Does COVID-19 Mark the End of Small Business?
By Ilah Ross
Does Covid-19 Mark the End of Small Business?
On April 16, 2020, Neal Gottlieb, founder of Three Twins Ice Cream, one of America’s leading grocery store brands in organic ice cream, announced that his business of 15 years would be ceasing operations as of April 17. Many were distraught to hear this news, as Three Twin’s iconic flavors of Lemon Cookie, Dad’s Cardamom, Land of Milk and Honey, and more, were staple ice creams in countless Bay Area homes. The reason for this abrupt closure was not unique to Three Twins; many other small businesses are also closing up shop due to the immense economic strain brought about by COVID-19.
When citizens of the United States were sheltered in place during the months of March and April, many were worried about the most pressing insecurity which COVID-19 introduced: the health and safety of their family members and themselves. However, a significant subset of Americans had other worries on their minds in addition to this basic concern. For the 49.2 percent of Americans who are owners and/or employees of a small business, COVID-19 was not only a matter of health, but also of livelihood, as the pandemic had a direct impact on the way in which these vital businesses function. Beyond the primary issue of many businesses completely closing down during March, April, and May, small businesses had to reevaluate how many people they could keep employed, and whether they could afford to stay open at all.
“The local business climate has been heavily impacted by the pandemic,” said Judy B. Lloyd, president and CEO of the Danville Area Chamber of Commerce. “Small businesses in the retail and restaurant sectors have been hit most directly, and many of these businesses have been well within compliance guidelines issued by the State and County, yet they were still forced to be closed out of fear of spreading the virus.”
According to the latest research by Yelp, 72,842 businesses in the United States have been forced to close permanently due to the impact of COVID-19 on businesses. As Lloyd notes, the food industry has been one of the most harshly affected by COVID-19. An estimated 15,770 restaurants have permanently closed in the US alone. One out of every 10 restaurants which temporarily closed in March, April, and May has since closed permanently. These devastating statistics are concerning for small business owners, as they serve as a reminder of the looming threat bigger businesses pose in encroaching on their market share. For Gottlieb, this threat came in the form of companies like Ben and Jerry’s and Haagen-Dazs.
“The biggest challenge of the grocery side of the business even before COVID was competing with the likes of Ben and Jerrys and Haagen-Dazs, who are cheaper grocery market brands. It’s just really challenging to offer a clean and organic product, and to get consumers to pay significantly more for it,” Gottlieb said.
The concern of national brands overtaking small business may have been exacerbated by the pandemic, but Gottlieb’s account suggests that it existed long before COVID-19. Most consumers opt for the more convenient and cheap option when it comes to food and other products. Supporting small businesses is becoming less of a priority for the American public.
Unfortunately, Three Twin’s business model was inherently harder to sustain due to their commitment to producing reasonably priced organic ice cream through environmentally friendly means of manufacturing. In the current consumer economy, it has become increasingly difficult to survive as a business while staying true to these values.
“I wanted to create a business that was organic and environmentally friendly but appealed to the masses for reasons far beyond just being a green business. So I wanted to put that out into the world at an affordable price, which was something that had a lot of initial success but that also proved to be very challenging as far as getting to a place where the business was sustained and profitable,” Gottlieb explained.
Then came the pandemic, an obstacle which introduced a new level of financial instability that Three Twins was unable to keep up with.
“The more established companies just have deeper pockets, and they have established profitability. So they are able to weather the storm when there’s a downturn, whereas we just didn’t have that. We were already running on fumes before the pandemic,” Gottlieb said.
The story of Three Twins Ice Cream is one of hope and resilience but ultimately loss. The 72,842 businesses which have permanently closed in the recent months suggest that there are many other stories like Gottlieb’s. COVID-19 has served as a harsh awakening for small business owners who started companies from the ground up with hopes of providing consumers with unique products. Many of these businesses were ultimately unable to withstand the combined forces of an economic recession fueled by a raging pandemic and the competition created by bigger companies who have established profitability.
There are, however, cases of successful pivots to an online format during the pandemic. Chris LaLanne, owner of LaLanne bootcamp in Castro Valley, California, quickly shifted his fitness business to an online format when the pandemic hit.
“In March, when the state mandated closure of gyms and bars and restaurants and all those services, there was lots of writing on the walls in the business community. The time to close down and pivot to an online format was something that couldn’t wait any longer.” LaLanne explained.
On his new LaLanne Bootcamp app, Chris LaLanne has created a holistic approach to exercise.
“I’m not necessarily just doing things like a workout or a plan; it's more of a holistic one-on-one makeover of your entire lifestyle. This has been far more fulfilling for me than allowing people to just take a class, and then going back to their life. Now we can work on your whole day and get results in a very efficient and far more intimate way. Going online has opened me up to a completely new avenue in how I help people,” LaLanne said.
The future of LaLanne’s venture in connecting with customers online is yet to be determined, but this potential success story may be the exception among most small businesses.
In a time where the average American’s trips to the grocery store are increasingly centered around finding the least expensive products in the shortest amount of time, many wonder if small businesses and brands still have a future in our world and consumer economy.
