Closed store sign

Half of Main Street Retailers Are at Risk of Closing for Good

The latest California stay-at-home orders couldn’t come at a worse time for independent retailers. The orders went into effect at midnight December 6 and will impact over 33 million people in Southern California, San Francisco and the Central Valley areas.

Set to last a minimum of three weeks, running right through Christmas, an unknown number of California retailers will be impacted. Before this all came down, the California Retail Association reported there are nearly 420,000 retailers throughout the state employing 3.2 million people.

Eight out of ten California residents are expected to be affected by the new orders. And since retailers congregate where people do, the new orders are likely to profoundly impact eight out of ten retail businesses too.

While the latest orders are not as draconian as those from earlier this year, when only essential retailers were allowed to remain open, this one is sure to put additional pressure on small independents that, if they haven’t closed down for good, are hanging on by a thread.

The current orders require that retailers other than grocery must operate at 20% capacity. Grocery stores get a reprieve and can operate at 50% capacity.

With California often being the bellwether of trends to come, retailers across the country are bracing for the potential for another round of closures or severe limits to operations now that the second wave of infection is here.

Alignable, the online small business referral network, just took the pulse of over 9,000 local businesses in its network and found that 50% of retailers surveyed believe they are in imminent danger of closing.

50% of retailers are in imminent danger of closing for good
50% of retailers are in imminent danger of closing for good

Other small businesses are expecting worse, like travel/hospitality where 62% expect to permanently close, 61% of gyms and fitness centers, and 60% beauty salons.

Surprising, only 45% of restaurant owners expect to close down for good. Maybe more people are ordering take-out than imagined.

While consumers widely express support for small businesses, like this one from Red Egg Marketing that found 83% of shoppers said they would rather support a local business than a large corporation, what people say and what they actually do are two different things.

Small Business Saturday (SBS), a shopping holiday inaugurated in 2010 by American Express to help small businesses, didn’t do much this year. Despite Small Business Saturday sales reaching record levels of $19.8 billion, that is only a 1% increase from sales of $19.6 billion last year.

Given shoppers’ worry about contracting Covid as infection rates rise, foot traffic on Small Business Saturday was noticeably light. In advance, CNBC reported only 30% of shoppers planned to patronize a small business on SBS, down 9% from levels last year. And RetailNext reported that actual traffic was off 38% from last year.

There was one bright spot for SBS retailers this year. E-commerce and social media orders were up, rising from 43% last year to 56% this year.

The Alignable survey reveals the situation on Main Street is going from bad to worse. After the negative business impact of the pandemic declined steadily from July through October, it took a sharp upward turn in November, reaching 50% who said it is “really” impacting business.

With vaccine just beginning to ship out, a near majority (48%) don’t expect its arrival to help turn around business until after March 2021. Question is, can they hang on till then?

Without a strong holiday season – or more accurately, a really strong holiday – the final curtain will come down on many.

A near majority of small businesses (48%) say they need to do at least 51% to 90% of last year’s 4Q revenues to keep going in the new year. But only half that (24%) actually expect to make those numbers.

And while finances are a perennial small business concern, greatly exacerbated by the pandemic, the number one worry on most small business owners’ mind now is the threat of more government-mandated business closures.

Short-term help may be on the way if the $908 second stimulus package goes through. But it may already be too late for the 24% of small businesses than need to make over 90% of last year’s 4Q revenues to just stay afloat.

Comments Off on Half of Main Street Retailers Are at Risk of Closing for Good