Alignable: Road To Recovery Report (Sept. 2020)
DATA INSIGHTS | MONTHLY REPORT/PRESS RELEASE |
Alignable’s State of Small Business Report: The Road To Recovery, September 2020
By Eric Groves – Alignable, Inc.
Who will have the financial reserves to survive?
15-Second Report Summary: Key Takeaways
- Employment growth heads in the opposite direction
- Inventory & sales outlook signal a weak Q4
- 35%+ of Main St. shops are on the brink of closure by year's end
- Revenue improvements lag far behind returning customer counts
- The new No. 1 SMB concern: cash reserves running out
September's Report, In Greater Detail:
- Current Impact Levels
- Reopening Status & Business Closures
- Recovery Concerns
- Customer Demand & Revenue Levels
- Hiring & Anticipated Employee Growth
- #MyMoneyStaysLocal Movement
- Alignable Research Center & Poll Demographics
Overview
Alignable has collected over 510,000 business owner responses since mid-March, mapping the Impact Of The Coronavirus and the Recovery of the Small Businesses Economy across the U.S. and Canada. Unless otherwise noted, polls in this report were conducted Aug. 29 – Sept. 2, 2020 among 5,557 respondents.
This month’s report was written during the first week of September. In addition to our typical monthly coverage, this month we’re paying specific attention to the small business economy’s B2C sector.
We ran an additional survey of 1,400 retail businesses for a deeper understanding of how the Coronavirus is impacting their businesses, and what they anticipate for the rest of the year. The results were alarming.
AUGUST CORONAVIRUS IMPACT LEVEL
- 70% Are Still Experiencing Negative Effects
- “Significant Impact” Drops To 45%
- Coronavirus Sales Lift Experienced By 13%
- Retail Segment: 65% Don’t Expect COVID-19 Case Levels To Decrease In 2020
Overall, small businesses experiencing a negative impact from COVID-19 decreased by 4% to 70%. Those business owners experiencing “significant impact” decreased 5% to 45%. And businesses reporting a positive impact during the COVID era held constant at 13%.
Some Good News
When we look at the trends over the past four months, we see continued improvement in the level of impact. It’s slow, but steady.
Effect On Retail
Of particular interest was the SMBs’ outlook regarding COVID-19 case levels during the fall shopping season and how that affected sales expectations.
The majority (65%) of retail business owners were not anticipating any improvement in the number of cases in 2020 and 69% predicted a decline in sales compared to Q4, 2019.
Not surprisingly, we confirmed that 63% of these businesses generate a disproportionate share of their sales during Q4.
Considered all together, those three statistics show that Q4, 2020 could be very disappointing for retailers.
Several comments by small business retailers taking the poll supported the statistics. Here's just a sample of what we heard:
“This whole thing is a nightmare!”
"The past 6 months have been something else, to say the least. I’ve been in specialty retail for 44 years, and this has been the roughest 6 months ever. You just have to give 100% to every customer, show that you appreciate them coming in and not going online. Re-educate yourself and employees that you're not just taking orders, but you’re selling! Hope to still be in business in the next 6 months.”
“I don't think the customers will have enough money or confidence in the economy to do much holiday shopping this year. Many people will be grieving the loss of relatives or friends to COVID-19. I also think people will look at the holiday season differently -- I don't think they’ll be doing much gift giving unless it's grocery gift cards.”
"As an independent manufacturer's rep, I sell to retailers. I would need consumers to return to their old shopping habits and at the same level to restore my business to the level it was before COVID struck.”
REOPENING STATUS & BUSINESS CLOSURES
- 61% Of Businesses Are Fully Reopened Now, Up From 56%
- Closed Business Rate Decreases 2% In July To 12%
- 87% Of Closed Businesses Want To Reopen – A 5% Decline
- Retail Segment: 64% Of 2019 Q4 Revenues Are Required To Survive 2020
We continued to see further improvement in the number of businesses reporting they were fully reopened in August, up 5% over July. The number of temporarily closed businesses decreased slightly to 12%.
Meanwhile, 87% of closed businesses reported they plan to reopen. However, that’s a 5% decrease since our July report.
What About Retail Closures?
To get an indication of the number of retail businesses at risk of closure by the end of the year, we asked what percentage of Q4 2019 sales they required for their businesses to stay in business into 2021 and what they anticipated for Q4 sales.
Based on their current financial situation, they estimate that 64% of 2019 sales will be required in Q4 of 2020 to continue into 2021. Combining that with their Q4 sales expectations, over 35% of retail businesses are at significant risk of failure by year’s end.
Even worse, that number could go as high as 50% if consumer behavior does not shift significantly this fall.
