Friday, August 12, 2022

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    Small businesses in Asia Pacific more resilient to withstand prolonged closures

    Small businesses in the Asia Pacific that closed early in the pandemic were about twice as likely as larger businesses to remain closed long term, demonstrating greater resilience than elsewhere in the world.

    Globally small retailers were on average three times as likely to remain closed after six months versus large retailers, according to Mastercard’s ‘Recovery Insights: Small Business Reset’ report, with one-third of small businesses that closed in April 2020 remaining closed after six months, and about one-fifth still closed after 12 months.

    “While businesses of all sizes were adversely impacted by the pandemic, reliance on local SMB support and lack of digital infrastructure saw SMBs in APAC experiencing far greater hardships at the outset,” said David Mann, chief economist, APAC, Middle East and Africa at Mastercard Economics Institute (MEI).

    “Against a backdrop of mobility restrictions and zero-Covid strategies, e-commerce was a lifeline for organizations to ride out the pandemic. However, the accelerated shift to digital has paved the way for the next generation of entrepreneurs, and we’ve seen a surge in newcomers seizing an opening amid the disruption.”

    What does the report find?

    • Following lockdowns, the number of businesses going online each month tripled from pre-pandemic levels, peaking in July 2020, reflecting increased demand for online sales channels.

    • The shift to digital has persisted at an elevated level since. In Australia, 60% more merchants accepted e-commerce sales in 2020 for the first time v 2019.

    • Roughly 35% more small retailers in APAC established operations in 2020 than in 2019, a slight increase on the global average of 32% new SMBs formed, and over eight times the 4% of large firms created.

    • This trend is most strongly reflected in Australia (+73%), Japan (+38%) and Thailand (+29%).

    • As tourists and workers stay closer to home, small businesses in commercial districts are seeing sales suffer, while sales within more residential neighborhoods grow.

    • Singapore has surpassed pre-pandemic spending outside of the business district, with both SMBs and large businesses seeing spending at 107% and 104% of 2019 levels respectively. In Sydney retail spending is down roughly 14% in the business district, but up 24% in the outer city.

    • In APAC, small lodging businesses outperformed large by a wide margin through 2020 and 2021. Where people are traveling, the trend to stay local has benefited small lodging companies (and hurt big cities’ big hotels).

    • Restaurants were a different story, with SMB eateries underperforming large ones globally by roughly 17% in 2021 in the year to date. A notable exception is in Hong Kong, where SMB eating places have seen increased outperformance over large businesses in 2021.

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