The COVID-19 pandemic and the ongoing recovery has significantly impacted small businesses globally as shown in the Mastercard report, Recovery Insights: Small Business Reset.
The Mastercard report was looking at nineteen markets around the world, including Australia, Hong Kong, Japan, Malaysia, New Zealand, Philippines, Singapore and Thailand.
Mastercard’s Recovery Insights: Small Business Reset
The Recovery Insights report revealed that sales at small and medium sized businesses (SMBs) lagged behind larger companies by up to 20% at the peak of the global pandemic.
However, 2021 indicated an upward trend. Total sales at SMBs rose 4.5% through August 2021 year-to-date compared to the same period in 2020 and e-commerce sales grew 31.4% globally.
David Mann is the Chief Economist for Asia Pacific, the Middle East and Africa at the Mastercard Economics Institute (MEI). He elaborated on the report thus far.
“Businesses of all size were adversely impacted by the pandemic. Reliance on local support and lack of digital infrastructure saw SMBs in APAC experiencing greater hardships at the outset.”
“Therefore, against a backdrop of mobility restrictions and an absence of COVID-19 mitigation strategies, e-commerce was a lifeline for organizations to ride out the pandemic.”
“The accelerated shift to digital has paved the way for the next generation of entrepreneurs, and we’ve seen a surge in newcomers seizing an opening amidst the disruption.”
Drawing on MEI’s new Small Business Performance Index of aggregated and anonymized sales within the Mastercard network, Recovery Insights: Small Business Reset identified key trends.
Closures
In APAC, small businesses that closed early in the pandemic were about twice as likely as larger businesses to remain closed long term, demonstrating greater resilience than elsewhere.
Globally small retailers were on average three times as likely to remain closed after 6 months, compared to large retailers, with one-third of small businesses that closed in April 2020 remaining closed after 6 months, and about one-fifth still closed after 12 months.
E-Commerce
Following lockdowns, the number of businesses going online each month tripled from pre-pandemic levels, peaking in July 2020, reflecting increased demand for online sales channels.
The shift to digital has persisted at an elevated level since. In Australia, 60% more merchants accepted e-commerce sales in 2020 for the first time vs. 2019.
Entrepreneurship
35% more small retailers in APAC started in 2020 than in 2019, a slight increase on the global average of 32% new SMBs formed and over 8 times the 4% of large firms created.
This trend is most strongly reflected in Australia (+ 73%), Japan (+38%) and Thailand (+29%).
Location
As tourists and workers stay closer to home, small businesses in commercial districts are seeing sales suffer, while sales within more residential neighborhoods grow.
Singapore has surpassed pre-pandemic spending outside of the business district, with both SMBs and large businesses seeing spending at 107% and 104% of 2019 levels respectively.
In Sydney retail spending is down 14% in the business district, but up 24% in the outer city.
Sectors – Restaurants & Lodging
In APAC, small lodging businesses outperformed large by a wide margin through 2020 and 2021. Where people are traveling, the trend to stay local has benefited small lodgings.
Restaurants saw SMB eateries under performing large ones globally by 17%. However, in Hong Kong, SMB eateries have seen increased out performance over large ones in 2021.
Supporting small business owners is a top priority for Mastercard which pledged to bring 50 million SMBs and 25 million women entrepreneurs into the digital economy by 2025.
Mastercard’s Digital Doors curriculum helps businesses get online and stay protected, ensuring they have the right tools to maximize their digital presence and integrate e-commerce seamlessly, including the free Small Business Digital Readiness Diagnostic.
Mastercard committed $25m to help 5m SMBs to digitize with their Strive initiative.
Mastercard also works closely with governments, businesses, and other organizations around the world to create environments, programs and policies so small businesses can flourish.
Mastercard provides high-frequency, local spending insights to many cities, states and federal governments using City Possible and Recovery Insights programs, plus content like the recent policy paper that is addressing ways that governments can support SMB recovery.
