Mastercard Economics Institute: U.K., U.S. and Australia lead in new small business formation, which grew 32% year-over-year globally
October 06 2021 - 12:01PM
Business Wire
Small Businesses Go Digital at Three-Times
Pre-Pandemic Levels
To shed light on the impact the global health crisis – and
ongoing recovery – has had on small businesses globally, Mastercard
today released Recovery Insights: Small Business Reset. 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 percentage points 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 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: 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. Locally, the situation
varied: in the U.S., roughly one in four small retailers remained
closed after 6 months, vs. roughly one in 12 large retailers.
- Location: Spending at SMB retailers in central business
districts is down 33% vs. 2019, while sales within more residential
neighborhoods grew 8%. As tourists and workers stay closer to
home, small businesses in commercial districts 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: Small lodging
businesses outperformed large by a wide margin during the summers
of 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.
“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.”
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.
*Methodology
The Mastercard Economics Institute developed the Mastercard
Small Business Performance Index as a more universal classification
system for SMBs. The Index leverages a comprehensive AI-driven
algorithm to identify unique indicators, such as number of
locations, sales volume, number of transactions, within aggregated
and anonymized sales activity in the Mastercard network.
Disclaimer
This presentation and content are intended solely as a research
tool for informational purposes and not as investment advice or
recommendations for any particular action or investment and should
not be relied upon, in whole or in part, as the basis for
decision-making or investment purposes. This presentation and
content are not guaranteed as to accuracy and are provided on an
"as is" basis to authorized users, who review and use this
information at their own risk. This presentation and content,
including estimated economic forecasts, simulations or scenarios
from the Mastercard Economics Institute, do not in any way reflect
expectations for (or actual) Mastercard operational or financial
performance.
About Mastercard Economics Institute
Mastercard Economics Institute launched in 2020 to analyze
macroeconomic trends through the lens of the consumer. A team of
economists, analysts and data scientists draws on Mastercard
insights - including Mastercard SpendingPulse™ - and third-party
data to deliver regular reporting on economic issues for key
customers, partners and policymakers.
About Mastercard (NYSE:MA)
Mastercard is a global technology company in the payments
industry. Our mission is to connect and power an inclusive, digital
economy that benefits everyone, everywhere by making transactions
safe, simple, smart and accessible. Using secure data and networks,
partnerships and passion, our innovations and solutions help
individuals, financial institutions, governments and businesses
realize their greatest potential. Our decency quotient, or DQ,
drives our culture and everything we do inside and outside of our
company. With connections across more than 210 countries and
territories, we are building a sustainable world that unlocks
priceless possibilities for all. www.mastercard.com
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Julia Monti Julia.monti@mastercard.com 914-249-6135
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