Mastercard Economics Institute has released a report on Recovery Insights for Small Business Reset. The report has revealed that in the Middle East and Africa, lodging small businesses have consistently outperformed larger businesses in 2021 as people traveled locally.
Looking at 19 markets around the world, the report reveals that sales at small and medium-sized businesses (SMBs) lagged larger companies by up to 20% at the peak of the crisis. However, spending has recovered in 2021. Total sales at SMBs rose 4.5% through August 2021 year-to-date compared to the same period in 2020, while e-commerce sales are up 31.4%.
Drawing on the Mastercard Economics Institute’s report on Small Business Performance Index: Small Business Reset identifies several key trends;
- Closures: Globally, small businesses that closed early in the pandemic were about three times as likely as larger businesses to remain closed long term. One-third of small businesses that closed in April 2020 remained closed after six months, and about one-fifth were still closed after 12 months.
- Location: Spending at SMB retailers in central business districts is down 33% vs. 2019, while sales at suburban small retailers grew 8%. As tourists and workers stay closer to home, small businesses in commercial districts around the globe are seeing sales suffer.
- E-Commerce: Following shutdowns, the number of businesses going online each month tripled from pre-pandemic levels, peaking in July 2020. This reflects increased demand for an online sales channel, as well as the slight lag after lockdowns began to bring it into reality. The shift to digital has persisted at an elevated level globally since.
- Entrepreneurship: One-third more small retailers launched in 2020 than in 2019, nearly 8x the number of larger firms created. This trend of considerable new SMB formation in 2020 is reflected around the world: U.K. (+101%), U.S. (+86%), Australia (+73%), Germany (+62%), Brazil (+35%) and South Africa (+13%).
- Sectors – Restaurants & Lodging: In Middle East and Africa (MEA), small lodging businesses have consistently outperformed larger businesses in 2021, seen specifically in South Africa. Where people are traveling, the trend to stay local has benefited small lodging companies (and hurt big cities’ big hotels). Globally, restaurants were a different story, with SME eateries underperforming large ones by roughly 17 percentage points in 2021 YTD.
“Supporting neighborhood businesses has been a rallying point throughout the pandemic. However, the challenges faced have been very real, due to their dependency on local markets, local supply chains and tighter cash flows,” said Bricklin Dwyer, Mastercard Chief Economist and Head of the Mastercard Economics Institute.
“But we see brighter opportunities ahead. The shift to digital opened the door to the pandemic’s silver lining: a resurgence of entrepreneurship and innovation,” he added.
Mastercard pledged to bring 50 million small businesses and 25 million women entrepreneurs into the digital economy by 2025. Mastercard’s Digital Doors curriculum helps businesses get online 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 SMBs digitize through the Strive initiative.