Small- and medium-sized businesses with presences online and in residential marketplaces did the best during the pandemic, according to the Small Business Reset report, produced by the Mastercard Economics Institute last month. As workers and tourists stayed home, businesses in central business districts suffered the most, the report indicates.
Mastercard Economic Institute estimates 1/3 of small and medium sized businesses in the world that closed in April 2020 remained closed six months later, and 1 in 5 small businesses remained closed 12 months later. That means small and medium sized businesses were more than three times as likely to close than large companies.
Small and medium sized businesses make up 90% of businesses and more than half of jobs across the world, according to an analysis by the World Bank. “Thus, the economic impact when small businesses close their doors or cut staff is consequential, creating a long-term ripple effect across a local economy,” according to the Mastercard report.
Stay-at-home restrictions made the gap between spending growth at small and medium businesses versus large businesses grow 20 percentage points at the start of 2021, according to the report. Climate change also played a role — colder in the Northern Hemisphere contributed to people being more likely to shop online, according to the report.
As supply-chains ground to a halt, prices surged to levels many small and medium sized businesses couldn’t afford.
Online turned out to be a haven for some small and medium sized businesses, especially those who had an existing digital presence. Many more moved their products online — businesses that made the shift online for the first time tripled in July 2020 compared to pre-pandemic levels, according to the Mastercard analysis. This rate has continued to be elevated globally, according to the report. However, businesses with products that are not able to be sold online — such as barbers, electricians and restaurant owners — struggled against the shift away from in-person business, according to the report.
At the same time businesses were closing, others were starting. About 32% more small or medium sized retailers were launched last year than 2019, according to the report. Sales at small and medium sized retailers grew 4.5% through August 2021 compared to the same period in 2020. Though, this is still lagging behind large retailers.
The next best place was residential areas rather than busy business districts where people seldom went once the pandemic put workers and tourists home.
For instance, in New York City, spending at small and medium sized businesses in the business districts was still down — it was 73% of 2019 levels in August 2021, according to the report. Meanwhile, these businesses in the outer city neighborhoods saw growth from before the pandemic– 124% of 2019 levels.
It’s a trend the analysts noticed around the world.