As Wall Street rewards big box stores for their monstrous sales volumes during the pandemic – propelling retail stocks like Target to an all-time high this week – thousands of small businesses across the country are still hanging on by a thread.
The growing divide between retail giants and locally-run small stores underscores the effect of the pandemic of creating a wedge between the haves and have-nots in the sector, as consumers turn to wholesale purchases and one-stop shops.
“We share second quarter results that are, in almost every way, exceptional,” Target CEO Brian Cornell said on Wednesday. “The incredible resilience of our team, the way they went first through the pandemic and then the social trauma that started in May here in Minneapolis is unlike anything I’ve seen or seen before. am likely to review in my career.
Target’s online sales jumped 24% in the quarter ending Aug. 1, compared to the same period last year. The company also grabbed $ 5 billion in additional market share in the first half of the year, Cornell said.
Walmart saw a 97% increase in online sales in the quarter compared to the same period last year, and Lowe’s online sales jumped 153%. The Home Depot reported a 23% increase in sales, fueled by people looking to upgrade their space while being stuck at home.
Let our news meet your inbox. The news and the stories that matter, delivered on weekday mornings.
As cases of the coronavirus continue to rise in parts of the country, people are not venturing to shop as much as they used to, dealing a blow to mall retailers and small businesses that weren’t. not classified as essential services during the early days of the virus. .
Before the pandemic, people shopped at different stores for different products. Now this has all been disrupted because no one wants to go out.
“What was going on before the pandemic was people used to shop in different stores for different products – and that was disrupted because they didn’t want to go out,” said Neil Saunders, Managing Director of GlobalData’s Retail Division. “The stores we visit are the ones that capture the most of our spending, and Target and Walmart have really benefited.”
But as big box retailers gain from having people bundle their baskets into one of their hundreds of chain stores, small businesses are struggling to survive. Many more small business owners saw lower sales from May to July compared to the previous three months, according to Christopher Carlozzi, state director at the National Federation of Independent Business. Small business sales are at under 28%, down nine points from May, when they were at a net negative 19%, he said.
There is no complete data on the number of small businesses that have closed since the pandemic. But from March 1 to August 11, about 155,000 businesses closed their doors, according to the online reviews site Yelp. The company estimates that around 91,000 of the closures are permanent. The American Bankruptcy Institute, a trade group representing bankruptcy law professionals, expects the total number of small businesses that file for bankruptcy this year in 2020 to increase 36% from last year, according to Bloomberg.
“Some of these small businesses have done well,” Carlozzi said. “I’m not going to say they’re okay, but they did well.”
The federal government’s paycheck protection program, introduced in March as part of the CARES coronavirus relief program, was designed to provide a lifeline for small businesses by covering the costs of their staff. With more than half of the country’s workers employed by small businesses, the program aimed to protect a vulnerable group of employees facing unemployment if those businesses ran out of cash and were forced to close. But the program has been riddled with controversy, and many business owners have not received funding.
For Neil Abramson, the program has helped avoid layoffs, even though his consignment business just hit 80% of sales in the same time period last year. Abramson has closed the doors of ECI stores in Leominster, Massachusetts, for three months this year, and all 22 employees have been placed on leave. Now that it has reopened, Abramson has rehired all of its staff and is moving inventory online to detect sales from customers who do not feel safe entering the store.
“You can’t replace three months of income. But we can get by, ”Abramson said. “I believe it will pass. We will not always be afraid of going out of business. “