Mom-and-Pop shops are one of the most traditional forms of commercial endeavor. But can these familiar icons of a more innocent, analog era survive as societies become increasingly digitized, or are they, just like other older members of society, in the virus risk group? And if the pandemic kills them off, will it dehumanize the communities they contributed to?
The cornerstone of every main street
The name says it all: Mom-and-Pop shops are family-run, small-scale, often somewhat old-fashioned businesses that are often held in great affection, despite perhaps being past their prime. Many are general stores, grocers or drugstores, although the term is often also used to describe other kinds of retail outlets such as barbershops and diners. Small traders, ranging from builders to children’s party organizers, also fall under this loose definition. Many of these firms have been severely affected by COVID-19, and their future is uncertain.
Small is beautiful
Intensely local by nature, Mom-and-Pop shops have always sprung up to serve the needs of the communities around them. Towns with large supermarkets often also have a scattering of small food stores too. These play an important role in providing top-up shopping or last-minute purchases. Elderly, lonely or busy people may do all their shopping at a Mom-and-Pop shop because it’s convenient, can be reached on foot, offers a chance to chat and is staffed by friendly faces. In other words, local stores such as these offer a mixture of convenience, social cohesion and community spirit, in addition to the milk and bagels you supposedly came for.
Similar considerations also apply to other types of small businesses. Homeowners derive a greater sense of security when dealing with a local plumber recommended by their neighbor than by picking a name out of a digital hat on the internet. It’s easier to pop in to a local hairdresser’s than to spend time, gas and parking money going to a larger, more anonymous establishment farther away. And why would you want to do so anyway? Many people enjoy building up a relationship with a trusted professional in the neighborhood over the years. Mom-and-Pop shops are not merely used in the functional sense; they are also loved.
How the virus attacked the economy?
But then came COVID-19. Warm feelings about neighborhood enterprises were suddenly replaced by hard facts. The number of active business owners in the US fell by 22% from 15 million to 11.7 million between February and April 2020, the largest drop on record. African-American businesses were hit hardest, with a 41% reduction in business activity, followed by above-average losses for Latino, Asian and female business owners. These losses at the early stage of the pandemic affected not only the entrepreneurs but also their staff 1.
This effect was replicated to different extents elsewhere in the world too. By the end of May this year, one out of four small businesses in developing countries was expected to close permanently due to the COVID-19 crisis 2. Two-thirds of micro firms (companies with fewer than ten employees) were strongly affected by the crisis, compared with 42% of large companies. The effect on micro-, small- and medium-sized enterprises was especially severe. One reason for this was because they tend to be overrepresented in sectors most strongly hit by the crisis, such as food or retail services 3. Small firms also usually have fewer assets and limited cash reserves to cushion the blow of lockdown-induced liquidity shortages.
In order to fully grasp the impact of the virus, it’s worth noting that the number of active business owners in the US decreased by only 5%, or 730,000 in all, during the 2007-2009 recession. In contrast, the 22% loss earlier this year took place over just a couple of months, rather than several years. The speed and severity of COVID-19’s effects are simply unprecedented 1.
Bad for business. Bad for happiness.
Less visible than boarded-up shop frontages, but no less present, were the mental health effects of the pandemic among small traders. A survey of small business owners in the UK at the end of September 2020 revealed that 83% of them felt that COVID-19 had had a severe or major impact on their business. While 70% of them reported that they had experienced stress in the last 12 months, for 24% of them this was so bad that they had sought professional help 4. Worries about how to adapt their business and stress over supporting their employees were key areas of concern. With the number of cases rising again in many countries, small-business owners are once again experiencing uncertainty and anxiety about dealing with possible new restrictions.
Help from above
To give businesses and individuals breathing space during the economic constriction caused by lockdowns, many governments have been providing temporary relief packages. In the US alone, this amounted to over USD 800 billion by August 2020 1. Yet even with this amount of financial aid, nearly a quarter of small businesses closed. A major reason for this was that PPP loans were not issued to businesses that did not have existing relationships with the banks. Large companies used all the available PPP money because they were at the front of the line. But small businesses owned by members of ethnic minorities were at even more of a disadvantage. In other countries, governmental support measures for businesses have featured initiatives such as a basic income for sole traders, help with paying employees’ salaries and support with retraining and investment.
However, this kind of support isn’t universally accessible. For instance, there are complaints that 3 million self-employed people in the UK have received no financial help since March 5. Also, it can’t go on forever, and in any case only goes a certain way towards papering over the gaping cracks in small traders’ earnings. Recognizing the need to access additional finance quickly, the UK set up the nationwide Bounce Back Loan Scheme 6. In the US, financial assistance programs have been offered in a more decentralized way: on a state, county and city basis. To support small businesses in Australia, the government and banks have stepped in with emergency financial relief and stimulus packages 7. Wherever in the world you look, the aim is to keep businesses alive during the crisis, boost their cash flow and ease business owners’ access to working capital so that they can continue to survive. This is particularly important as the wallets of the customers using Mom-and-Pop shops aren’t as full as they used to be before the crisis.
Prospects for recovery
Governmental help has proven to be a welcome temporary treatment for the devastating blow dealt by COVID-19, but it’s by no means a cure. Some small businesses in hard-hit sectors will never recover, while for others it is likely to take years 8.
