Australia, the U.K. and the U.S. lead in new small business creation
Mastercard released Recovery insights: Small business reset today, to shed light on the effects of the global health crisis and the ongoing recovery.
The report examines 19 markets worldwide and shows that sales of small- and medium-sized companies (SMBs)lagged larger businesses by as much as 20 percentage points during the crisis. But, spending has started to recover in 2021. SMB sales increased 4.5% in August 2021 compared to the same time period in 2020. E-commerce sales have increased 31.4%.
The Recovery Insights Small Business Reset uses the Mastercard Economics Institute’s new Small Business Performance Index, which aggregates and anonymizes sales activity within Mastercard networks. It identifies key trends.
- Closures: Small businesses that shut down early during the pandemic were three times more likely to close long-term than larger businesses. About one-third of the small businesses that had closed in April 2020 were still open six months later, while about one-fifth were still closed 12 months later. Locally, the situation was different: In the U.S. approximately one-fourth of small retailers remained shut after six months, while roughly one-fifth of large retailers were still closed after 12 months.
- Location: The spending at SMB stores in central business districts has fallen 33% compared to 2019, but sales in more residential areas grew by 8%. Small businesses in commercial areas are experiencing a drop in sales as workers and tourists stay closer to home.
- E-Commerce: After the shutdowns, the number businesses that go online every month more than tripled from pre pandemic levels. It reached its peak in July 2020. This is due to increased demand for online sales channels and the slight delay after lockdowns started to make it a reality. Since then, the shift to digital has continued at an elevated global level.
- Entrepreneurship: Nearly 8x more small businesses were created in 2020 than in 2019. This is a third increase in the number of new SMBs. The trend of significant new SMB formation in 2020 can be seen around the globe: U.K. (+101%); U.S. (+86%)), Australia (+73%)), Germany (+62%)), Brazil (+35%), South Africa (+13%).
- Sectors-Lodging: The trend for people to travel locally has helped small lodging businesses (and hurt big city hotels). SMB restaurants outperformed large ones by 17 percentage points globally in 2021 YTD.
"Supporting local businesses has been a rallying cry throughout the pandemic,” said Bricklin Dwyer, the Mastercard Economics Institute chief economist. “We see better opportunities ahead. Digital revolution opened up the doors to the silver lining of the pandemic: the resurgence in entrepreneurship and innovation.”
Mastercard continues to support small business owners. It pledged to bring 50 million small businesses and 25,000,000 women entrepreneurs into the digital economy in 2025. Mastercard's Digital Doors program helps businesses get online and remain protected. It also provides the Small Business Digital Readiness Assessment that allows them to seamlessly integrate ecommerce and maximize their digital presence. Mastercard recently committed $25 million to assist more than 5 million small and medium-sized businesses digitize via the Strive initiative.
Mastercard offers high-frequency, local spending insight to dozens of cities, states, and federal governments via their Cities Possible, and Rehabilitation Insights programs. Additionally, Mastercard has content like the policy paper that addresses ways governments can help SMB recovery.