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Tech Startup Allows Communities to Support Local Businesses – Episode 20 of the Building Local Power Podcast

| Written by Nick Stumo-Langer | No Comments | Updated on May 18, 2017 The content that follows was originally published on the Institute for Local Self-Reliance website at https://ilsr.org/tech-startup-local-businesses-episode-20-of-the-building-local-power-podcast/

This week in Building Local Power, we’re discussing independent businesses and the communities that support them. Host Christopher Mitchell and ILSR co-director and Community-Scaled Economies initiative director Stacy Mitchell interview Katrina Scotto di Carlo from Portland, Oregon. di Carlo is the co-founder of Supportland (now called Placemaker), which work to bolster independent businesses by offering new marketing and technological solutions.

Katrina Scotto di Carlo started Supportland and Placemaker as tech companies aimed at bolstering the power of independent businesses not only in Portland but now in British Columbia (Canada), Florida, and Massachusetts. Placemaker knits the independent businesses of these communities together, in order for them to better retain and gain customers in the face of big-box retail and online platforms such as Amazon.

Full transcript is available here.

“[Independent businesses] keep more money local. There’s more local character because we have all these funky businesses [that] also increase the amount of choice that you have when you go to purchase something,” says di Carlo of the power of independent businesses. “[These] ancillary studies are interesting, like the overall health of everyone in the community is better.”

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Get caught up with the latest work from the Institute for Local Self-Reliance on composting based economic development by exploring our resources, below:

Key Studies: Why Local Matters

Monopoly Power and the Decline of Small Business: The Case for Restoring America’s Once Robust Antitrust Policies

America’s Major Market Power Problem – Episode 13 of the Building Local Power Podcast

Watch: How Cities Can Create a Built Environment Where Local Businesses Thrive

Here are the reading/watching recommendations from the group this week:

From our guest, Katrina Scotto di Carlo:

From Michael Shuman, “The Local Economy Solution,” find from an independent retailer here: https://www.indiebound.org/book/9781603585750.

Written by Jane Jacobs, our guest shared this book as “essential for anyone who loves local.” “The Death and Life of Great American Cities,” available to search from an independent retailer, here: https://www.indiebound.org/book/9780679741954.

From our hosts, Christopher Mitchell and Stacy Mitchell:

Both Christopher Mitchell and Stacy Mitchell recommend this book, by David Graeber – called “The Utopia of Rules.” Find it from an independent retailer here: https://www.indiebound.org/book/9781612195186.

View the full transcript of the podcast, below.If you missed our previous episodes make sure to bookmark our Building Local Power Podcast Homepage. Please give us a review and rating on iTunes or wherever you subscribe to podcasts.

Full Transcript of Podcast:

Chris Mitchell: Stacy, how much of the economy consists of locally owned businesses?
Stacy Mitchell: About a third, depending on how you measure it.
Chris Mitchell: Okay. I think we’re going to maybe learn a little bit more about that here in this next episode of Building Local Power. That was Stacy Mitchell, co-director of the Institute For Local Self-Reliance and director of the Community Scaled Economy Initiative, also known around the office as “The Wiser” Mitchell.

I’m Christopher Mitchell, director of our broadband network and the more impetuous Mitchell and this is the Building Local Power podcast from the Institute for Local Self-Reliance. Today, we’re talking to Katrina Scotto di Carlo, co-founder of Supportland and Placemaker. Welcome to the show.

Katrina Scotto di Carlo: Thank you.
Chris Mitchell: All right. Let’s build some local power. Stacy, Katrina, why should we care if the businesses we patronize are local?
Katrina Scotto di Carlo: Well, the reason we should care about independent businesses thriving, there’s like a host of amazing studies that were doing to support the fact that it’s better for the environment because we have more [walkability 00:01:15]. It keeps more money local. There’s more local character because we got all these funky shops and those funky businesses also increase just the amount of choice that you have when you go to purchase something. It’s not just one corporation’s, sort of they decide what they’re going to buy and serve up to your community. These are your neighbors that are really choosing what’s suitable and cool and so there’s a ton of reasons.

