Richmond's Surge in Consumer Spending Trends

We partnered with Mastercard Advisors to explore how small businesses have fared in recent years in Richmond, Virginia. By analyzing trends in Mastercard Spend Volume, we tracked what industries and where geographically across the city businesses are growing. As a mid-sized city with healthy small business growth, Richmond can serve as a potential model for similar municipalities.

Our findings indicate the success of place-based development paired with dedicated community partners, alongside a shared recognition that there is still more work to ensure truly equitable development.

In December 2020, the city of Richmond, Virginia adopted a citywide master plan for its future called “Richmond 300: A Guide for Growth.” The guide includes policy recommendations for land use, transportation, economic diversity, housing, and environmental sustainability. 

As part of the plan, Richmond designated certain areas as “priority growth nodes” to encourage development where population growth is expected over the next 20 years. This continued population growth, alongside effective support programs, may be one of the reasons Richmond’s businesses are recovering well after the pandemic. 

During the COVID-19 pandemic, small businesses in Richmond were growing slower than non-small businesses which had a large jump in spend creating a large growth gap that widened significantly through 2021. Large businesses benefited from surplus spending and growth in online spend, while small businesses as a whole experienced a small decline before rebounding.

Since then, the gap in Mastercard Spend Volume growth between small businesses and non-small businesses has started to shrink as small businesses have grown healthily. By August 2023, Mastercard Spend Volume increased by 75 percent for small businesses relative to 2019, compared to a 107 percent increase experienced by non-small businesses. While there is still room to close the growth gap, small businesses are catching up. 

To better understand where small business success is driven from, we investigated spending growth in the priority growth nodes where Richmond’s local government is committed to growth. Small business spend growth trends are shown for:

• Manchester which includes priority growth nodes Manchester and Southside Plaza

• Downtown which includes priority growth nodes Jackson Ward, Monroe Ward, Shockoe, and the Downtown Core

• Near West which includes priority growth node Greater Scott’s Addition

• Bon Air which includes priority growth node Stony Point Fashion Park. 

We chose not to focus on the two intersection-specific priority growth nodes (Route 1 Bellemeade or Route 1 Bells) due to their smaller footprints.

Figure 4 demonstrates the districts as defined by the city of Richmond and where they are geographically, as well as the circled priority growth nodes. It is important to distinguish between neighborhoods and districts. The neighborhood of Manchester is a small neighborhood located just south of downtown, across the James River, while what we are referring to as the Manchester district is inclusive of many other neighborhoods that are historically Black, Hispanic, and have higher rates of low income community members. Right above it, sits the Downtown district, a small business hub for the city and an area that includes well-known neighborhoods like Jackson Ward, Shockoe, and Monroe Ward. The Near West district contains the Greater Scott’s Addition Neighborhood. To the west of all three is the Stony Point Fashion Park neighborhood within the Bon Air district. 

Our study found that, since 2019, both Mastercard Spend Volume and the number of small businesses have been growing in those four priority districts (with the exception of spending in Near West which is still recovering from 2020 lows).

The Manchester and Downtown districts stand out for both the number of new small businesses and for the growth in Mastercard Spend Volume experienced by small businesses since 2019. While Near West didn’t experience the large gain in overall Mastercard Spend Growth seen elsewhere, by 2022, it nearly returned to 2019 levels, while experiencing a significant growth in the number of active small businesses. 

Manchester District
Our study found that spend volumes in Manchester have consistently remained above 2019 levels – 53 percent higher in 2021 and 44 percent in 2022. During that same time, from 2019 to 2022, Manchester saw a 41 percent increase in the number of open small businesses.

According to the Richmond 300 plan, the city has rezoned about 700 properties from heavy industrial to residential and mixed-use with a majority of these happening in Manchester. Since then, several dozen new developments have sprung up in Manchester. Former warehouses, for example, have been converted into loft apartments with breweries on the first floor.

“It’s much easier [in Richmond] to develop large-scale development projects in these industrial sites, as opposed to in heavily residential communities,” said George Piazza, Senior Economic Development Program Officer at LISC Virginia. A community development financial institution (CDFI), LISC Virginia focuses on low- and moderate-income communities, but made a larger commitment in 2020 toward racial equity, particularly in its lending practices.

In addition to rezoning, the Manchester district is eligible for or partaking in a number of additional development related programs. In 2019, the “Urban Business District” became the “Central Business District,” expanding from the Downtown core into north Manchester. Select blocks of Manchester qualify for various government programs that encourage job creation and private investment such as, the Virginia Enterprise Zone program, the Richmond Enterprise Zone program, and/or the Commercial Area Revitalization Effort (CARE) Program. In fact, all of the businesses on Manchester’s main Hull Street corridor are eligible for CARE. Manchester is also designated a Federal Opportunity Zone, a program created by the federal Tax Cut and Jobs Act of 2017 to ”spur economic growth and job creation in low-income communities while providing tax benefits to investors.”

“The growth is unreal,” said Pat Foster, Director of Minority Business Development for the City of Richmond. “The businesses are growing because… the population has multiplied in the last few years. And where you have population [growth], you have business [growth].” 

By creatively re-using industrial sites, Richmond has been able to spur small business growth without displacing existing businesses in Manchester. This strategy, partnered with supportive policy programs and population growth, has allowed Manchester to fuel an equitable small business development environment.

Downtown
While Manchester experienced significant growth, Downtown experienced the biggest jump in Mastercard Spend Volume for the time period from 2019 to 2022 of the geographic areas reviewed. Downtown small business spend increased 49 percent from 2019 to 2022. This growth is remarkable because Spend Volume initially fell between 2019 and 2020. Cities across the nation have struggled with businesses and employees returning to their downtown cores, but Richmond’s small business environment continues to thrive in Downtown. 

Notably, the Downtown district contains within it the Jackson Ward neighborhood, one of Richmond 300’s priority growth nodes and a former social and economic hub for Richmond’s Black community. Once known as the “Black Wall Street” and the “Harlem of the South,” Jackson Ward lies at the northern edge of the Downtown district. The city’s Jackson Ward Community Plan aims to revitalize it using federal grants and funding from the federal infrastructure bill. 

“When you look at corridors that have been systematically bled of economic activity, you need new money to come in. You need people to live in those neighborhoods and shop there,” said Leah Fremouw, CEO of Bridging Virginia, a community development loan fund focused on historically marginalized small businesses. “At the same time, you need to protect and support the homegrown businesses so that they can stay in place. It’s not an either/or. It’s a balance of the two.”