Whitman Voices

Introduction

The Juxtaposition of How COVID-19 is Impacting Business, Diversity is Key

The Juxtaposition of How COVID-19 is Impacting Business, Diversity is Key

The COVID-19 pandemic shook the world in early 2020 and brought capitalism to its knees…to an extent. Many large retail stores have added themselves to the list of companies filing for bankruptcy. However, at the same time, a select group of companies has increased stock and thrived during the “Coronavirus Crash.”

As the United States acts as the epicenter of the virus; Jeff Bezos, CEO and founder of Amazon.com Inc., has been projected to become the world’s first trillionaire. Simultaneously, the current unemployment rate has outpaced the one during the Great Depression. The juxtaposition of success among a select few compared to the crippling debt of many others is startling. What has COVID-19 done to large and small businesses?

U.S states began to roll out reopening schemes and the country has responded with various stimulus relief efforts. The economic impact that COVID-19 has had on the country is beginning to reveal itself more clearly and some mom and pop shops do not seem to be coming back as strong as retail behemoths.

Peter Koveos, department chair of finance and director of the Kiebach Center for International Business at the Martin J Whitman School of Management at Syracuse University, states, “Small companies indeed seem to be suffering for a number of reasons, including their financial constraints and the lack of diversification of their operations. Of course, there are various degrees of damage done to these businesses depending on the industry and other characteristics of the business.”

Amazon.com Inc. is a multinational e-commerce retailer that has seen success during COVID-19. On April 16, the company stock reached an all-time high during the pandemic. In addition, they hired over 100,000 workers and as mentioned previously; the CEO is expected to become the world’s first trillionaire. They offer a wide variety of products to keep themselves afloat; e-books, streaming service and almost any home good one could wish for, including food and cleaning supplies, which everyone needed during this health crisis. 

Due to stay at home orders and social distancing guidelines, many small businesses could not remain open during the pandemic and some could not transition online. Amazon has been able to soak up eager customers.

Amazon is not the only profiting large entity at the moment. Companies such as Walmart, Dominos, Costco, and Netflix are among organizations that have also seen increases in share prices during COVID-19.

The S&P 500, which measures the performance of the U.S. top 500 companies is on a slow rise as well, but it would not be without the dependency on tech giants such as Apple and healthcare organizations. Trends in data show that small and medium-sized companies have had a much more dramatic stock price decrease as well.

In addition, companies such as Boeing and Ford had the option to refinance, which led to sharing values increasing. According to the New York Times,  a variety of large corporations are becoming the beneficiaries of bailout money intended for small businesses. 

Many brick and mortar stores cannot take advantage of the government small-business loan programs. One example is the Main Street Lender Program.

Another problem that small business have is a lack of ability to diversify their services. According to a survey put out by SMB (Small and Medium Business Group, small businesses who deal in hospitality and personal services, such as salons, are the most negatively impacted by COVID-19. 

Kenneth Walslesben, professor of entrepreneurial practice explains that COVID-19 has not discriminated, it has hurt large and small businesses economically. “Companies who do retail, big and small, are getting hurt. I’m not just talking about clothing, anything that requires consumer activity is hurt. I’m not going to suggest every big business is going to go under, but many are in a lot of trouble. Obviously, small guys are not doing well because they don’t have the financial reserves that big businesses do.”

The Main Street Loan Program requires businesses to loan a minimum amount of $1 million, which is not feasible for many small businesses, even with a low interest rate. Forbes quotes Tristen Snell, who claims, “The system is rigged in favor of larger businesses that can lobby the government for special assistance and get the laws and regulations written in their favor. Mom-and- pop retailers in America are basically 60 days or less from being shuttered.”

Koveos adds, “Although most of us believe in the lockdown, we understand why some people are so upset as to take their case to the streets. I did not see Jeff Bezos or Dave Calhoun among the protesters.” 

There is a bright side for small businesses. The CARES Act may supply some temporary relief to them. One of the most highly regarded parts of the program is the Paycheck Protection Program, which allows small businesses to take loans on the basis that they will pay employees wages. 

The CARES Act states, “The amount of the loan forgiven at the end of the covered period will be determined by how many employees were retained on the company’s payroll.”

Walsleben explains that there are structural issues to the recovery policies. “For example, if a restaurant can reopen, that doesn’t mean they will be filled right away. There are structural issues that will be in place long after the quarantine mandate ends which may further suppress economic recovery. The government will need to look at other ways to help business flourish.”

Small businesses across the country remained open until the last minute possible before stay at home orders were put in place. Some have adapted to online business and were innovative in serving their customers. However, the mass disruption of COVID-19 has closed a plethora of mom and pop shops indefinitely and only time will reveal who will make a comeback from this crisis.

Until then, keep supporting local by ordering take-out food, buying gift cards and saving money to spend at your favorite boutiques until the community can support small businesses in person.

Learn more about how small businesses in Syracuse are reacting to COVID-19.

Maya Bingaman