Inside her home, Farla Efros has every coffee percolator and expresso churner a caffeine lover could dream of, yet, in COVID-19 times, she makes the trek every morning to her neighborhood barista.
And, the reason’s much bigger than a cup of joe.
Efros, like many people feeling the ripple effects of COVID-19, is taking up a personal mandate to support local restaurants and mom-and-pop shops by, for example, committing to a couple take-out orders a week from her favorite neighborhood diners. Or, grabbing her morning coffee from a local shop versus at home or from a larger chain like Starbucks.
It’s no secret: While no person or business will walk away from COVID-19 unscathed, the pandemic has dealt quite the blow to small businesses.
Just weeks after the health crisis’ onset and prior to the availability of federal government aid, a report from the Proceedings of the National Academy of Sciences of the U.S. found the pandemic had already caused “massive dislocation” among small businesses.
Watch on FN
PNAS researchers surveyed 5,800 small business owners between March 28 and April 4, and nearly half were forced to shut down temporarily and most were struggling to stay afloat amid a stoppage in revenues. For instance, the median firm with monthly expenses over $10,000 had only enough cash on hand to last roughly two weeks.
Fast forward to September and 88% of U.S. small business owners told Babson’s Goldman Sachs researchers that they had exhausted their Paycheck Protection Program (PPP) loan, part of the federal relief offered via the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
While challenges vary across business type — finance and professional services firms have generally fared better than retail, arts & entertainment and food industries — an overwhelming rise in altruism coupled with a growing need to foster feelings of community (see: we’re all in this together) have appeared as lifelines of sorts for some independent businesses.
“I believe people are really asking themselves: ‘How do we continue to support our local businesses so they can stay around?’ Because obviously the government funding will only happen for so long,” explained Efros, president of HRC Retail Advisory.
It makes sense for Efros and many of those who find themselves gainfully employed amid a global crisis to lean in and support the communities they’re a part of. But Efros and many of her peers in retail will tell you it’s going to take a lot more than a few kind hearts to save stores saddled with debt and unable to generate much sales.
“I don’t know that altruism towards local is going to work at scale — especially in period of economic uncertainty when we’re all a little tighter in terms of how much we spend,” explained Ethan Chernofsky, VP of marketing at Placer.ai.
Instead, Efros and Chernofsky argue that the future of many small businesses will hinge more closely on their ability to tap into creativity and convenience.
When it comes to the latter, local retailers already have a leg up — i.e. they’re in the neighborhood — it’s what they choose to do with it that will make all the difference.
“Small, local retailers can have this notion of personalization,” said Efros. “And what I mean by that is you get to know people in the stores and [vice versa]. So these stores and their [staffers] can easily make the experience very convenient for you. If you’re comfortable walking into a store, they can help you out. If you want to go in after hours, they can [accommodate that] and help you out. They have so much more flexibility. They can allow for a [range of] possibilities versus a Walmart or Target with less flexibility and [not as tight] customer relationships.”
What’s more, according to Melissa Gonzalez, founder and CEO of Lion’esque Group, while big firms like Amazon, Walmart and Target were more advantageously positioned at the outset of the pandemic, nine months in, some smaller businesses — the ones that are more likely to come out on top — “have found their way to pivot.”
“They’re now doing order ahead, curbside pickup and things like QR codes [which allows for contactless transactions] — they’ve done the work and positioned themselves to be adaptive and find new opportunities,” explained Gonzalez. “Some are even doing livestream from their stores. We have a brand doing a pop-up shop in Midtown Manhattan. And [the owner] was doing livestream tutorials from the shop and showing customers how to style the sweaters and other items in the store.”
As the pandemic stretches on, that kind of resourcefulness and innovation could become key differentiators for smaller firms because, as Chernofsky cautions, they’re not the only companies benefiting from proximity. Big chains have the technical savvy and capital to place stores exactly where they need to be to best serve the largest share of customers.
“The biggest thing that’s going to drive success for smaller retailers over the short term is going to be: Can you understand the trends that are affecting the big players, too?” he explained. “Local and proximity have become critical factors for success [in the era of COVID] but that affects big and small companies alike.”
He added, “It’s going to be creativity and good ideas [that tip the scale]. Are you willing to try things? If you’re in a situation where the odds are against you, you have to say: ‘What assets do I have that I can use?’”
Gonzalez, whose firm specializes in retail innovation, is steadfast that as things even out post-COVID-19, customers will start to gravitate back to more exciting in-store experiences as well as maintain their desire for convenience and efficiencies. In other words, any smart investment in ingenuity now could yield dividends in the future.
And, even in the current economic environment, there is still wallet share up for grabs.
“It’s not like we’re not spending. [There are people who] have the cash and, if you think about it, we’re now spending it on different things because we’re not going on vacation,” said Efros. “So a lot of it we’re spending in our home. As a retailer, it’s [thinking about how you can] satisfy those needs we now have. Where do you fit into that?”