No question about it: The pandemic did as yet incalculable damage to small businesses across the country. Help is needed now and American Express is giving it with a $100 million investment to jump-start small businesses this summer.
How bad was it?
Vice President Kamala Harris, who is acting as the Biden administration’s ambassador to small business, recently said that some one-third of small businesses were forced to close for good as a result of the pandemic.
That figure was backed up by a recently released study from National League of Cities which found there are 33.6% fewer small businesses open in April 2021 as compared to January 2020.
However, another study from the Federal Reserve suggests that the damage may not be so great, finding that the death rate was between 9.4% to 10% for the first year of the pandemic.
That would be higher than normal, which typically runs about 7.5% per year, but not all that much. However, the Fed report also warns that more permanent closures may follow if businesses can’t catch up and pay overdue bills.
But there are many caveats in the Fed’s data. Specifically, permanent business closures, which are hard to distinguish from temporary closures, were not evenly distributed across all industries. For example, clothing stores experienced elevated exit rates, while grocery store closures tracked below normal levels in retail.
And the business death rates were significantly higher among “extremely small firms and establishments.”
What constitutes small versus extremely small businesses is another sticking point. The Fed study defines “extremely small businesses” as those with fewer than five employees and “small businesses” are those with fewer than 500 employees.
Talk to the typical independent retailer and those definitions don’t hold water. Across the retail trade (NAICS 44-45), virtually all of the nation’s over 640,000 retail firms (99.6%) have fewer than 500 employees, according to the Census Bureau’s 2018 data.
Further, 60% are classified as “extremely small firms” with fewer than five employees, while 91% have fewer than 20 employees. Less than 1% (~2,250) have 500 or more employees.
Regardless what the final small business death toll is, when even one small business closes, along with it go the dreams of its owners, the livelihoods of its employees and the vitality of their local communities.
Celebrate summer: Shop Small!
Into the brink comes American Express putting $100 million toward a new “Let’s Go Shop Small” summer-long campaign to encourage shoppers to support small businesses. And this investment follows an even bigger $200 million investment last year toward its global Shop Small campaign.
Effectively, as a result of the pandemic, American Express is turning its long-standing one-day event – Shop Small Saturday (the Saturday following Thanksgiving and Black Friday) – into a full-year program. The only question is: what took American Express so long?
Shop Small Saturday was first launched in 2010 to help small businesses recover from the recession. It was an immediate success, leading to the Senate passing a resolution in 2011 to recognize the shopping holiday. Over the past ten years, American Express estimates Small Business Saturday drove over $120 billion in sales to local businesses.
Now in response to the devastation caused by the pandemic, American Express recognized that a one-day event doesn’t cut it anymore.
“Back when Small Business Saturday was created after the recession, we were focused on helping get shoppers back into the stores during the holiday season,” explains American Express’ Walter Frye, vice president, global brand engagement.
“But as the years progressed, we saw this opportunity that our customers should be focused on supporting small businesses year-round, so that’s why we expanded our focus to amplify the impact small businesses have in our communities all year long .”
For the weekends throughout the 2021 summer season, American Express figures some $27 billion of consumer spending is on the table.
“Summer weekends are so important for small businesses,” Frye states. “So we are going to encourage shoppers to shop small and support business in their communities over the weekends, even if they are traveling.”
That has local retailers worried because more Americans are expected to take to the road this summer. For example, a survey conducted by Vrbo found some 65% of Americans plan to travel more this year than before Covid.
If their regular customers take off, nearly half (47%) of the 500 small businesses surveyed by American Express are concerned about lost sales and profits this summer when they need it most.
More help is needed
A strong summer season would set small retail businesses up well for the critical holiday season. Without it, many may face an uncertain future in 2022. Some 62% of small business owners surveyed reported it will take at least another six months or more for their businesses to recover from Covid.
Besides the promotional efforts behind the “Let’s Go Shop Small” campaign, American Express is also giving small businesses a leg up selling online. It has partnered with Pinterest in a Shop Small Summer Pinterest Shop featuring summer-friendly fashion, outdoor living, beauty and home items.
This effort was spurred on by the findings from a consumer survey conducted by American Express. Some 75% of consumers said they would shop with small businesses more often if there were more ways to do so.
The new online shop also serves the needs of Pinterest users who have increased their searches for “how to support small business quote” by 50%. In addition to the Pinterest shop, American Express is presenting card members special offers from its small business merchants through an online hub.
Friend to small businesses
Of course, American Express isn’t just doing this out of the goodness of its heart. It’s getting free advertising space on thousand and thousand of small retailers’ windows and doors to remind shoppers to use its card.
After lagging behind Visa and Mastercard as an accepted payment method among small businesses due to higher merchant fees, American Express reports its has now reached parity with those cards in terms of acceptance. Some 99% of merchants that accept other credit cards now also take American Express.
Besides its support of small businesses through its “Shop Small” promotional campaigns, American Express also offers small businesses an OptBlue program that reduces typical processing fees for businesses that do less than $1 million per year in charge volume.
With its “all boats rise with the tide” thinking, American Express is throwing a lot of support behind its small business partners this year. After 2020 when federal and state governments sided with big “essential” retailers which could stay open while so many small retailers had to close, American Express is proving in word and deed it is a friend to small businesses.
“We’re excited to extend our commitment to small businesses this year when needed most into a year-round perspective,” Frye concludes.