Small Retailers Haven't Recovered Enough To Be Ready For Economic Resurgence

As the weather warms and now that every adult in the U.S. is eligible to receive the coronavirus vaccine, consumer demand for retail is at its highest levels since the pandemic first hit the country.

Despite the best efforts of the federal government to support them with stimulus packages, many small businesses are still suffering effects of the pandemic, leaving them at a disadvantage when compared to larger companies in capitalizing on the improving economy.

Around 31% of small retailers couldn't pay their rent in April, according to data from Alignable reported by Retail Dive. Restaurants have not been able to rehire workers they had to let go when everything locked down, Axios reports. The global supply chain remains months behind schedule, and smaller businesses have less power to push back on price hikes and fewer options to work around shortages, The Wall Street Journal reports.

April's rent numbers are a marked improvement over March, when half of small retailers couldn't make rent, Retail Dive reports. Over half of minority-owned businesses were unable to make April rent, down from two-thirds in March. As many such businesses were not declared essential by cities and states in their lockdown periods last year, they saw customers look online and to larger retailers for similar needs, according to retail and hospitality research firm IHL Group.

"While the pandemic has been challenging to companies of all size, it has been particularly devastating to the smallest companies worldwide," IHL Group President Greg Buzek said in a statement reported by Retail Dive. "As governments defined ‘essential vs non-essential' companies, they unwittingly oversaw the largest transfer of retail wealth ever from smaller to larger companies."

For those able to survive this long, the distribution of money through stimulus components like the Paycheck Protection Program will be a lifeline, and landlords might be desperate enough to meet them in the middle, at least in urban cores. Asking rents along Manhattan's major retail corridors were down from 9% to 20% year-over-year in March, according to Cushman & Wakefield data reported by Bloomberg.

Just as in the construction industry, restaurants around the country are facing much larger labor needs than last year, only to find that many of the workers furloughed or laid off in 2020 have either left the labor pool entirely or changed industries, Axios reports. About 37% of hospitality and food businesses have had their operating ability affected by an inability to find enough workers, according to the bimonthly Small Business Pulse Survey conducted by the U.S. Census Bureau.

The ban on temporary foreign workers imposed by the Trump administration lapsed on March 31, but that may not have been soon enough to have a major effect in shoring up the labor gap, Axios reports. 

Though the largest companies in any industry, from development to retail, are able to exert more pricing power and bulk deals with distributors, small businesses have had to spend more to get products delivered, and even then deliveries have been weeks slower than they had been pre-pandemic, the WSJ reports. About 44% of small businesses reported shortages and other supply chain disruptions in a survey of 800 such businesses by business advisory firm Vistage Worldwide.

With consumers expected to break spending records this year, businesses that don't have the staff or merchandise to meet demand have been unable to make enough money to pay rent, imperiling their future even as giants like Amazon grow at astronomical rates.