How Covid19 Might Impact Our Small Storefront Operators

By N. David Milder


While I do not believe that brick and mortar retail will disappear, it was becoming of decreasing strength in many, perhaps even most, of our downtowns before the Covid19 crisis appeared. Their leaders needed to recognize that their district’s vitality was increasingly dependent on the firms and nonprofits engaged in its central social district functions such as restaurants, bars, public spaces, theaters, museums, cinemas, senior and childcare centers, houses of worship, etc.  I also argued strongly that downtown leaders should stop being snobs and looking down at pamper niche operations such as hair and nail salons, gyms, martial arts studios, spas, yoga and Pilates studios, dance studios because they brought in shoppers with discretionary dollars to spend and their shop windows were usually neither inert nor boring.1 Looking to the post Covid19 future, the recovery of the vast majority of our downtowns also will depend on the resurgence of these types of operations, not just the independent and/or chain store retailers. Consequently, this article does not focus on just small retailers.

The Pre-Crisis Situation

 In our biggest and strongest downtowns, these small operations have been disappearing from their main storefront commercial corridors for some time now as more chains entered and rents rose at a gallop. And it was not just the small retailers who were disappearing. Some, mostly small eateries, have in declining numbers hung on in side street locations. 

Pre-crisis, in many, perhaps most, smaller downtowns, finding tenants for vacant storefronts was already a prime concern. Since the Great Recession, many downtown revitalization observers have noted a strong tendency for vacant retail spaces to be filled by personal service operations and/or FIRE industry tenants. Banks, for example, for some years were taking the prime large storefronts at districts’ key intersections. In one suburban downtown, they sat at three of the corners of such an intersection.

Acceptable downtown vacancy rates rose in the pre-crisis years to a level, about 10%, that in years past would have been treated as a sign that a district is in serious trouble.

Compounding the situation was

  • The decline in small business startups.
  • The relatively short lives of most of these small firms.
  • For decades these small businesses have been fighting waves of strong new competitors that have appeared one after the other such as national retail chains, regional shopping malls, big box stores, and online merchants.

This prior situation has not been erased by the current crisis. Instead, it probably will serves as a legacy layer of conditions that will influence the recovery of small operators from the Covid19 crisis. These old challenges are unlikely to have gone away during the Covid19 crisis, but they may have mutated.

Their Survival and Adaptation During the Crisis

Since we are still in this crisis, it is impossible to accurately assess how many of the small businesses that tenant most of our storefronts in the vast majority of our downtowns will survive. That said, there are enough well established facts that suggest the number of failed/closed small firms will be very high. For example, as this chart above from a recent study of about 600,000 small businesses by the Chase Institute shows, depending on their industry, small firms are likely to have on hand only enough cash to cover their cash expenditures for between 16 and 47 days, with the median being 27 buffer days.2 Twenty five percent have less than 13 cash buffer days. Notably, two downtown strategists’ favorites,  restaurants at 16 cash buffer days, and retailers at 19, are at the lower end. The crisis induced disappearance of customer traffic and sales revenues turned this weakness into a mortal threat.

Parts of the $2 trillion CARES Act passed by Congress is aimed at addressing  this problem. However, numerous problems have emerged with its implementation. To maintain focus, they will not be detailed here. However, lots of the small firms who need this survival money most have not been funded, especially those who are “under banked” and in minority areas. Success rates for obtaining these funds have also varied significantly by state.

Under its $349 billion Paycheck Protection Program administered by the SBA, overwhelming demand has meant that funds were quickly depleted even though a loan maximum of $15,000 was imposed. The table above shows that the ability of these loans to help small firms survive depends not only on the amount of the loan, but the industry the firm is in. It should be noted that during this crisis with many non-essential small businesses closed and others having limited operations, their cash outflow needs may be lower, so these loan amounts could support them for additional days. However, even with that in mind, it should be clear that if a full economic recovery will take a year or longer to achieve, these loans will be insufficient to keep many of these small businesses afloat. They need to again have sales revenues.

