COVID-19 has shut hundreds of the Philly-area’s small businesses, Yelp says. And that’s just for starters.
The widespread loss of so many small businesses is painful for owners and a poor indicator for a broader recovery, one expert said.
For seven years, Maxine Sheaffer owned an art studio in Philadelphia’s Manayunk section, where aspiring painters went for lessons and workshops. Her studio, Art on Main, was a gathering place to explore creativity, said Sheaffer, 39, who ran the business with her husband and a part-time worker.
Sheaffer’s studio closed in mid-March after Gov. Tom Wolf ordered the temporary shutdown of businesses deemed nonessential, as the wildfire-like spread of COVID-19 made gatherings dangerous. Sheaffer lost her customers and couldn’t earn enough on art commissions to pay bills. She made the hard choice in May to close Art on Main forever.
“It’s been very difficult,” Sheaffer said. “All you can do is be hopeful that in the future this isn’t going to continue.”
Sheaffer’s studio is among thousands of small shops, salons, studios, and eateries that couldn’t survive the pandemic. In the Philadelphia region, at least 252 businesses have permanently closed between March 1 and July 10, according to Yelp, the business listing and review website. That tally is almost certainly an undercount, as it includes only businesses that reported their closures on Yelp.
More small businesses are expected to go under after weathering the first five months of the pandemic, experts said. Operating a small business is challenging enough in good times, but now they are navigating government restrictions, cautious consumers, and widespread remote work that has slashed downtown foot traffic, experts said.
The widespread loss of so many small businesses is not only a concern for individual owners but will also slow a broader recovery, said Joel Naroff, president of Naroff Economics, a consulting firm in Bucks County. “That will contribute to the problems of trying to get the economy growing at a fast pace because that will raise the unemployment rate.”
Small businesses collectively employ almost half of all private-sector workers nationwide and make up 44% of economic output, according to the Small Business Administration. As of 2017, a vast majority of businesses in the Philadelphia region qualified as small, with 99.7% employing fewer than 500 people, while 53.7 percent employed fewer than five people, according to the Economy League of Greater Philadelphia.
Jennifer Kinka saw her staff shrink from 21 employees to seven after she closed two of the three storefronts of the Nesting House, a retail business she launched in 2010 to offer cloth diapers, wooden toys and other sustainable childcare items to new parents. Though the business has an online presence, most sales are made in-store and foot traffic was suddenly a fraction of what it was before the pandemic, she said. Kinka made the tough choice to shut down her South and West Philly locations in mid-May, leaving only a Mount Airy shop.
“I woke up sick to my stomach when I realized I was going to have to pull these out of the communities,” she said. “There were many, many people who relied on them, but our hands were tied.”
It’s impossible to get a definitive count of local businesses that shut down during the pandemic. Representatives for state and city government agencies, chambers of commerce and local trade associations said no agency or group keeps such tallies.
And any count of failed businesses will likely miss those operated solely by owners. Consultants, independent contractors, and “solopreneurs” — who run shops by themselves — are often not included as small businesses since they don’t have employees, said Maura Shenker, director of Temple’s Small Business Development Center. Plus, there is an informal economy of businesses that operate without a license, such as those that run out of their owners’ homes, she said.
Still, some firms have tried to quantify the damage. When counting temporary closures, there were 2,053 businesses in the Philadelphia metropolitan region that were still shut down as of July 10, Yelp said. Yelp declined to share the total number of Philadelphia-area businesses in its database.
The number of small businesses open in the Philadelphia metro area retreated 15% between January and July 24, according to data from the San Francisco software company Womply, which was published by Opportunity Insights, a Harvard-backed research group.
Womply has tracked transactions for just under 9,000 firms in the Philadelphia region, and counts businesses as closed if they have not seen a debit or credit card transaction for at least three straight days. The 15% decline amounts to about 1,350 Philadelphia-area businesses that are still closed since January.
The leisure and hospitality industry was hit harder, with the number of open businesses in that sector down nearly 21%. Education and health services businesses fell 33% since January.
Retail and restaurants have fared the worst during the pandemic, according to Yelp’s national data. Between March 1 and June 15, more than 27,600 retail stores have temporarily or permanently closed, followed by nearly 24,000 restaurants. About 20% of all closures were retail businesses, and 35% of those are permanent, Yelp said.
Small businesses face the added challenge of having fewer resources than large corporations. Small businesses often carry enough cash to last a month and don’t have as much access to credit or loans as larger firms, Temple’s Shenker said.
Government grants and loans — such as the federal Paycheck Protection Program — have kept many small businesses afloat. More than five million PPP loans totaling more than $521 billion have been approved as of July 31, according to the SBA. But once that money runs out, more small businesses will close, said Naroff, the Bucks County economist.
Not everyone has the same access to these lifeline loans, some advocates said. Jennifer Rodriguez, president of the Greater Philadelphia Hispanic Chamber of Commerce, has worked with businesses that have struggled with applying for loans or grants, and have had trouble transitioning to virtual platforms. Rodriguez notes that low- and moderate-income communities “don’t pivot to technology and online purchasing at the same rate as more affluent communities do.” That means their business models still have a strong need for in-person interaction.
She worries about the impact the pandemic will have on the local hospitality industry, too. “The Latino is the backbone of that industry, with both workers and owners,” she said. “For our community, it would be really, really devastating to see those businesses not make it.”
Yelp’s national data show the biggest spikes of permanent closures occurred in March, followed by May and June. That suggests businesses that were already struggling closed right away, then businesses that tried to hold on were forced to close in recent months, Yelp said in a recent report.
Shelley Marine and Karen Cooke are affectionately known by their customers as the Shiva Ladies. They own In Time of Need, a two-person business that helps plan shivas, funerals and memorial services in the Philadelphia region.
Marine said they used to get two or three calls a week pre-pandemic, but their phones stopped ringing once restrictions were placed on large gatherings. They’ve been out of work since March 11.
In Time of Need has been in business since 2010, but Marine isn’t sure how much longer it can last. What upsets Marine the most is not potentially losing the business, but the inability to help the community.
“This is everyone’s time of need, and we can’t do anything about it,” she said.