Then there’s all these weird, ancillary studies that are interesting, like the overall health of everyone in the community is better. There’s all these interesting studies that have come out of it. A lot of people buy local and eat local for different reasons. Some people are real economy nerds and they buy local because so much more money stays local. Then there’s other folks, I’m also a person that shops local and eats local just because I like diversity and I don’t like everything looking like a strip mall. There’s sort of personal reasons everyone has, but you can kind of pick and choose from this huge menu of rad reasons to support local.

Stacy Mitchell: Yeah, I love the idea of those decisions being made by my neighbors. What to carry, how to run their business, what the shape of the economy is in my community, I love keeping that local.
Chris Mitchell: One of the things that I like, I really like the idea of the ecosystem. I think about that a lot just in terms of different … so like a web, in which you are interacting and being very cognizant of the fact that when you make a decision to buy something somewhere. That’s not a discreet interaction that ceases to have any impact once you’ve made the decision. Depending on where you shop may help you figure out if your children have a sponsor for the sports teams or support the local schools or that sort of thing.
Stacy Mitchell: Yeah, you get all this value back when you support a locally owned business. Those dollars and that business, it comes back to you in the form of more dollars circulating in your local economy, more tax revenue and those kinds of donations going to a local charity and so on.
Chris Mitchell: Well, one of the things that I get the impression is that a few of us supporting local businesses isn’t enough. Katrina, you started something called Supportland, which seems to be a way of local businesses getting more support in the community. Now it’s being called, it’s changing the name to Placemaker, as it’s going big across the United States and Canada, from what I can tell. Tell us more about this.
Katrina Scotto di Carlo: Yeah. It’s really along the lines of what we’re talking about where we kind of realized about a decade ago how important independent businesses were, just in our own lives. We were like, “That’s great! They’re so important and we love them, but wait a minute. Why is our little Main Street in our neighborhood so boarded up?” Answering that question was really a two year search. We looked at basically the whole economy. We said, “Well, why are consumers moving out of the local economy? What’s happening?” It was kind of funny because we realized it’s really customer acquisition and retention tools, which is a fancy way of saying that bigger corporations have a lot more resources to throw towards gaining customers and keeping them loyal.

Once we realized that, we said, “Okay, is there anyway to make tools for local businesses that could compete on the scale?” That’s how we came up with the idea that was originally Supportland and now is Placemaker. It’s a bit of a community loyalty play, which doesn’t really exist outside of us, I believe. It’s really about keeping folks eating and shopping local. We use sort of a similar set of tools as the big guys, frankly.

We’re talking about loyalty. We have a rewards program, where there’s these points that flow between businesses and customers. It’s universal throughout the community. You can earn points, which we call merits, at any independent business participating and you can redeem those for rewards at any independent business participating. It really makes the customer feel like the local economy is now this cohesive experience, whether they’re dining out or picking up a new dress. It’s all sort of this one kind of tribe of businesses that they’re supporting and they’re getting rewarded for.

Chris Mitchell: One of the things that I think I saw on your website was that people like me could actually kind of recruit a business into it, it looks like. It’s not just something for the businesses themselves, but I could recommend businesses that would then, you’d be in contact with, I guess. How does that work?
Katrina Scotto di Carlo: Yeah, totally. We’re way different. People think “technology company” and they have this idea of the million dollars, backed, whatever. That’s not us at all. We’re actually a mom-and-pop tech company, which is very strange. We have actually not taken any venture capital, so that we could keep a social mission intact. What that means is that we don’t have a marketing department. We don’t have the Groupon level sales people that are calling all the small … We don’t do any of that because we really don’t need to. It’s about the product and the product’s rad and so customers basically spread word to businesses.

Now the way that we kind of work with other communities is also really interesting because we have to do it without venture-backed money. How we work with other communities is we have a local business association or Think Local campaign that we partner with and then they actually gain most of the revenue from the program. We just facilitate a license of the technology, but it’s really run locally wherever it goes. Most of the money stays local, which again, is really outside of a venture model.

Normal technology and American scaling business is about extracting wealth as you scale. When we scaled to another community, it looks really different than when a venture-backed company scales to another community. A traditional business, American business scale model is that a business is scaled to a new community simply to extract as much wealth as possible from that community. That’s what scale means. That’s why people do it.