While many small business owners believe their current struggles will continue into Q4, some show signs of optimism. These quotes reflect a range of sentiments.
“The virus has had a huge impact on my business. We still are not able to deliver to hospitals, retirement homes, churches and some businesses. Weddings are very small. People do not have the money for casual gift items. Holiday parties, as well as decorating, will not be profitable. The floral industry in our area has taken a financial hit.”
“I am the proud owner of a small retail clothing boutique that started 6 years ago. Think big, shop small, and spend local. We all need everyone's support now more than ever.”
“We have stayed busy; however, it seems like we are working twice as hard -- to earn less money. Unavailable products & supplies from manufacturers are our worst enemy.”
“Schools, country clubs, corporate events, etc., are tending to pass on all their holiday parties due to management policies. Hoping that can reverse to some extent in the near future.”
“I am a wholesale gift rep. Most retailers are optimistic, but they are also cautious, and are bringing in about 1/2 of what they did last year for the 4th quarter. People will put more thought into gifts this year, buying meaningful things versus gift cards. We can only hope this helps our hometown retailers. Every purchase at a small business makes a difference. It is so important, now more than ever, that we support local!”
GREATEST RECOVERY CONCERNS
- Having Sufficient Cash Reserves Is Now The No. 1 Concern
- Customer Fears & Government Reclosures Decline
- Retail: 92% Have Altered Their Operations To Generate Sales
In August, we saw the reclosure risk decline as a major concern, while small business owners shifted their concerns to basic survival. Their greatest worry now is the possibility that their financial reserves will run out, possibly forcing them to close.
Several small businesses have shown that they can adapt to guidelines to help more customers feel comfortable returning to their businesses, even some in very “hands-on” personal services industries such as beauty (hair/nail salons) and massage therapy. Here’s what a few had to say:
‘We’ve spaced out our salon with hair stations that are 6 feet away from each other. Our shampoo bowls & front desk are separated by plastic shields. We closed our waiting area. We also have masks & hand sanitizers & face shields for all our staff & clients. And we have one-use, disposable capes for each individual client for color or for haircuts.”
“We changed many things and we have our protocol in place to make sure we have the best, safest setup. We temperature check all clients and therapists each day. Everyone must wear masks. We posted many signs to show clients and massage therapists all of the measures they must follow to ensure a safe environment for everyone.”
How Others Are Combatting COVID’s Effects
We found over 92% of retail businesses have adjusted how they operate in order to stay in business. From implementing stringent safety measures to incorporating online services to opening up outdoor seating areas and offering curbside pickup, they're finding ways to keep the doors open.
That said, with the change in the seasons, some of these options might become difficult for many to continue through the remainder of the year. However, several Main St. merchants are already trying to pursue some creative solutions:
“I am tenting the patio and adding outdoor heaters for October and November.”
“With only 25% of our indoor capacity permitted for the fall and winter, I hired a contractor to enclose the porch and we’re looking into a tent over the patio area. It will give us additional seating for the winter. And we’ll have it for future years down the road.”
“We’ll continue to serve our customers on the deck and add our heaters in the cooler climate for as long as we are able to. Curbside pickup will continue as we have done through this pandemic. We only hope that we can open to at least 50% capacity inside after the deck closes.”
This chart shows a variety of other measures small business owners are taking to combat the effects of COVID -- looking ahead to the holiday season.
CUSTOMER DEMAND
- Continued Improvement In Customers Returning
- 33% Of Open Businesses Report Return To Pre-COVID Levels
- Retail Segment: 69% Anticipating Decline in Q4 Sales
Recovery depends on customers returning to businesses and we continue to see movement in the right direction here. In this chart of currently open businesses, we’re looking for a continued shift towards customer percentages returning to Pre-COVID levels.
While those with over 90% of customers returning showed only modest growth, we were encouraged by the decline in businesses reporting less than 25% of their customers returning.
When we include all businesses (even those that are currently closed), we see a similar improvement anticipated for the next 30 days.
Retail Impact
Anticipating customer demand is a critical skill for retail business owners, since they often have to make inventory purchasing decisions months in advance of demand.
As mentioned previously, we learned that 69% of them expect sales levels below what they experienced in 2019, which is not too surprising. However, we also found that 33% predict sales levels less than 50% of their Q4, 2019 revenue. That figure is a cause for concern.
Significantly lower Q4 sales in the retail sector will have broad-reaching impact on local economies.
We’ve already seen a shift to lower levels of inventory purchasing: 59% of retail business owners polled said they were reducing purchasing based on anticipated Q4 sales declines.
