low price, means subscribers are effectively wasting the money they’ve already paid each and every time they buy something elsewhere. The idea, it seems, is to get the hooks into customers and yank them away from the competitors.

The decline isn’t yet irreversible. In some places, like the well-heeled London suburb of Maida Vale, the rise in working from home during the Covid-19 pandemic saw local businesses undergo a renaissance. Instead of spending big bucks in chain stores near their offices and train stations, or ordering things online to be delivered straight to the office, workers with disposable cash and more time on their hands turned to independent retailers. 

“It sounds bad to say, but this has been the best thing for us,” the manager of a boutique butcher shop told me through his mask and visor. Keeping people in their neighborhoods and communities for longer, it seems, creates a demand for interesting and unique things to pop up and thrive. If remote working, at least in some form, persists, local shopping may, too. 

Likewise, retailers in Russia may not always be able to depend on a steady stream of business. The country’s domestic online giant, Yandex, which fills the role of everything from Google to Spotify to Uber, has made its entry into the home delivery market, focusing on things that can be dispatched almost immediately. Only available in Moscow at present, couriers in bright yellow jackets can turn up at your door in minutes with fruit, hot lattes, and a phone charger cable.

For the time being, though, despite all the advances in technology and the pressure to cut costs and bolster convenience, people in places like Penza will keep going to the store to buy dinner, checking out shoes in shop windows, and spending their money with small businesses. Hole in the road or no hole in the road.

Gabriel Gavin is a journalist based in Russia.