Small businesses across the United States have decimated from the COVID-19 pandemic. The coming winter months – which bring predictions of a second wave of infections – will not be any milder and without government help, many businesses will not be able to recover, he says Nada Saundersdistinguished professor of supply chain management at Northeastern.
Considered a key source of employment, small businesses — those with fewer than 500 employees — account for nearly half of all private sector jobs. ONE report by McKinsey & Company in May noted that 30 million small business jobs were vulnerable to the coronavirus crisis.
Small business closings by type
The small businesses that have survived thus far have had to learn in the midst of extraordinary challenges. At the beginning of the crisis, a number of distilleries and breweries were started manufacture and sale of hand sanitizer. Some restaurants adjusted their offerings and turned to delivery and takeout to maintain business.
Measures like these will be even more critical in the coming months, Sanders says, especially as enhanced federal unemployment benefits and small business loans remain in limbo.
“This is an extremely difficult time for businesses—small and medium-sized, but especially small,” says Sanders. “We've had these simultaneous shocks on both the demand side and the supply side, and for a really long time. This is very different from any of the economic shocks we've ever seen before.”
Small business closure from November 4, 2020
Although smaller companies and startups were hit hardest by the crisis, some actually prospered, Sanders says. Companies that were already profitable and used technology to their advantage fared better than others in the early stages of the pandemic.
But even cash-strapped businesses, which tend to have lower administrative overhead, were at an advantage if they were able to be loose and flexible in their decision-making or reinvent themselves entirely, Sanders says. Maintaining strong one-to-one relationships with their suppliers and customers has also led to these businesses doing well.
The impact of COVID-19 on consumer spending year over year
“Most small businesses and entrepreneurs have better visibility along their supply chain and closer relationships with their suppliers than large businesses, simply by the nature of being small,” he says.
Businesses should think strategically as winter approaches and the coronavirus continues to circulate widely around the world. To further reduce costs during this time, Sanders says smaller companies should identify what they want, narrowing their offerings to focus on products and services that ensure customer retention and cash flow. . Some online retailers and mid-sized businesses adopted this strategy even before the pandemic.
Photo by Adam Glanzman/Northeastern University
“We've seen restaurants that are small and financially tight focus on delivery and delivery, and that requires a certain shift in operations, but it also means containment,” Sanders says.
Some grocery chains, small and large, start doing this as the holidays approach, Sanders says. They have reduced their inventory so that they offer less variety, but still meet the needs of their customers.
Although consultancies have encouraged businesses to embrace analytics and digital technologies to better understand the market and suppliers, Sanders says now is the time for businesses to work with what they have, make what it works best for them and not to experiment with new methods or technologies.
Additional stimulus money from Washington will be needed to support small businesses over the next three to four months, Sanders says. Without government subsidies, small businesses won't be able to recover, portending bankruptcies, unemployment and even greater economic damage as Amazon expands its reach.
“It would be economically devastating in terms of the number of people who would be out of a job and the businesses that would be lost,” Sanders says. “It would also be really devastating for consumer choice and what the whole economic landscape could potentially look like.”
Sanders says small business owners might take note that COVID-19 shares similarities with the 1918 flu pandemic. Both crises caused a major shift in consumer behavior and market patterns that reverberated into the next decade , a period known as the Roaring Twenties. For some businesses, it may be a matter of getting rid of it until a vaccine is available, he says.
The US stock market soared on the news that US drug giant Pfizer and German pharmaceutical company BioNTech both claimed their coronavirus vaccines are more than 90% effective. The White House adviser on the coronavirus Dr. Anthony Fauci said that one accepted The vaccine could only be 50 to 60 percent effective.
“If history is any indication of the future, then we can hope that the markets will come back,” says Sanders.
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