And this, in turn, will impact the already-struggling supply chain. Around 40% of retail businesses are not receiving products on a timely basis now. This could worsen in the coming months.
As we get closer to the holiday season, we also will see:
- Lower levels of temporary employment in this sector (The National Retail Federation says 2019 seasonal jobs exceeded 500,000. Chances are good those levels will be much lower in Q4, 2020).
- Commercial retail real estate vacancies balloon
- Lower tax collections (payroll and sales) to support local government spending.
This will adversely affect everything from education to infrastructure spending. But it all starts with lower expectations around Q4 sales, as evidenced by this chart.
REVENUE LEVELS
- Revenue Growth Lags Behind Customer Growth
- 46% Report Revenues Under Half Of Pre-COVID Levels
The most important component of economic recovery is returning to Pre-COVID levels of revenue generation. This will require both a return of customers along with the purchasing behavior they had prior to the crisis.
In the chart below, you can see how revenue growth is lagging behind customer growth for many businesses operating below Pre-COVID levels.
While we saw some solid improvement in customer levels in August, on the revenue side, there was only a modest lift.
HIRING & ANTICIPATED EMPLOYEE GROWTH
- Anticipated August Employment Falls Short
- September Outlook: Decline To May Levels
- Significant Decrease In Year-End Projections
July’s projected growth in August job creation fell significantly short of expectations with businesses reporting 82% of Pre-COVID employees back on payroll.
And now September’s outlook shows a 15% decrease in employment with an overall decline to 70%, which is back to May levels. In addition, estimates for January 2021 were also disappointing.
Just one month ago, small business owners were expecting a return to full employment by the end of January. But now, they’re estimating a return to only 90% of Pre-COVID employment at that point.
Retail Hiring Is Even More Troubling
When we asked retail business owners -- who traditionally hire seasonal employees for the fall holiday season -- what they anticipate for Q4, 66% reported it was too soon to tell whether or not they would create those job openings.
Many might have all of the staff they need if their current sales estimates are accurate.
MY MONEY STAYS LOCAL
Join the movement to help our local businesses & economies recover
As mentioned earlier, economic recovery can only happen with a massive change in human behavior.
The Coronavirus Outbreak caused us all to shift into survival mode. As local businesses were forced to close, we shifted the vast majority of our purchasing power to online businesses that delivered products directly to our door.
While that was great for companies like Amazon, the impact of this change in our behavior has devastated local business owners. And the statistics we just shared about expectations for 2020’s holiday season show that the negative effects of Amazon purchasing might not subside in time to save many Main St. businesses.
Changing our behavior for a day in November when we are all encouraged to Shop Small on Saturday won’t solve this problem. We need a long-term shift in consumer behavior within all of our communities – moving away from online purchases supporting out-of-town businesses and moving toward a dramatic increase in shopping at Main St. stores.
We all need to keep that money in our communities to boost and expedite our local recovery, too.
We believe the first step in moving in this direction is for us all to simply do the math and understand as business owners and consumers how much of what we spend currently stays within our communities and how much goes elsewhere.
I did the math both for Alignable (66%) and myself (44%), and I encourage everyone reading this report to do the same and share your numbers with others.
Then increase those numbers by shopping local as often as possible.
Only by bringing awareness to these levels can we create the movement necessary to inspire the change needed for our economies to recover.
Learn more about the #MyMoneyStaysLocal Movement NOW.
Several Alignable members have already expressed their support for the movement, which is a step in the right direction:
“Supporting small and local businesses has always been important to me. Now it’s critical for their survival. Small businesses create tons of jobs, and significantly contribute not only to the economy, but to healthier communities. Where you spend your money matters.”
‘The Upper Tampa Bay Chamber is working hard to help any and all businesses. We are having a scavenger hunt presently, bringing attention to 100 businesses. We are also hosting our 'Relationship Builders' breakfasts and lunches. We're honoring mask requirements and proper seating. Blessings to all!”
“I plan on buying gift certificates at local businesses (especially restaurants) as gifts for holidays, birthdays, anniversaries, and graduations. Will you join me and start a trend?”
We're thankful for all of the people who have joined the movement so far, and look forward to many more helping their local merchants to get through a very challenging Q4.
ABOUT THE ALIGNABLE RESEARCH CENTER
Alignable is the largest online referral network for small businesses with over 5.5 million members across North America.
We established our research center in early March 2020, to track and report the impact of the Coronavirus on small businesses, and to monitor recovery efforts, informing the media, policymakers, and our members.
For more details about any of these findings, including the methodology behind our polls, please contact Chuck Casto at press@alignable.com.
