Despite the seemingly strong recovery, more than half of the businesses closed due to the COVID-19 shutdowns will not be opening their doors once life returns to normal.
Yelp’s September economic report confirmed what many of feared: small businesses lost to Coronavirus inspired shutdowns may be gone forever, or at least those listed who’re listed on the popular review website are.
Yelp’s analysis of businesses on their site found not only was there a 23% increase in closures since July 10th, but 60% of them are permanent.
By recording all the businesses open on March 1st, Yelp saw almost 180,000 businesses shut down by April 10th, 36,700 of which were already permanently out of business. While the total business shutdowns decreased significantly to 132,500 on July 10th, the number of businesses that permanently closed spiked to almost 73,000. That number continued to rise to 98,000 on August 31st, whereas 65,700 closed businesses still hope to reopen their doors one day. As states continue to relax their restrictions, it’s becoming apparent that their efforts are too little too late for many entrepreneurs.
Not all industries were hit equally, but all are struggling. “Yelp closure data shows that businesses providing home, local and professional services have been able to withstand the effects of the pandemic particularly well. But despite bright spots in some sectors, restaurants and retail continue to struggle and total closures nationwide have started to increase,” the report reads.
Sectors faring relatively well “includes lawyers, real estate agents, architects, and accountants [and healthcare specialists]– all with only two to three out of every thousand businesses closed, as of August 31.”
“In fact,” Yelp adds, “the share of consumer interest in home and local services is up 24% between March 1 and August 31, relative to all categories on Yelp, compared to the same time last year.”
While home, local, professional, and auto services see less pressure, restaurants and retail stores are facing between 25 and 60 closures per 1,000 businesses. Restaurants alone account for 32,109 closures with 19,590 being permanently shut down. 3,499 bars and nightlife businesses have permanently closed as well.
Where the business is located matters too. “Bigger states and metros with higher rents and more stringent local operations for small businesses throughout the last six months have felt a greater toll.” Hawaii, California, and Nevada are the hardest hit whereas West Virginia and the Dakotas have the lowest closure rates.
“Las Vegas in Nevada, Honolulu in Hawaii, and several of the largest California urban areas all are among the metro areas with the highest total closure and permanent closure rates (San Diego, San Francisco, San Jose, Los Angeles and others), with roughly 20 businesses per thousand temporarily or permanently closing their doors since March 1.”
Though a bit outdated, Axios reported “the number of business owners between February and April [decreased by] least 3.3 million,” giving us a broader perspective of the real world impact of Coronavirus shutdowns crafted to minimize the number of illness related deaths. Back in April, MSNBC reported, “nearly 7.5 million small businesses are at risk of closing their doors permanently over the next several months if the coronavirus pandemic persists.”
“Around two-thirds of entrepreneurs said they may have to shut forever if business disruption continues at its current rate for up to five months,” consistent with Yelp’s findings four months later.
Despite the troubling findings, the U.S. unemployment rate continues to drop month over month from its high of 14.7% in April to 8.4% in August. While the unemployment rate is still higher than the sub 4% unemployment rate prior to the pandemic, it remains impressive nonetheless. However, studies like Yelp’s leaves many wondering whether we can continue this V-shaped recovery.