Small businesses are going digital at levels three times the pandemic
Mastercard Economics Institute: UK, US and Australia’s leader in new small business formation, which grew 32% year over year.
Recovery Preview: Small Business Reset – Source Mastercard
To shed light on the impact of the global health crisis – and the ongoing recovery – on small businesses around the world, Mastercard today released Recovery Insights: Small Business Reset. Looking at 19 markets around the world, the report finds that sales of small and medium-sized enterprises (SMEs) lagged large companies by up to 20 percentage points at the height of the crisis. However, spending picked up in 2021. Total SME sales increased 4.5% through August 2021 since the start of the year compared to the same period in 2020, while e-commerce sales increased by 4.5% through August 2021. are up 31.4%.
Based on the new Small Business Performance Index * from the Mastercard Economics Institute on aggregated and anonymized sales activity within the Mastercard network, Recovery Insights: Small Business Reset identifies several key trends:
- Closures: Globally, small businesses that closed at the start of the pandemic were about three times more likely than large businesses to remain shut down for the long term. A third of small businesses that closed in April 2020 remained closed after six months, and about a fifth were still closed after 12 months. Locally, the situation varied: in the United States, about one in four small retailers remained closed after 6 months, compared to about one in twelve large retailers.
- Location: Spending by SME retailers in central business districts is down 33% from 2019, while sales in more residential areas are up 8%. As tourists and workers stay closer to home, small businesses in shopping districts are seeing sales suffer.
- E-commerce: After the closures, the number of businesses logging in each month has tripled from pre-pandemic levels, peaking in July 2020. This reflects the increased demand for an online sales channel, as well as the slight lag after the lockdowns started to materialize. The digital switchover has persisted at a high level in the world ever since.
- Entrepreneurship: One-third more small retailers launched in 2020 than in 2019, almost 8 times the number of large businesses created. This trend towards the considerable formation of new SMEs in 2020 is reflected in the world: United Kingdom (+ 101%), United States (+ 86%), Australia (+ 73%), Germany (+ 62%), Brazil (+ 35%) and South Africa (+ 13%).
- Sectors – Restaurants and Accommodation: Small accommodation companies have significantly outperformed large companies during the summers of 2020 and 2021. Where people travel, the trend to stay local has benefited smaller accommodation companies (and hurt big hotels in big cities). Restaurants were a different story, with SME restaurants underperforming the big ones globally by about 17 percentage points in YTD 2021.
âSupport for neighborhood businesses has been a rallying point throughout the pandemic. However, the challenges faced are very real, due to their reliance on local markets, local supply chains and tighter cash flow, âsaid Bricklin Dwyer, Mastercard chief economist and director from the Mastercard Economics Institute. âBut, we see better opportunities ahead. The digital switchover has opened the door to the silver lining of the pandemic: a resurgence of entrepreneurship and innovation. “
Supporting small business owners is an ongoing priority for Mastercard, which is committed to bringing 50 million small businesses and 25 million women entrepreneurs into the digital economy by 2025. Mastercard’s Digital Doors program helps businesses to connect 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. Most recently, Mastercard committed $ 25 million to help more than five million micro and small businesses digitize through the Strive initiative.
Mastercard also works closely with governments, businesses, and other organizations around the world to create environments, programs, and policies for small businesses to thrive. Mastercard provides high-frequency local spending information to dozens of city, state, and federal governments through our City Possible and Recovery Insights programs, as well as content such as the recent guidance document on How governments can support SME takeovers.
You can read the full Recovery Insights: Small Business Reset here.
The Mastercard Economics Institute developed the Mastercard Small Business Performance Index as a more universal classification system for SMEs. The index relies on a comprehensive AI-powered algorithm to identify unique metrics, such as number of placements, sales volume, number of transactions, within the network’s aggregated and anonymized sales activities. MasterCard.
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