The situation among the department stores is equally stressed, as noted by a recent article in Retail Dive:

“Cowen analysts said department stores have about five to eight months of liquidity before a cash crunch becomes a risk factor. J.C. Penney has about eight months of available cash, Macy’s has about four and a half months and Kohl’s has about five months, according to Cowen’s analysis. The analysts previously pegged Nordstrom at about seven months but have since revised their forecast to one year.” 3

For small merchants to have a good chance of achieving adequate sales revenues the following conditions must be met:

  • A sufficient amount of consumer demand, with allied spending power, must return. With very large numbers of unemployed and large declines in the values of 401ks and stocks, demand may not return quickly. Also, returning demand can be expected to vary with the wealth in a downtown’s trade area. 
  • Supply chain problems must be adequately healed to have adequate selections and timely access to inventory. Much of the merchandise our shops now sell  are produced offshore and Covid19 is an international crisis impeding production and transport. We may not learn about the true extent of our supply chain problems until existing in-country inventories are depleted.
  • These small firms will still have to deal with many of their old pre-crisis problems, though some may have been ameliorated for the survivors. Large scale closings of small merchants will likely result in much higher storefront vacancy rates, increasing their bargaining position with landlords. That is likely to create strong pressures for lower rents for tenants and mortgage payment problems for landlords. The overall quality of the surviving small merchants, though,  might be much higher because they were the best and fittest operators.  However, finding new tenants and high vacancy rates may be larger problems than ever for their downtown’s leaders and EDOs. Amazon, Costco, Walmart, Target et al are doing record business, a lot of it for online groceries, but their deliveries have become very problematic and uncertain. As a result, they may have lost boat loads of customer good will. Getting a food delivery time from Amazon Fresh or Costco/Instacart, for example, has become like winning the lottery. But, by the same token, if these giants right their ships, they may become even more powerful than ever because so many more consumers relied on them during the crisis, and so many more of them ordered online and learned how easy online shopping can be when the systems are not stressed beyond their capacities. Keep in mind that grocery sales have long been thought to be very resistant to being captured by online retailers, yet during this crisis a huge proportion of America’s households become dependent on them. We fall off our bikes often when we are learning to ride them.
  • Small firms will need to change the way they operate to accommodate the need for social distancing among customers and employees, to improve sanitation as the new offices will do, and to learn how to deal with more customers who are located outside of their stores and/or who care a lot about convenience and speed of service. 

On this last point of adapting to the new conditions, I’ve been noting over the recent years a growing trend of smaller merchants to use  the internet, and the younger ones are often quite adept at it. The most successful of them do so as part of an omnichannel marketing approach that ties their online operations with their brick and mortar stores, backdoor marketing to other businesses, and in-person marketing efforts at trade shows and other similar events. From some very interesting articles I’ve recently read that will appear in the June issue of The American Downtown Revitalization Review (The ADRR), it seems that during the current crisis many small town merchants have relied on the internet to maintain a revenue stream, with many of them adopting the BOPIS strategy – shoppers buy online and pickup in the store or at its curbside – that lots of large chains are using.4  The critical question that has yet to be answered is: are these revenues streams large enough to keep them afloat, with or without CARES Act loans? 

From those articles as well as  from visiting the website of Center City in Philadelphia, I’ve noticed that many pamper niche operations, especially those that involve some form of teaching have taken to the internet. Included are yoga, Pilates, dance, martial arts, and meditation studios.5 These operations also have relatively low daily cash outflows and need to capture relatively low market shares to stay solvent. They also usually do not require prime locations. Nor do they need large inventories of merchandise on hand, so they can pay a higher percentage of their annual revenues for space costs. Consequently, they may be a good group for downtown tenant recruitment efforts to target during the earlier stages of the economic recovery.

However, being able to adapt to the new conditions will also mean changes in the ways employees and shoppers use these stores so that they have cleaner air and surfaces and support any necessary social distancing. Large retail chains are already contemplating serious changes such as contactless payments and curbside deliveries, one -way and wider aisles, better air filtration, more frequent and more thorough cleaning of interior surfaces, salespeople wearing masks and gloves, and limiting access to a specific number of shoppers at any one time. Many of these steps can be quite costly for either the landlord and/or the retailer. Small merchants have far fewer resources, so two questions come to mind: 1) can they afford similar changes, and 2) if not, will consumers still feel sufficiently safe to patronize their operations? The big retailers will hire professional firms such as  Gensler to help them. Will the small merchants know who to hire, and will they be able to afford them? For many downtown EDOs the needs of their small merchants to reconfigure how their shops operate will pose challenges similar to their trying to help small merchants improve their storefront’s facade, but on an even more complex scale.


1) Milder, N. David. Nail, Hair and Skin Salons: Bane or Boon?  Downtown Idea Exchange. October 2005

2) Diana Farrell and Chris Wheat. “Cash is King: Flows, Balances, and Buffer Days: Evidence from 600,000 Small Businesses.” The JPMorgan Chase Institute, 2020.

3) Caroline Jansen.  “What retail could look like when stores reopen”. Retail Dive. April 15, 2020.

4) Visit 

5) See: “Support Center City Businesses: This master list will keep you connected to Center City businesses still offering services at this time.”