For us, it took us years to figure out how to flip that paradigm and how to make it that when we scaled, we actually created wealth for the communities we scaled to. That’s how we’ve arrived on the business model we have. We work really closely with the local business associations and Think Local First campaigns to make sure that when our technology is used and licensed by them, it’s increasing lots for the organization as well as their whole local economy. That’s been a really big chunk of our journey because it turns out business doesn’t really work this way, which is not what I realized when we started. Thankfully there’s so many amazing local economy leaders out there. I’ve been really fortunate to know them and be mentored by them. That kind of community within the local economy space has been what really carried us through for the last decade. Our journey’s been really interesting, but we’re still on it.

Stacy Mitchell: I think this idea you have about how to scale up and still be local is really interesting. I want to come back to that, but first, I just want to go back a little bit to the impact of what you’ve done in Portland. You’re based in Portland, Oregon. I think I saw on your website that you’re now up to several hundred businesses that are members and I believe around 80,000 customers that are also members of it. Talk a little bit about what kind of impacts you’ve seen in Portland and I’m wondering in particular … it’s a really interesting idea to just network all of those people and all of those businesses. Outside of the loyalty benefits and keeping people shopping local and introducing them to new businesses, have you found that there are unexpected impacts of just, of building that kind of a network?
Katrina Scotto di Carlo: You totally hit the nail on the head. For us, this loyalty rewards aspect is just the beginning. Really it’s the network that’s powerful. The problem with independent business and the reason that we’re always the underdog is because it’s such a fractured one-third of the economy. It’s one-third of the economy. You know what I mean? We should be the mammoth that’s like, “When we report our holiday numbers, Wall Street goes to its knees.” You know what I mean?

The reason it’s not that way is because it’s fractured because we’re all working independently in our tiny little silos, our four walls, our one door. That’s the problem. It’s a weird pain point. It’s a strange point, but when you really dissect it down, you’re like, “The problem is we’re isolated.” We have all this potential and all this energy that can be harnessed if we just networked ourselves. People are really excited to participate. Portland is over a hundred thousand users. It gets all these people rah-rah-rah excited to join and that’s what we need. Starting with rewards is really handy for getting everyone participating.

Now that, when we get that networking effect of all these small businesses collaborating, it’s really the sky’s the limit. I’m talking internet of things and crazy artificial intelligence, machine learning. There’s so many radical technologies out there that independent businesses are just totally cut off from. I know that the mom-and-pop business owners sitting in their business is like, “I don’t need that. I’ve got Facebook and Twitter.” That’s okay for now, but the information age is moving so fast that I’m concerned that they’re going to be left in the dust if we don’t pick it up a little bit on the innovation side.

Chris Mitchell: I have very little background for most of the things you’re talking about, but one of the things that I’m really excited about living in this time is that it seems like for independent businesses that embrace these technologies, it is such a better time than 50 years ago. I think the 50’s and 60’s were the heyday of centralized massive corporations. Now it’s a time for decentralized technologies, when you can print in your home or in your business. You can … the 3D printing. You can do all kinds of things that is changing the way that independent business can now move so much faster than these corporate entities.
Katrina Scotto di Carlo: I totally agree with that side. Weirdly, I have one foot in independent business and one foot in tech startup. It’s a very strange perspective. There’s this sort of glorious side of technology for independent business and then there’s a very dark side. For me, I kind of see both of those at the same time. For example, when Chase Bank put out that “We’re going to give five businesses 20,000, apply for this grant thing”, basically all of these businesses went on to Chase’s website and gave them so much data that is worth so much money to Chase. The odds of winning we’re like [inaudible 00:13:11]. Your data is valuable. Everybody wants it. Do not give it away. If there’s no product you’re paying money for, you are the product.

The way Placemaker works is it’s actually a transaction of the business. It’s not like one of these programs where you just show a discount card or something like that. It’s much more sort of involved for the customer and business owner. One example of how we have businesses collaborating is that we had a toy store and a coffee shop that had a lot of market crossover, which we can tell from the data. What we did was when a customer walked into the toy store and they picked out some toys and then they went to the counter and they bought something and they would use their Placemaker account, so that they earn their points, then the clerk would say, “Hey. I just put a cookie on your Placemaker account for this bakery down the street.” It gives the customer this sort of warm, fuzzy feeling and it gives the store, the toy store has now increased the value of that exchange with that customer.

