World Reimagined

World Reimagined: The State of Small Business

Customer getting temperature taken outside a restaurant in Tel Aviv
Credit: Amir Cohen - Reuters /

Small business has experienced seismic shifts in 2020, as the coronavirus has fundamentally altered the daily lives of people across the United States and thrown the economy into turmoil, profoundly impacting the small business sector.

Despite unprecedented efforts by the U.S. government to provide aid and support to small businesses, many entrepreneurs find themselves struggling to keep their doors open. Other, less fortunate businesses have had to close their doors for good.

Yet, not every small business industry has been impacted by the virus in the same way. Some industries have faced strict guidelines and restrictions, while others have not. Some industries have even thrived in the wake of Covid-19.

Womply, a data and software company serving small businesses, has tracked debit and credit card transactions at local businesses across the U.S. throughout the pandemic. Through an in-depth review of this data, we can see how different types of businesses have fared throughout the course of this pandemic, giving us unparalleled insight into the current state of small business in America.

COVID-19 crushed consumer behavior

We began our analysis by comparing total consumer spending at different industries for each week of the year in 2020 and compared it to the same week in 2019.

Here’s how the year so far has looked at some of the more prominent types of small businesses in the U.S.:

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The arts and entertainment industry was hit first and hardest, and has seen almost no recovery. This category includes businesses like local movie theaters, concert venues, arcades, theme parks, etc., which have all struggled to navigate restrictions and attract customers in the midst of this deadly pandemic.

The next most-impacted industries have experienced strikingly similar patterns -- a steep crash followed by a slow recovery. These industries include lodging (hotels, motels, bed and breakfasts, etc.), bars and lounges, restaurants, sports and recreation businesses (gyms, etc.), and health and beauty businesses (hair and nail salons, day spas, massage parlors, etc.).

Here’s an isolated comparison of the most heavily impacted industries.

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While the above group of industries has been completely devastated by the pandemic, the next grouping of industries has fared slightly better.

Retail, auto services, local services (dry cleaning and laundry, self-storage facilities, contractors, home repair, etc.), and pet services have all experienced smaller drops in consumer spending.

Spending at most of these businesses appeared to rebound to near or above 2019 levels by the end of the spring, although there appears to be some softening and inconsistency as the pandemic has continued and resurged into the fall.

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Finally, let’s look at a major small business industry that actually saw sales spike, especially in the earliest days of the pandemic: food and beverage shops. This category primarily includes local grocery stores, supermarkets, and convenience stores — where Americans cleared out shelves in order to stock up for imminent lockdowns and shelter-in-place orders.

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Imbalanced impact

Retail businesses, which make up a huge portion of the small business sector, vary wildly and run the gamut from clothing, electronics and hardware to furniture, firearms and books -- and just about anything else you can imagine.

With such a wide variety of retail shops in our dataset, we drilled a little deeper to see how COVID-19 has affected different types of retail establishments.

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Of particular note, COVID-19 has seen sales surge at local sporting goods and firearm stores, with weekly revenue in the early days of the pandemic spiking to 140% more than 2019.

Electronics stores, as well as hardware/home and garden stores have also fared quite well. Both categories saw only modest dips in revenue during the height of local lockdowns. Electronics stores have continued to do well throughout the rest of the year, but home and garden stores saw sales soften as the summer drew to a close.

Furniture stores saw steep declines in consumer spending amidst early nationwide lockdown measures. Revenue rebounded to better than 2019 figures as stores began to reopen in mid-to-late spring as millions of Americans, now spending more time at home than ever, looked to upgrade their surroundings or build out home offices.

Department and clothing stores were particularly crushed by COVID-19, perhaps due to the surge in online shopping we saw at the big box ecommerce sites like Amazon and Walmart. Year-over-year spending at these industries has somewhat recovered, but still lags behind 2019’s figures.

It’s hard to predict whether local retail shops will continue to lose out to big box online retail in a post-pandemic world, but it’s a trend we will keep a close eye on in the months ahead.

Comparing the States

The coronavirus has impacted every state in the country, but it certainly has not impacted each state the same way at the same time. The severity of cases ranged just as much as the strictness of local ordinances.

Some states enacted and maintained strict lockdowns, while others have pushed hard to loosen restrictions in hopes that their economies might recover more quickly.

The chart below compares total consumer spending at each industry in each state from April through mid-October 2020 vs. the same period in 2019. If you visit the table itself, you can hover over a tile to see exact figures.

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From a glance, it appears that the industry types hit hardest by COVID-19 have been hammered no matter in which state the business is located.

Some states certainly appear to have experienced more across-the-board decreases, but even in states that have had notably lax restrictions, many small businesses are still suffering.

To get an even clearer picture into how each state’s response to COVID-19 might be impacting businesses, we combined the industries hit hardest (arts and entertainment, bars and lounges, health and beauty, lodging, restaurants, and sports and recreation businesses) into a single group and charted year-over-year spending in each state.

Feel free to select any states from the dropdown menu at the link to the chart below to compare the performance of these types of businesses in different states:

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It’s clear that several states did see spending at these industries recover more than other states, but it appears that many of those early recoveries were short-lived.

Doors Closing

Thin margins and cash flow are a constant concern for small businesses. According to a survey conducted by Womply, 1 in 5 local businesses said they wouldn’t last 30 days if sales stopped completely, while 55% of small businesses wouldn’t last more than 90 days.

Sadly, this situation has become reality for millions of small businesses across the country. Womply provided additional data in order to determine just how many businesses have had to shut down—either temporarily or permanently.

Here’s how we determined this:

  • We identified businesses that were regularly transacting between January 1 and March 1
  • A business was designated as “closed” if it didn’t process a single transaction for three straight days starting on March 1
  • If, after that three-day period, the business processed a transaction, they were no longer considered closed

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Health and beauty, arts and entertainment, and bars and lounges all saw over half of businesses close down in the earliest days of the pandemic.

As restrictions were rolled back later in the spring, most health and beauty businesses were able to reopen, as their closure rate is now on par with restaurants. Bars and lounges were on track to open at a similar rate until late June, when case rates began to rise in many parts of the country, prompting several states to reinstate restrictions on bars and lounges.

Arts and entertainment businesses have been far less fortunate. Well over half of the small businesses in that industry have remained closed since early March.

The least-impacted industries appear to be service-oriented businesses like pet services and auto services, as well as lodging. Retail businesses have also recovered from a temporarily high closure rate as business owners have found ways to adhere to local regulations and adapt to a new way of doing business.

However, even the less-affected categories still show a number of closed businesses, lost jobs, and uncertain futures for millions of Americans—a sobering window into the devastating toll this pandemic has taken on the nation’s small businesses.

Barring any major breakthroughs in finding an effective treatment or vaccine for COVID-19, it would appear that many small businesses are in for a long recovery period.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Justin Davies

Justin Davies is a senior member of the Womply marketing team, where he leads analysis and content strategy on the impact of consumer behavior on small business.

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