To shed light on the impact the global health crisis – and ongoing recovery – has had on small businesses globally, Mastercard released its latest report: Recovery Insights: Small Business Reset.

Looking at 19 markets around the world, including Australia, Hong Kong, Japan, Malaysia, New Zealand, Philippines, Singapore, and Thailand, the report reveals that sales at small- and medium-sized businesses (SMBs) lagged larger companies by up to 20 percentage points at the peak of the crisis.  However, 2021 indicated an upward trend. Total sales at SMBs rose 4.5% through August 2021 year-to-date compared to the same period in 2020, and e-commerce sales grew 31.4% globally.

“While businesses of all size 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, AP and MEA, 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 amidst the disruption.”

Drawing on the MEI’s new Small Business Performance Index* of aggregated and anonymized sales activity within the Mastercard network, Recovery Insights: Small Business Reset identifies several key trends:

• Closures: In APAC, small businesses 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 6 months, vs. large retailers, with one-third of small businesses that closed in April 2020 remaining closed after 6 months, and about one-fifth still closed after 12 months.

• E-Commerce: 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 vs. 2019. .

• Entrepreneurship: 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 8 times the 4% of large firms created. This trend is most strongly reflected in Australia (+ 73%), Japan (+38%) and Thailand (+29%).

• Location: 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.
• Sectors - Restaurants & Lodging: 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 percentage points in 2021 YTD. A notable exception is in Hong Kong, whose SMB eating places have seen increased outperformance over large businesses in 2021.

Supporting small business owners is a continued priority for Mastercard, which 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.

Mastercard also works closely with governments, businesses, and other organizations around the world to create environments, programs and policies so small businesses can flourish. Mastercard provides high-frequency, local spending insights to dozens of city, state and federal governments as part of our City Possible and Recovery Insights programs, as well as content such as the recent policy paper addressing ways governments can support SMB recovery.

You can view the full Recovery Insights: Small Business Reset here. This is the fifth report in the Recovery Insights series; other reports can be found here.