They didn’t have to do it through discounting their inventory or any of these kind of conventional ways. They did it through a collaboration. The customer now has this sort of digital token for a cookie on their Placemaker account. The neat thing is if they forget it’s there, we have their contact, so we kind of, the system automatically emails them two weeks later. The deal is that that cookie eventually expires out of what we call their Placemaker wallet, but that positive brand association between these two dissimilar businesses that collaborated to give them a warm fuzzy vibe, that’s the magical part.

What we found when we ran these collaborations is that the metric to watch was not how many customers then redeemed for the cookie. That was not a good metric because sometimes it would be zero customers [failing 00:15:09] to redeem for the cookie. What the radical thing was is we can follow the data over time. We can see that, okay, that group of customers, they didn’t go into the bakery and get the cookie within the two week period before the cookie expired because it was never about the cookie. It was about that warm, fuzzy vibe. What we did find is that they do make it in eventually. That’s what’s fascinating is the amount of numbers of people that one little exchange that gives them the warm fuzzies, the amount of retention, that that business gets an uplift in retention, but also the business they’re sending them to gets this uplift in new customers. Since we have the data, we can show, “Oh, it’s exactly these 27 customers and they made it into your bakery within the next six months.” It’s really fascinating for us.

Right now, the running kind of number is that if a person in our system engages with one engaged business on Placemaker, then they’ll go to nine other businesses, on average. Once a customer steps into the space and they start to get that vibe, like, “Okay, this is community shopping.” Then it does kind of explore out from there and it does seem to be working.

Stacy Mitchell: I think it’s interesting what a business ends up conveying when they give a customer a thank you gift that’s really for another business in the community. I remember, I’ve been involved in … I live in the other Portland, in Portland, Maine and I’ve been involved in our local business alliance here. We had this thing we did a number of years ago where we had a photographer take portraits of a lot of different business owners in town. We made these great posters about supporting local business and why it mattered. We used these portraits of business owners with a little bit of a story and a quote from them about how they founded their business and why they cared about the community. What was great is that different businesses would hang posters in their shop for other businesses. You would walk around. You’d go into the book store and you’d see this great portrait of the local grocer and his family and their store.

I found it so interesting people’s reactions to that was so strong. It made this clear idea that local businesses, sure they compete, they’re part of a market economy, they sometimes compete with one another, but at root, they’re all part of a community and that there’s this network and set of connections. There’s something that’s really a much deeper thing that a business is saying about what it means to be locally owned and how they’re different from big corporations when they do that.

Katrina Scotto di Carlo: Yeah, totally. We had one campaign where it was just one business district and all they did during the holidays is they hid gift cards to each other’s businesses inside the Placemaker system. I was in a shop and it’s a shop that makes bags and sells jewelry and clothing. I’m in that store and a customer transacted on Placemaker with the clerk and then instantly won a gift card for the dog and cat shop. Now, it was so crazy to that customer. They kind of freaked out at the register. It was so neat to see them kind of freak out and not understand how local business owners just love each other and want to support each other and we get it. We’re all in this together and all of that.

For us, the neat thing is the system is built for this sort of fulfillment. When they won the gift card, it’s automatically loaded on their Placemaker account and then when they go into the dog and cat shop, it shows up automatically over there. For us, these kinds of collaborations are really simple. That’s why we built it, but it’s sort of mind blowing for the end customer because they’re not used to independent businesses being this sophisticated and acting almost like one marketing entity.

Chris Mitchell: Those are really great, hands-on examples that are perfect for what we’re looking in this discussion. I’m curious about that thing that Stacy put a pin in earlier, which is how you scale local. What can you tell us about that?
Katrina Scotto di Carlo: For us, just to be clear, we had to scale because we’re a technology company. One community can’t support a tech company, but how to scale local is really difficult. There’s a way to do it authentically and conscientiously and there’s a way to do it that’s sort of like a green washing, local washing approach. We’ve really took great pains to talk to people and figure out how we can kind of jerry-rig a system that actually kept wealth local rather than teasing it from the communities we scale from, which is sort of the normal model.

