Biggest Negative Impact of COVID-19 on Small Businesses Is in Accommodation and Food Services: Survey

New government data shows that the pandemic has had a moderate-to-large negative impact on over three quarters of the nation’s small businesses, with the hardest-hit being those in accommodation and food services.

The most recent Small Business Pulse Survey, which collects real-time information on how small businesses are being impacted by the CCP (Chinese Communist Party) virus, featured data gathered from Sept. 6 to Sept. 12, the U.S. Census Bureau said in a release.

While the national average of small businesses that reported a “large negative impact” of the virus on operations stood at 30.9 percent in the reporting period, nearly 65 percent of small businesses in accommodation and food services said they have suffered a major blow.

Yavonne Sarber said she knew her Sugar Whisky Sis restaurant in Covington, Kentucky, wouldn’t survive a government-ordered shutdown. So, she closed it for good and four weeks later opened an entirely new restaurant on the site, one focused on takeout and delivery.

“We couldn’t sit still—we knew we had to do something,” Sarber said.

The Census Bureau figures follow a report from consumer review site Yelp, which said Wednesday that small businesses, particularly in restaurants and retail, continue to close their doors and lay off workers. The number of small businesses that have temporarily or permanently shut down has increased since mid-July, Yelp said, to more than 160,000, reversing a steady decline from the spring. Particularly hard-hit have been restaurants and bars, including dessert shops, burger joints, and sandwich shops. Restaurants that are more likely to deliver, such as pizza restaurants, have fared better.

Deniz and Yeliz Karafazli were ready to put the finishing touches on their Manhattan cafe, Madame Bonte, and expected to open it in March. But as the virus spread across New York City, the siblings couldn’t get architects, air conditioner installers, and other workers to come to the restaurant.

The work was finally finished in July, allowing the cafe to open, although its business has been limited by the city’s continuing ban on indoor dining. That ban will be partially eased starting Sept. 30 as officials allow restaurants to have indoor dining at 25 percent of capacity.

The cafe survived because the Karafazlis’ landlord and some of their vendors gave them a break on payments. And Deniz Karafazli is heartened by the fact the cafe’s menu lends itself to takeout, with sandwiches and coffee, and revenue has been better than he expected.

“It was the right place at the right time—once we opened,” he said.

A grim report from the beginning of September from the New York State Restaurant Association (pdf) found that, without some form of relief, 63.6 percent of restaurants in the state are likely or somewhat likely to shut down by the end of the year.

“It is painfully clear that without financial assistance, the restaurant industry in New York state could collapse,” Melissa Fleischut, the association president and CEO, said in a statement. “These recent survey results illustrate just how dire the financial situation has become for most restaurants, and it shows how critical it is that elected officials understand the urgency of the situation.”

The report also found that nearly 90 percent of New York’s restaurant owners said that it will be very or somewhat unlikely that they will turn a profit within the next six months.

Census Bureau data showed that just 1.7 percent of small businesses in the accommodation and food services sector reported a large positive impact on operations amid the pandemic, while 3 percent said they experienced a “moderate positive effect.”

While small businesses that rely on walk-in traffic face grim prospects, those that have managed to adjust operations to take advantage of the surge in online purchasing have fared better.

Julie Campbell, who launched Pasted Paper in February, said she had to rethink her new wallpaper business before she could sell her first sheet. The pandemic forced the cancellation of the trade shows where she expected to introduce her wallpaper to prospective retail customers. She said that to save her fledgling company from ruin, she had to quickly learn online selling and marketing skills and transform the business to sell directly to consumers.

“I had so much inventory and I needed to sell it. I was forced to figure this out,” Campbell said.

While the pandemic-driven surge in online sales has leveled off, executives and researchers are saying the digital shopping boom will persist even after the CCP virus outbreak subsides.

The latest data from Adobe, which analyzed 1 trillion visits to retail sites, found that the pandemic has driven $107 billion in additional online spending since March, with the first eight months of 2020 driving $497 billion in online buying. Also, “buy online pickup in store,” or BOPIS shopping, continued to surge, growing 59 percent month-over-month in August and 259 percent year-over-year.

“The fact that even while states are starting to open up, the numbers remain so much higher than typical proves that things will never really go back to ‘normal.’ E-commerce is more embedded into our lives than it has ever been before and that is irreversible,” John Copeland, Adobe’s VP of marketing and customer insights, said in a recent blog post.

Chipotle Chief Executive Officer Brian Niccol told Bloomberg in a recent interview that he believes much of the pandemic-driven surge in business is permanent. He told the publication in March that he expected online to account for between 30 percent and 40 percent of Chipotle’s business within several years. The outbreak has accelerated that trend significantly.

“That was before digital became 80 percent of our business for a time. Now we’re in that 40 to 50 percent range, and that will fluctuate as the dining rooms reopen, but I definitely think there’s a real possibility that’s where it could stick,” he told Bloomberg.

The Associated Press contributed to this report.