COVID-19 and Small Businesses

By Felicia Zheng, June, 2020

On Friday night, March 13, I got a notification on my phone saying Governor Evers had issued a stay at home order and was closing up Wisconsin. Within a week, my parents, who own the Chinese restaurant Happy Wok in Monona, began cutting down hours. In two weeks, they decided to close down entirely. To me, that move was unprecedented. For as long as my parents have operated it, Happy Wok has been open 364 days a year. In the past decade, they have weathered stormed, outages, and more, but COVID-19 is a challenge that no one was prepared for. It is changing the very ways we buy and sell, leaving businesses to play catch up. My parents are just one of many small business owners who have been forced to adjust to quarantine. COVID-19 has affected every aspect of society but has hurt small businesses especially.

According to a testimony to the Senate from Micheal R. Strain of the American Enterprise Institute, “The Bureau of Economic Analysis estimates that pandemic lockdowns have reduced consumer spending by 27.8 percent, with restaurant sales dropping by 70 percent and accommodations sales dropping by 80 percent. My calculations suggest that GDP as a whole has been reduced by roughly $80 billion per week because of the pandemic.” Small businesses are especially susceptible to changes in consumer spending because owners don’t have extensive savings to fall back on like corporations do. Many are also closing down or reducing hours, which only exacerbates the problem. To save money, owners are forced to make tough decisions to lower their costs like firing employees. According to the National Restaurant Association, “the U.S. restaurant industry could lose $225 billion in revenue from closures resulting from the coronavirus outbreak, and the industry could shed up to seven million jobs”

COVID 19 is forcing business owners to rapidly innovate in order to comply with social distancing. Many are moving to online orders or changing how they conduct business. Personal services like hairdressers and tattoo artists are working by appointment. Craftsmen are selling their products online. Restaurants are transitioning to take out and delivery. But there are consequences to this too. Third-party services like GrubHub and Postmates take a large percentage of profits, usually around 20-30% of an order. Some products and services are finding it difficult to adapt. Local stores can find it challenging to move their entire inventory online. Even those who manage to put together a website will struggle to compete with established retailers. Delivery can also be a challenge for stores that now have to pay shipping costs to get their products to customers.

The effects of COVID-19 will not be limited to the duration of the pandemic. For example, it is changing the way we shop; as people adjust and become accustomed to online ordering, physical locations will become more obsolete. Businesses that previously relied on foot traffic will now have to find new ways to bring in customers. We, as consumers, can continue to support our local businesses by doing things like ordering directly, instead of using third-party apps, buying gift cards, and making a conscious effort to shop from small businesses.

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