A New Report By Yelp Outlines The Local Economic Impact of Covid-19
As the world anxiously awaits a Covid vaccine, states and businesses struggle to adapt to a “new normal.” The steep decline in economic activity over the last few months left more than 100,000 small businesses with no choice but to shut their doors. This was according to the Local Economic Impact of Covid-19 Report published by Yelp on Tuesday.
The uncertainty surrounding the future of the economy has many business owners wondering what the path to recovery will look like. While some businesses may have the resources to stay afloat, others may have to close permanently.
A Spike In Permanent Closures
The Local Economic Impact Report by Yelp outlines the grave impact that the pandemic has had on businesses across the nation. As of August 31st, nearly 163,735 businesses have shut their doors and while this number is lower than the 180,000 businesses that closed at the start of the pandemic in March, it is still 23% higher than the number of closures in July.
But in addition to shuttered businesses, the study also considers the number of permanent closures. According to Yelp, there has been a steady incline in the number of businesses that shut their doors for good, bringing the total to a whopping 97,966 or 60% of total closures. The most pronounced increase in permanent closures was in July when there was a 34% spike in the establishments that shut their doors for good.
The Impact By Industry
While it’s true that the pandemic has served as a death-knell for businesses across the board, the intensity of the impact varies by industry. The data in the Yelp report supports the idea that most people no longer frequent physical establishments like bars, restaurants and clubs.
Companies in these industries are facing the brunt of the pandemic and have seen the highest number of closures. In the last six months, 32,109 restaurants have closed their doors and 61% of this number will be shut permanently.
On the flip side, businesses that cater to consumers’ at-home needs saw a spike in demand over the last few months. Services like lawn-mowing, contractors and landscapers are able to operate while abiding by social-distancing rules. These businesses have been proven to be more resilient to the effects of the pandemic.
Moreover, restaurants that made the switch to online-deliver in the early days of the pandemic have also managed to stay afloat. In particular, pizza chains, coffee shops and delis are well suited to adapt to the “new normal” with ease. The same cannot be said for brunch spots and high-end restaurants that depend on the physical presence of customers for revenue.
Pandemic Running Riot
Nightlife entertainment venues are taking a major hit. Bars and nightclubs were not built to adapt to outdoor dining or takeout, pushing many businesses in this industry to the brink of collapse. Yelp reports that as of August 31st 6,451 venues have remained closed and 54% of these will shut down permanently.
In the coming weeks, the New York government has sanctioned the rollout of indoor dining at many restaurants. For establishments that walk a fine line between staying open and shutting its doors forever, the ability to abide by social distancing rules and other safety measures successfully will be critical to determining its future.
On the retail side, the story isn’t any different. Many stores that depend on in-person visits have been forced to shut their doors for the foreseeable future. Out of 30,274 retail closures, 58% have shut down permanently. This is most pronounced in the beauty industry where 42% of out of a total of 16,585 businesses have indicated a permanent shutdown.
States Across The Nation Feel The Heat
The economic impact isn’t just limited to individual businesses, but to entire states as well. Just like businesses, multiple states are facing different degrees of closures based on certain factors. The study by Yelp reports that states with the highest unemployment rates are also seeing the highest number of closures, unsurprisingly. California, Arizona and Nevada are among the states that were hit the hardest.
Moreover, states that depend on tourism for revenue are also facing the impact of travel restrictions. Tourism-related businesses in certain cities also face a high level of unemployment. This includes Las Vegas and cities like San Francisco and Los Angeles in California.
Small businesses are also seeing a different impact based on the state they operate in. According to Yelp, businesses that operate in cities where the local government has been kinder to small businesses have seen the least number of closures. These include places like Pittsburgh and Baltimore. The same cannot be said for cities like New York and Los Angeles where small businesses face a much more dire situation.
The Bottom Line
As the path forward remains bleak and uncertain, it’s hard to say what will become of businesses that are edging toward permanent closures. Although unemployment rates have declined over the last few months, the real economy continues to suffer as activity remains dim.
But it’s also worth noting that many businesses have made the successful transition to adapt to a new business model since the start of the pandemic- one that is able to operate in a remote community. As local and national governments work towards designing policies that cater to the “new normal”, many businesses could eventually find themselves back on their feet.