Of all the sectors impacted by the COVID-19 pandemic, SMBs look set to be among the hardest hit.
Small to medium businesses generally operate at very tight margins as it is, and they don’t have the same safety nets that larger corporations are able to fall back on. As a result, predictions suggest that up to 7.5 million small businesses in America are at risk of shuttering permanently in the coming months unless they’re able to find a way to recoup costs, and get back to some level of regular operation.
The expanded impacts of this – on employment, opportunity, local economies, etc. – are difficult to fully comprehend. But while the forecasts are dire, it’s likely of more value to get some sense of what’s actually happening on the ground. What are SMBs seeing at the moment, how are they dealing with the impacts of the pandemic, and how do they feel about their situations moving forward?
This week, Facebook has published a new report to shed some more light on this, incorporating responses from over 86,000 people who own, manage or work for a small to medium-sized business. The data also includes 9,000 operators of “personal” businesses (i.e. people who reported that they were “self-employed providing goods or services”).
The report provides a range of insights into SMB sentiment, and may also highlight rising areas of opportunity moving forward. You can read Facebook’s full report here, but below are some of the key points of note.
First off, Facebook’s report provides some scale as to how many businesses have actually been significantly impacted by the COVID-19 lockdowns, with a look at the percentage of SMBs in each sector that are currently unable to operate.
Many businesses, of course, have been able to shift to alternate operational models, like working from home or putting more focus on delivery. That makes it difficult to get a true sense of the full impacts of the current lockdowns – but this chart gets a little deeper into the actual reality of the situation.
As per Facebook:
“According to the survey, 31% of small and medium-sized businesses have shut down [entirely] in the last three months. The situation is worse for personal business (52% of which report shutting down), hotels, cafes and restaurants (43%) and services like wellness, grooming, fitness or other professional services (41%).”
Most of these trends are as you would expect, with high exposure businesses going into forced hibernation. But it is interesting to note the scope of the impacts, with all sectors seeing at least some closures. The numbers also wrap some further context around the 36 million unemployment claims in the US over the past six weeks.
The question, then, is how many of these businesses expect to recover, and rebound once the lockdowns are lifted?
That’s obviously difficult to answer, as we don’t know how long it’s going to take to ‘snap back’ to our normal way of life, and the longer the forced closures remain in place, the worse the economic situation gets.
In general, however, the majority of SMBs remain cautiously optimistic.
There are a lot of ‘maybe’s here, but most notably, there are very few ‘No’s. That reflects the pervading uncertainty, but also provides some hope of getting most people back into employment, and the economy back on track, at some stage.
In the report’s further notes, Facebook also provides some context as to current impacts on revenue, even for those businesses that have remained in operation.
Unfortunately, for almost everybody, 2020 is essentially a write-off for growth plans.
But as noted, there are some indicators of future potential, in addition to enduring owner optimism/hope.
More businesses are exploring online connection opportunities and digital payments, which are both progressive steps towards the next generation of consumption.
That may actually end up being the biggest long-term shift we see stemming from the COVID-19 shutdowns. With consumers forced to shop online, many will become more accustomed to the convenience of such, aided by the simplicity of digital payments. For those already working in the digital sector, that could lead to ongoing opportunities to help usher more businesses along this shift, with many, potentially, putting increased reliance on digital connection, and shifting their business models in line with what the next generation of consumers are growing to expect.
Indeed, while eCommerce accounted for only around 16% of total US retail sales in 2019, that figure is steadily inching upwards year after year, a trend that’s expected to continue.
COVID-19 may exacerbate this shift – and while retail is only one of the sectors highlighted here, the trend may well be indicative, which could prompt more businesses to consider their options for digital operations, meeting consumers where they’re spending more and more of their time.
Essentially, the lockdowns have forced many businesses to look at their online opportunities, which could have benefits going forward, and could even help SMBs expand their reach into new markets in future. But the immediate path ahead remains tough and uncertain, at least until some sort of breakthrough is reached.
Hopefully, there are enough alternative revenue paths to keep most SMBs running as we navigate through the pandemic – but it may well be worth exploring digital options, where possible, to align with broader consumption shifts.