COVID-19, today’s black swan, keeps conquering new territories all over the world, changing our ways of living and shaking business and economy. No matter whether it’s a local small business or a giant company, everyone’s been hit by the pandemic. The isolation measures aimed at preventing the spreading of the disease, unfortunately prevent businesses to normally operate and get customers, which results in significant losses of profits and looming closures. It’s especially critical for small businesses.
Let’s have a closer look at the consequences of the pandemic for SMBs, and what we can do about it.
A note. COVID-19 is a respiratory disease caused by a new coronavirus that features fever, coughing, sore throat, and trouble breathing. It can end up in severe pneumonia and lethal outcome. First reported in Chinese Wuhan City in December 2019, it spread all over the world at a speed of a wildfire fire. It’s contagious, as it can spread from person to person during close contacts, and it can remain on different surfaces for quite a long time. Good hygiene, keeping distance, and temporary isolation can prevent infection.
The global effect of COVID-19
Due to the fast spread of the coronavirus globally and the high level of mortality, governments take extensive measures to protect their citizens, following the recommendations by the WHO and elaborating their own protective means, depending on their peculiar situation.
Thus, many countries have closed their borders for any foreigners and keep quarantining the citizens who arrive from abroad. Together with the temporary cessation of international transport communications, it seriously impacts the global logistics, transportation, supply chain, and travel industries.
Many governments put in action quarantine and isolation measures forbidding mass events and encouraging people to stay home and not leave without any serious reason. Some go further and close schools and universities, while others recommend companies to transfer their employees to remote working.
All these results in the growth of fear and psychological tension within the society, drastically changing consumer behavior and the way people deal with business.
The impact on the small business
Small businesses are particularly vulnerable to the economic changes caused by the coronavirus. While big corporations and enterprises are likely to protect themselves from the most severe aftermaths, SMBs have been put in the situation when their stability is in question.
According to a study by the National Federation of Independent Business, 23% of SMBs claimed to be negatively affected. Among the reasons, they named supply chain disruptions (39%), slower sales (42%), and sick employees (4%). There’s also a comparatively high level of concern regarding the situation, with 44% of small business owners being “somewhat” or “very” concerned about it.
Let’s see what small businesses suffered the most.
Both online and offline retailers experience supply chain troubles. At the early stages of the pandemic, it was due to the closure of Chinese factories that provided the biggest share of products for retailers. Now, as the factories return to operation, the problem persists due to the difficult logistics connected with the closure of the borders.
Even those who initially profited from significant growth in sales of medical supplies, expect losses due to the persistent supply chain trouble.
Things seem to be going from bad to worse for offline retailers who have to close temporarily to prevent the spread of coronavirus. If there is a chance to return on the market for large retailers, not all the smaller ones are likely to recover.
- Local businesses
Coffee shops, restaurants, and dry cleaners remain open, but many of their customers are gone, says the article by The Washington Post.
Unfortunately, the anti-COVID measures imply, among others, keeping distance and avoiding populated places, which directly affects businesses that serve customers face-to-face.
Restaurants, cafes, and catering services have probably suffered most severely, as they were among the first places that people stopped visiting or canceled bookings for events. Taking into account the operational costs, product expenses, taxes, etc., the lack of clients may drastically disrupt the financial stability of such SMBs and lead to layoffs and stopping the business at all.
Small service providers such as dry cleaners, hairdressers and barbershops, nails, and SPA salons are as well at peril.
- Travel agencies
COVID-19 became the hardest blast for the travel industry in more than 18 years. According to the International Air Transport Association, the revenue worldwide this year could decline by 20%, between $63bn and $113bn.
With many countries closing their borders for travelers, travel agencies face huge losses due to massively canceled tours. Though agencies are trying to find ways to postpone the booked trips, many customers prefer to have their money back.
Moreover, as many companies stopped sending their workers on business trips, travel companies can’t even rely on domestic tourism as a means to survive the crisis.
Consequently, hotels experience mass tourists outflows. Canceled vacations aside, many hotels suffer from the cancellation or postponement of big international events such as business conferences, game conventions, etc.
Helping SMBs survive
Small businesses create two-thirds of net new jobs and account for 44% of the US economic activity. It is a giant contribution, so the governmental institutions take certain measures today to support small businesses that appeared in a tough situation.
Such measures include financial assistance in the form of grants and loans that can help small businesses overcome the temporary loss of revenue they are experiencing.
Besides, all of us can also help them through. Show your support to your favorite local place: buy a gift card or a dinner voucher, there are plenty of things you can do to help a local small business pay their bills and keep their staff. Do it today, and you’ll be able to celebrate it together later on when the crisis and isolation are over.