Uncertainty has been a key theme throughout 2021. This is especially true for small retail businesses that are looking to make up lost revenue during the holiday shopping season.

According to a new survey of 1,250 small retail businesses conducted by Digital.com, about one-quarter of small businesses will face bankruptcy or closure if holiday sales fall flat.

Key Findings:

  • 27% of small retail businesses say permanent closure is a possibility if holiday sales don’t bring in needed revenue
  • 1 in 5 retailers say Black Friday weekend sales fell short of their expectations this year
  • 19% of small retail businesses say Black Friday-Cyber Monday sales dipped from 2020 to 2021
  • Pandemic-related shutdowns in 2021 impacted revenue for 1 in 2 small retail businesses

27% of small retail businesses may have to close if holiday sales fall short

As retailers reckon with a second year of pandemic-related disruptions, many face serious potential consequences if they don’t meet sales goals for the holiday shopping season.

Permanent closure is a possible consequence if sales goals are not met for 27% of small retail businesses. Meanwhile, 24% may be forced to consider bankruptcy if they don’t hit the necessary sales goals through the end of 2021.

According to small business marketing consultant Dennis Consorte, these dire findings are not shocking.

“The risk of closure for many small businesses isn’t a question of ‘if’ – it’s a question of ‘when,’ Consorte says. “Pandemic lockdowns sent ripples throughout the economy that impacted supply chains, worker availability, and spending habits, all of which affected revenue for small retail businesses.”

In order to stay afloat into 2022, many small retail businesses are considering other measures besides closure or bankruptcy.

Forty percent of small retail business owners would cut their own salaries if they miss sales goals, while 28% say cutting employees’ salaries is an option. Thirty-two percent of small business owners would lay off employees if necessary.

Layoffs most likely at restaurants, supermarkets, department stores

Based on the type of retailer, certain businesses are facing worse odds than others.

Employees at grocery stores, department stores, discount stores, and restaurants may be in the most peril. Thirty-seven percent of grocery stores, 36% of department stores and discount stores, and 35% of restaurants say staff layoffs are possible if holiday sales don’t bring in the necessary revenue.

The possibility of permanent closure is highest among second-hand stores (34%), department stores (32%), grocery stores (32%), and discount stores (31%).

Meanwhile, 47% of grocery store owners, 46% of general merchandise store owners, and 44% of personal care service business owners are also keeping open the option of cutting their own salaries to stay afloat.

Sales during Black Friday weekend miss expectations for 1 in 5 retailers

After sales during Black Friday weekend 2020 were muted by the pandemic, the outlook for sales during this year’s Black Friday-Cyber Monday weekend was more positive.

However, 22% of small retail businesses report that sales for the period between Black Friday and Cyber Monday 2021 did not meet their expectations.

“Retailers are often optimistic about their holiday shopping numbers, but this year was different,” Consorte says. “Shrinking discounts and promotions combined with record-high inflation and product shortages put retailers in a very bad position.”

When looked at by how businesses operate, brick-and-mortar store owners were most disappointed, with 29% saying sales fell short of expectations. By comparison, 26% of online-only businesses say Black Friday weekend sales didn’t meet expectations, as did 17% of businesses that operate both in-person and online.

1 in 4 small businesses that didn’t meet Black Friday sales projections will end year in the red

The term “Black Friday” is believed by some to have been coined because it traditionally marked the point in the year when retailers would turn a profit, or “be in the black.”

However, 24% of small retail businesses whose sales during Black Friday weekend didn’t meet projections are now predicting they’ll end the year at a loss. These businesses are twice as likely to predict they’ll end the year in the red as those whose sales for Black Friday weekend exceeded expectations (13%) or met expectations (10%).

Consorte predicts more disappointing holiday sales for small businesses, at least for the foreseeable future.

“As small businesses shut down, international chain stores will capture more of that market, making it nearly impossible for many small businesses to compete,” he says. “It creates a vicious cycle.”

19% of small retail businesses saw decline in Black Friday weekend sales from 2020

In another foreboding sign, 19% of small business retailers saw Black Friday weekend sales decline from the same time period in 2020.

For 61% of retailers, the drop in sales was between 10% and 50%, with the highest percentage, 16%, reporting a 40% dip in sales.

Thirty-five percent of small retail businesses whose sales fell from Black Friday weekend 2020 say that their sales this year fell short of expectations and 39% anticipate ending 2021 at a loss.

Pandemic-related shutdowns disrupted revenue for half of small retail businesses in 2021

The ongoing pandemic and subsequent restrictions continued to wreak havoc on small businesses this year. In fact, 50% of business owners say shutdowns impacted their revenue.

Other issues that affected revenue for small retailers this year include supply chain issues (45%), inflation (43%), and labor shortages (39%).

According to Consorte, these outcomes were predictable.

“COVID lockdowns were a disaster for small businesses,” Consorte says. “People re-evaluated their jobs, triggering ‘The Great Resignation.’ This caused worker shortages throughout the retail supply chain. Combine this with government checks that incentivized people to stay home, and it’s not hard to see how we ended up here.”

Small businesses that require on-site employees were more likely to feel the effects of labor shortages, as Covid concerns and preferences for remote work kept employees at home.

Forty-two percent of businesses that operate only brick-and-mortar locations, and 41% of businesses with in-person and online operations say labor shortages affected their revenue, compared to 32% of online-only businesses.

Methodology

All data found within this report derives from a survey commissioned by Digital.com and conducted online by survey platform Pollfish. In total, 1,250 small retail business owners were surveyed. The survey defined a small retail business as having less than 500 employees. Appropriate respondents were found via a screening question. This survey was conducted on December 4, 2021. All respondents were asked to answer all questions truthfully and to the best of their abilities. For full survey data, please email Content Marketing Specialist Kristen Scatton at [email protected].