Yeah. That’s like for us, that was a big milestone for our business, when we discovered how to do it in a way that actually works with our ethics and our values as a company. It’s really difficult and there was no company ahead of us to look at. Social enterprise is a really [inaudible 00:20:18] space. Without those examples ahead of us, it was a really huge pain in the butt and it still is. My hope is that this becomes more normal and this is just how people have this option to do business, but right now it’s really not fun. It requires a lot more work, rather than just being capitalists about it.

Stacy Mitchell: See, you’re growing and bringing Placemaker to other communities by building a set of relationships, as opposed to sort of showing up, sort of coming in and out competing anything that might be there and being a highly centralized company. Basically you’re going to places and partnering with groups and businesses on the ground to grow this. Is that right?
Katrina Scotto di Carlo: Yes. It does two things for us. It keeps the model local and it also keeps our costs down, so that we don’t have to take venture capital. The only other piece of the puzzle you haven’t mentioned is that our degree of automation is really high, so that we don’t have this really huge headquarters in Portland. We have a very, very lean headquarters. A lot of our stuff is automated for bringing communities on board and training them, et cetera. Since that automation is sort of in our wheelhouse, that makes sense for us. So far the reception’s been really good for it.
Stacy Mitchell: For those of us who are outside of Silicon Valley and don’t sort of live and breath in tech companies, what would happen if you did take venture capital? What would they make you do? How would they make you operate differently?
Katrina Scotto di Carlo: When a company takes venture capital, in general, that investment money that’s coming in expects a 10X return, meaning ten times the investment they put in. Really it’s impossible, in my opinion, for any company to get that sort of return when you’re talking about independent businesses. It’s just not there. Any company that’s got venture money and is targeting a market demographic and is independent business likely has other revenue streams, whether it’s selling data, et cetera, to make up that difference.

I’m open to maybe there’s going to be some interesting revolution in the venture capital space that where we would be able to keep our social mission intact, but as it is currently, we just haven’t seen that. Not to be pessimistic, but our favorite company, the one social enterprise that is sort of ahead of us and we used to meet with them regularly was Etsy. When they went for their IPO, we kind of drooled over their filing at the SEC. It was so beautiful and so [inaudible 00:22:57] and amazing. To see what happened to Etsy after their IPO has been really discouraging in our state. We haven’t yet discovered that sort of happy medium between bidding the poor social entrepreneurs and the really well-funded venture capital company with no social mission.

Chris Mitchell: Yeah. It seems like if you get venture capital money, it’s kind of like if you’re the very first to think of something, then you’re expected to own the space and pull everything, extract the wealth that you don’t want to do. If you’re not, I suspect that they would be looking for you to figure out some way of getting bought by American Express for their Small Business Saturdays campaign kind of thing.
Katrina Scotto di Carlo: Oh, totally. Yeah. For social enterprise in general, the exit is a big problem. When you talk to investors, it’s like slide number seven is the exit, right? Everybody wants to know how am I going to get my money back. What’s the liquidity event? For social enterprise, it’s sort of like, “Well, we might be a cooperative.” It doesn’t fly well in those spaces.

We’ve been really lucky. We do have investment, but it’s all impact investors and angels that get it, so we’re very, very fortunate, but that was a lot of work in itself. We have the product development, enough capital to move to other communities. We’ve got customers there working it. My hope is that we can just build the sustainable business model from here. A part of me wants to be a bigger part of the solution because I do see investment and venture capital and all of this as a problem right now. That doesn’t sit well with me because that’s how 99.99% of American business, at least, runs. For me, I’m open to sort of innovating on some new angle or maybe there’s a venture capitalist that has this intriguing, new idea or there’s a cooperative model that does that. For me, the future is really wide open in that aspect because I want to be a bigger part of that solution as well.

