Retail sales through July season-to-date are flat to last year according to the US Census Bureau. However, the breakdown by category shows a sawtooth of performance across categories. Discount stores and warehouse clubs, grocery stores and home improvement stores have performed well amidst the COVID-19 pandemic with sales increases of 7.4%, 14.7% and 12.7% respectively. However, some segments of the retail industry have suffered greatly and many of these include categories where small businesses operate. Gift card shops and vintage clothing stores along with other miscellaneous stores are down 6.6%, clothing and accessories stores are down 41.5% and sporting goods and hobby stores are down 3.0%.
Small businesses have unique challenges when crises hit
Small businesses have unique challenges and are constantly concerned with making ends meet. They are continuously seeking financing and revenue opportunities to carry them forward during normal economic times. When events like the coronavirus pandemic hit the US retail market, it became much more difficult for some of the smaller businesses to overcome obstacles such as mandatory store closings or management of stringent social distancing practices. These obstacles coupled with the uncertainty of future business have made this year especially challenging for the smaller stores.
Ann Cantrell, owner of Annie’s Blue Ribbon General Store & assistant professor, Fashion Institute of Technology, stated, “Doubt and uncertainty are never good for business.” Cantrell owns a modern general store in the heart of a thriving Brooklyn neighborhood, combining the charm of a country general store with the convenience of city living. Being the sole owner of one shop and an e-commerce business have brought its own specific challenges but ones which many small businesses face. Cantrell says that Annie’s Blue Ribbon Store has never lived through such uncertainty. Brands are being equally cautious with customers as well as team members and are cutting back inventory and supply in the process. In the past, when a crisis emerged like 9/11 or the 2008 financial downturn, communities could stick together and move forward. With the current pandemic, social distancing has complicated the ability of people to work closely together toward recovery. Cantrell says, “The doubt of when things will turn around has been particularly challenging.”
The agility of small businesses provides opportunity to pivot quickly
Cantrell knows that small businesses can hustle and pivot much more easily than bigger companies and states, “We do it because we have to, our lives depend on it and we need to pay rent, cover expenses, and help our employees because they are our family.” Larger retailers have reportedly stated they were refusing to pay rent yet small businesses often cannot take such bold stands. Cantrell adds, “We need to hustle and find a way or risk closing.”
In an interview with Daniel Hodges, CEO of World Retail Forum, Rebecca Minkoff, designer and founder of Rebecca Minkoff, discussed the importance of responding to the current environment and reflected back on the 2008 financial crisis. Minkoff said the brand succeeded because it met the customer where she was. Prior to 2008, its handbag prices were $495.00 and $595.00, which was a great deal at the time. There were maybe five brands that were doing really great bags at that price point. “And when the recession hit in 2008 there just wasn’t that customer, she was still the same person, but she just wasn’t making that kind of money or didn’t have the savings or didn’t feel comfortable spending that much on a bag.” Rebecca Minkoff lowered the prices in some cases by several hundred dollars and grew during the recession by 548%. Minkoff stated, “Not everyone needs to lower their price point, but you should be very clear about who your customer is and what the price-value ratio should be for the brand.”
When Minkoff started her business in 2001, she had a five-piece capsule collection including an “I Love New York” t-shirt which became an overnight success having launched two days after 9/11. The t-shirt struck a chord with consumers and the timing, although unplanned, hit the market perfectly. Rebecca Minkoff now has three national stores, eight international stores and distributes products to over 900 stores worldwide. Even as the business has grown, the agility still exists within the brand which operates with an entrepreneurial mindset. Rebecca Minkoff just launched a new fragrance but had to do some pivoting because of the current coronavirus pandemic. The fragrance launched exclusively on the brand’s namesake site for the first month of August but it’s now rolling out to Macy’s
Building solid customer relationships is key
Part of the success for small businesses is listening to their customers and retail partners to create relevant products for the market. Minkoff reflects on how some of the retail partners would ask for exclusive products to stand out in the marketplace. Minkoff said,”I’m really trying to tailor different, special things to each one of our retail partners to provide them with a unique value proposition for their customers.”
Cantrell discusses how social media is vital to help build good customer relationships and it’s how the brand connects these days, especially with limited in-store shopping experiences. With so many people visiting virtually on the website, Cantrell says, “I love our Instagram Stories and really try to show my true voice and connect with customers here.”
Small businesses are the lifeblood of the community and tend to be resilient but they also need support. Cantrell stated, “Supporting them keeps the creative energy alive in neighborhoods, and brings jobs and money back to the people that need it most.” For small businesses to survive Cantrell suggests to keep the cash flow tight and expenses lean, negotiate with the landlord, connect with your customers in a meaningful way to stay relevant, and hopefully emerge as an even stronger business on the other side of the pandemic.
True grit drives survival
Small businesses are scrappy, nimble, and struggling to survive the current pandemic. “The daily barrage of news about the virus and the current social environment in our country, compounded with the upcoming election, are draining to us all,” says Cantrell. Small businesses have fewer resources, financing and lack sophisticated IT and supply chain models. But the one characteristic that small businesses exhibit is grit, pure and simple. Small businesses have a strong desire and need to survive, so many of them will.