FOR ADDITIONAL COVID-RELATED POLLS & INSIGHTS FROM ALIGNABLE:
Comments (1-10)
CONSIDER THIS...I have been working with small businesses on a concept which I call: "Niche Enterprising". These are offshoot businesses from the original business. For ex: A restaurant learned they can perform curb service, then started offering home/business delivery services, then started a catering business, now are offering bake goods and delivering, and lastly, they are renting out their kitchen to a new start-up company baking doggie biscuits. This not only helped in making up a large portion of income losses, but the profit margins on the new "Niches" were much greater. Then we incorporated the 'Niche Companies" under statuses that will (in 6 months) allow the client to apply for "Diversification Certifications". With this kind of certification, that will allow the client to apply for government and/or corporate contracts that could produce multi-million dollar contracts. The dog biscuit company because of their multi-facet "Diverse Certification" (Women Owned & Vet Owned Company) is already getting bites to selling their products in large box stores as well as military commissaries.
This is the time to be creative and use your brain-power to "NICHING" your way to SUCCESS!!!
I have not been able to conduct my art classes since mid March so there has been no business at all since then. Now, I have just built an outdoor patio classroom and have required spacing for students so I hope to be back in business by next month.
Since we are in the rental business for events, weddings, trade shows, etc,, our business and others like ours have been impacted tremendously to the negative. While the virus is real, shutting down the country was and is worse. People should be careful, follow the best safe practices but we should have the right to choose whether to live our lives or become hermits. The death toll from other health problems are just as bad or worse than covid. Covid is also blamed, whether it is truly the cause or not.
We have been done a great disservice to our lives. The fact that media feeds on the fear promoted by the far left, then hammers it home every day all day has nothing to do with free speech and honest reporting. They have all lost sight of the right thing.
It's tough to see people struggle, I know and understand the fear of not being able to adequately provide. However, we must understand that many of the local businesses were barely hanging on prior to COVID, many were closing because of the high cost to do business in Bozeman, high store front rents, taxes nearly quadrupling for commercial property owners and then having the additional costs passed on to tenants. We had become a hospitality based economy as well, more restaurants than clothiers, more bars than hard goods outlets and so on. But business owners must remember this: We, you and I, burned our ships behind us when we came to Bozeman. There is no place to escape to. People from other parts of the country are escaping TO us! We must buckle down, rethink things, ask one another for help, run our businesses responsibly in the era of COVID (insist your customers ALL wear masks. I won't personally shop where people aren't wearing them. It's up to the store owners to enforce. No pity if your ship is sinking and you won't plug this simple, easy to fix hole in the boat)! Get fanatical about protecting your customers when they come to your place of business. Offer incentives for them to visit. Reach out, don't wait for them to come to you. Remind them you're here and working hard to survive and you need, and deserve, their help. People will respond. And, please, next time someone floats the idea of a local option sales tax, INSIST that your political representatives embrace the idea and pass a law to allow us to vote either for or against it. Taxes, especially downtown commercial property taxes, are hurting us. Peace and good luck!
Great Stuff! We need to support each other!
This tough , But if they could just ditch those face diapers we could at least see smiles again !
Very good detail information, However what I have been experiencing is that there are a lot of loan programs (PPP, SBA loans ) and many more, but at some point you have to pay them back with interest and what ever grant programs that are out here always always end up with we ran out of funds or you're in a pool hopefully waiting to be chosen. If you are a struggling company especially due to covid 19 where is the help? Loans eventually just take you out of depth to put you into a greater one!
This information is extremely helpful in planning the Comeback of the Community.
We have stayed open with no health issues and are very grateful for that. We look forward to the resumption of our tourist industry in the winter. We had just finally recovered our business numbers before the pandemic, from Irma and Maria direct hits on our island. Two Cat 5's and a pandemic have certainly been a challenge.
I am expecting there to be a 2nd surge of some proportion here after it dipped way down with stage 3 of opening up happening end of June - fall is coming, and schools have reopened; signs of it already. Translation is an essential business that can be done remotely so we simply went down to about 30% at worst, and work has been exceptionally high since July. I don't know if a 2nd surge will affect us. For example, if there's a lot of virtual work being done, then I imagine that software companies and such may be hiring new people, which means a spate of resumes, educational backgrounds, some of which will be not in English. Financial statements that include earnings from abroad, maybe for applications. Tutoring, teaching, teaching-related, maybe. People traveling, of course, is generally not in there.
I "bought local" when my 40 year old washing machine gave up the ghost. My Electrolux is US-made, and the vendor is a 3rd generation family-run local store in Canada, my city - showing the kind of expertise you'd expect (i.e. excellent).