Small business around America are living through an entirely different economic fallout than those working for large public corporations. While we are seeing household names like Home Depot and Target bounce back, or Wall Street stocks rebound, these positive indicators do not reflect what’s happening on Main Street.
How are businesses recovering?
The V-shaped recovery many hoped for is not what we’re getting, at least not everywhere. Small business owners are recouping at a slower rate as consumer spending across the country is unsteady.
The House Small Business Committee reported in July that 110,000 small businesses had closed permanently, and another 7.5 million face the same fate. While that may seem grim, what’s interesting is that small business owners are actually reporting an increase in confidence, meaning that out of the 7.5 million facing potential closures, many will come out on the other end intact.
The confidence index score rose to 53 in Q3 from 49 in Q2, according to a CNBC study. For reference, the confidence score was at 61 in January 2020 while the economy was still booming. Higher, yes, but not by much.
We can see that even with a sluggish recovery, many small businesses are reporting positive predictions. Experts believe this is because small business owners don’t feel mandated quarantines and rollbacks are coming, despite public fears of a second viral wave. The money many received from the Small Business Administration’s loan programs was enough to keep them afloat for a couple of quarters to a year, and business owners believe the economy will continue to open up.
Better Business Bureau found similar findings when we gauged the sentiment of our customers. In our latest report, we found that the number of business owners who perceived COVID-19 as having a negative impact on their current state went down to 71 percent in June from 87 percent in March.
Over the next 60 days as we move into fall, 31 percent of respondents actually predict positive changes, up from 6 percent who felt positively in March.
There seems to be a light at the end of the tunnel for Main Street America but a major variable in recovery is and will be consumer spending. Right now, consumer spending patterns are erratic.
Shopping behavior plays a role in business recovery
Shopping behavior has varied widely by the type of business in question, how prevalent the outbreak is in said area, and that consumer’s specific spending capacity, according to data from the New York Times. The additional $600 per week in federal unemployment benefits stopped at the end of July, putting a halt to a lot of extracurricular spending.
Consumers are acting very differently throughout the country, making it difficult to discern any consistent recovery trends.
For example, Oregon is skewing very close to the national average with visits to business remaining well below the percent it was at last year. Washington is one of the slowest states to bounce back, which makes sense since it started as the epicenter of COVID-19. Consumer spending in Washington took a huge dip from last year and has since plateaued.
States like Montana and Idaho, however, tell a different story. Both were close to nearing a full consumer-spending recoup, approaching similar levels compared to the same time last year, as of July. However, once the unemployment checks stopped, both took a small dip, though are still much higher in spending than Washington and Oregon.
What can businesses do to accelerate their recovery?
On the bright side, federal data shows that retail sales are still climbing with a 1.2 percent increase in July. To maintain this momentum, it will be imperative retailers’ market themselves as safe and trustworthy businesses to attract new customers and retain old ones. In fact, BBB’s study highlights that 52 percent of business owners view attracting new customers as a real opportunity.
While Main Street faces a prolonged and uneven recovery, current trends do suggest consumers don’t plan on staying home. Spending will continue even if its modest and varied by region, allowing for business owners to stay afloat as we all adapt our financial habits in a new environment.
Learn more about advertising honestly during the pandemic, as well as practicing Better Business Bureau’s other Standards for Trust in your organization, by visiting trust-bbb.org.