Stacy Mitchell:  You started out building this tool that gives consumers power. Basically says, “Here’s a way for you to support the kind of economy that you want to see and to get rewarded and helps businesses network together and to build that kind of economic power.” Over time, you’ve been focusing more and more on citizen power and actually have gotten very active in Portland politics. I wanted to ask you about how that evolution came about and what it is that you’re engaged in.
Katrina Scotto di Carlo: Well, I think it’s just that we’re all whole people. I’m finding that I’m sort of being pulled to work on a more national scale with the business side of Placemaker, but at the same time, in that, my own self scaling and knowledge and meeting people. All of these kind of amazingly enlightened beings that I get to rub elbows with, I hear so many amazing ideas. It’s really hard for me to be like, “Okay.” Then I come back to Portland and it’s just like, “Whatever, Portland.” A lot of it was just that the more neat ideas I hear about and best practices and interesting pilot projects and whatnot, the more I want to bring those back to my own community. It’s been kind of a cool process because I actually started to apply some of this to my community and then realized that I had a wealth of information that was locked into my head. I might be helping Portland, Oregon, but I wasn’t helping my friend in Omaha or my friend in Northampton.

Because it was all in my head and I was able to implement some of these things in Portland, Oregon, it wasn’t really as beneficial as I wanted it to be. The project I’m working on actually today is using Placemaker not just as the technology tool that helps Main Street businesses, but also as a community of learning where we kind of intake all the amazing work at the Institute of Local Self Reliance and local vesting and Michael Shuman’s books and everything and all of the people we meet at conferences and anything we hear that’s juicy that we can kind of [stead 00:27:22] out links for people or reports or blueprints for how to do this in your community. I’m kind of gathering all that up and building a bit of a community of learning off of Placemaker for that purpose. It’s been so helpful for my work in Portland, Oregon, but I’m like, “This isn’t scalable if it’s just coming in my ears and into my brain and I’m doing it. I should be trying to reflect some of this knowledge out that I’ve gained through all the people I’ve met.”

That’s the current project is kind of bouncing it back and figuring out how we can be more helpful in the space for promoting your guys’ work and just all the … Everybody’s such hard workers in our space. It’s like the more people that can be shining lights on that hard work, the better.

Chris Mitchell: Katrina, that was wonderful. Katrina, I’m curious as we wrap the interview up, if there’s anything you’d recommend people read.
Katrina Scotto di Carlo: There is Michael Shuman’s book The New Economy Solution and then also just like for me, sort of a backbone to this work is Jane Jacobs and Life And Death of Great American Cities. She’s one of the first people that addressed why I love local. That’s sort of a book that I’m like, “Oh, everyone should read this.”
Chris Mitchell: Wonderful. From Stacy and I, because we collaborated a little bit before this, I came up with one. It’s a book that I think is, really reflects our bottom up approach. It’s The Utopia of Rules: On Technology, Stupidity And The Secret Joys of Bureaucracy by David Graeber, which is a kind of anarchist look at bureaucracy and the leftist critique of bureaucracy in terms of how we implement power in a lot of ways and the rules that have been implemented often times for good ends, but may not have worked out the way they were intended to. I loved it. I’m about to read it again.

With that, I do want to encourage people to engage on our Facebook page, one of those great Silicon Valley companies. We are at facebook.com/localselfreliance and it would great to continue the conversation there, in terms of what local businesses you love, how to get them to join the Placemaker program, any exciting stories about, that you’ve had engaging with Placemaker or local businesses. Bring it all there and let’s talk about it.

Thanks, everyone, for listening.

Lisa Gonzalez: That was Katrina Scotto di Carlo di Carlo, co-founder of Supportland and Placemaker, joining our co-director of ILSR, Stacy Mitchell, who also heads up the Community Scaled Economy Initiative and Christopher Mitchell, from the Community of Broadband Networks Initiative. Learn more about Katrina’s startup at Supportland.com. Subscribe to this podcast and all of our other podcasts on iTunes, Stitcher or wherever else you get your podcasts. You can also sign up for our monthly newsletter at ILSR.org.

Thanks to Dysfunction Al for the music, licensed through Creative Commons. The song is Funk Interlude. I’m Lisa Gonzalez for the Institute for Local Self Reliance. Thanks again for listening to episode 20 of the Building Local Power podcast.

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Audio Credit: Funk Interlude by Dysfunction_AL Ft: Fourstones – Scomber (Bonus Track). Copyright 2016 Licensed under a Creative Commons Attribution Noncommercial (3.0) license.

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