The good news is that state-financed aid is only one of a number of economic salvage or renewal methods. Let’s look again at why Mom-and-Pop shops exist, but this time from their owners’ point of view. This form of commerce offers several advantages: it allows people to exert control over their own income and employment preferences, it gives many small-time entrepreneurs the chance to commercially develop a craft form (such as hairdressing or carpentry), it allows them to be employers rather than employees and it creates a worthwhile connection to the community that confers a certain status and recognition. For family-run firms that continue through the generations, it provides stability and the chance of doing business with people you trust. There’s the additional convenience of always having extra hands to help, and sometimes, even the bonus of adjoining accommodation.
These factors all provide a powerful stimulus to keep the business going, or to resuscitate it in some form as soon as possible. Of course, it does help to have fertile ground in which to nurture it back to life. A favorable tax, zoning, employment and regulatory environment are prerequisites, so it’s up to governments to offer these. Another important reason to preserve these small businesses is that alternative forms of employment aren’t readily available. The sudden shutdown of large parts of the economy in the spring of 2020 forced over 20 million people out of their jobs in the US alone. The initial economic pain is far from over in countries where the pandemic is still unchecked, such as within Europe and the US. This is in marked contrast to countries such as China or New Zealand, where the virus was tackled more decisively or kept almost entirely out of the country. The health of a country’s economy seems to mirror the health of its people.
In September 2020, the unemployment rate in the US was still high at 7.9%. In the absence of a thriving employment market, individuals are more incentivized to start up or renew a business in which they can hire themselves and perhaps a few other people. This is particularly true of immigrants, who had more difficulty in getting hired even before COVID-19 struck, and who are keen to gain an economic foothold in their adopted country. The number of start-ups in the US has soared over the past few months, indicating that the spirit of entrepreneurship is still alive and well 9. Yet the ripple effects of the initial wave of the virus are still unclear, and a second wave could knock start-ups, or even steady small businesses, off their feet.
Adaptations and restrictions
In the ‘new normal,’ where personal contact has to be kept to a minimum to restrict the spread of the virus, adaptability is key. Unfortunately for cash-strapped Mom-and-Pop shops that operate from a brick-and-mortar storefront, even just meeting today’s most basic hygiene and safety expectations costs money. Protective items such as plexiglass screens, signage, disinfectant spray, paper towels, bins, personal protective equipment and endless other paraphernalia needed to ensure the safety of customers and staff all add up.
One obvious solution is to branch out online. The restaurants that have done better since the start of the COVID-19 crisis are the ones that have invested in technology and used their digital capabilities to increase takeout and delivery. However, shifting to more off-premises trade is likely to erode their profitability by limiting their ability to sell high-margin items, such as alcohol and desserts 8. Some small general stores have acted in a similar contact-limited way by offering curbside pickup. A downside here, apart from the extra cost of paying staff to pick and bag products, is that the lack of browsing means that customers don’t casually add extra items to their basket. Other brick-and-mortar stores have teamed up with digital businesses to offer a drop-off and pickup location for online orders.
However, most Mom-and-Pop shops only have one outlet. Some combination of public and private aid may be necessary for these small operators to access the technical and financial support they need to compete with larger ones that can build contactless solutions at scale 8. But however small they are, they need to acknowledge and accept that their customers expect them to be digitally competent. It’s now crucial to their survival to create a good website, stay on top of social media, keep profiling themselves and build online connections. Unfortunately, the skills, knowledge and techniques required to do so are at odds with the small-scale, highly personal, down-to-earth appeal of most friendly neighbourhood enterprises.
It’s also worth remembering that many small businesses entered 2020 with low financial resilience, just managing to break even or even operating at a loss before COVID-19 struck. EBITDA margins are typically below 5% for small retailers selling staples such as groceries 8. Being small players, Mom-and-Pop shops usually don’t have the market power to demand cost savings such as rent reductions. What’s more, debt is an important component of many small businesses’ financial obligations. Small manufacturers who took part in a recent economic survey stated that they spent an average of 30% of their revenue on servicing their debt 8. With so many competing and relentless demands on their financial reserves and borrowing power, there’s not a lot of wiggle room.
The future of Mom-and-Pop shops
The way in which COVID-19 has infected different individuals in the population is replicated to a wide extent by the economic effects. Depending on their nature and underlying health, some businesses have passed through it completely or largely unscathed, whereas others have been severely affected or taken out entirely. Mom-and-Pop shops clearly belong to the “vulnerable” category, although many can survive and even thrive again if given appropriate and sufficient care.
The person-to-person contact offered by Mom-and-Pop shops will always be an emotional necessity for us as human beings. In fact, after the loneliness and disconnection of lockdown, it’s valued now more than ever. Deliveries from Amazon can’t replicate the pleasurable experience of wandering down a local street with a good friend on a sunny day to browse the shops and have a drink together. Passing quickly through a faceless restaurant drive-in to collect your takeout isn’t as enjoyable as settling into a comfortable chair at a friendly diner. Despite the upsurge in digitally enabled jobs, no amount of computer code will ever repair a leaking roof, massage your feet or give you a great hairdo. What’s more, when the waitress at the snack bar knows not only your name but also your favorite sandwich, you feel instantly at home.
Mom-and-Pop shops are about community, emotion, trust and familiarity. So when they come under attack, it’s personal. They’re a key part of our whole economic family. But it remains to be seen how many will survive coronavirus. It would be a crying shame if the smell of freshly baked bagels, the candy handed out to shoppers’ children by friendly store owners and the jokes told by the neighborhood barber were consigned to family folklore.
Cathy Scott is a British journalist, copywriter, editor and translator living in Dutch suburbia. She has written for Expats Magazine, Living France and a wide variety of corporate magazines. She loves cat videos, café culture, musicals and big hair.
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