Small businesses turned to technology to survive the pandemic. But it may not be enough.

  • An employee carries a produce crate outside the Fresh Goods warehouse in Long Island City, New York.

    An employee carries a produce crate outside the Fresh Goods warehouse in Long Island City, New York. Photo for The Washington Post by Calla Kessler.

 
 
Posted6/27/2020 6:25 AM

Everything about Uncle Bobbie's Coffee and Books was designed to be experienced in person. Flipping through the pages of its carefully chosen selection of books, milling around and talking to neighbors over an espresso, crowding in to hear speakers at free events.

When Philadelphia announced its shelter-in-place order to slow the spread of the coronavirus on March 16, the three-year-old bookstore had to rethink how it was going survive.

                                                                                                                                                                                                                       
 

Three months later, the store, founded by author and activist Marc Lamont Hill, is selling physical books online through a service called Bookshop and selling audio books with a company called Libra.fm. It's hosting Zoom happy hours, wellness talks, and virtual events with authors. And in the past few weeks, it has seen a surge in online business from people wanting to support black-owned bookstores and read more about anti-racism. Still, the bookstore will largely rely on loans and a Go Fund Me campaign to survive until it reopens.

"You can always get the books cheaper on Amazon, faster on Amazon," general manager Justin Moore said. "Customers are going out of their way to not only purchase books from independent bookstores themselves, but to encourage their friends and colleagues to do it as well. It's been very much a community-led initiative."

Despite a widespread shift to online shopping, nearly 90% of U.S. commerce takes place in the physical world. Small businesses, including restaurants, bookstores and yoga studios, have long earned their keep through brick-and-mortar operations built on attracting customers to come in, gather, mingle and spend money.

But the pandemic has changed that, forcing businesses to embrace technology to move online. Many major cities have some form of lockdown in place, and the threat of another round of shutdowns looms as covid-19 cases spike in some areas. One in five small businesses reported having to temporarily close down since the pandemic started, according to the U.S. Chamber of Commerce.

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As shoppers in some areas are hesitant to return to their everyday habits, and filling a room for a book reading or exercise class is unthinkable for many, small businesses such as Uncle Bobbie's are hoping that a transition to online sales might help keep them afloat as they prepare to reopen.

"We would never want to replace that experience of when you walk into our store," Moore said. "You come, you stay, you talk, you meet some friends, you have some fun conversation."

In response to the shutdowns, restaurants closed dining areas and scraped by on pickup and delivery ordered via apps. Small shops that sell physical goods such as clothes and books figured out ways to list products online and in some cases created websites for the first time. Stores that still sell from physical locations are changing how they get paid - moving away from riskier cash and even physical credit card payment systems to prepaid invoices and contactless options. Technology adoptions that were expected to take years happened in weeks.

"Overnight, doing business in person was not really an option anymore, so everyone scrambled to get online," said David Rusenko, head of e-commerce at mobile payments company Square. "We saw a three-year adoption cycle get compressed to three weeks."

                                                                                                                                                                                                                       
 
Employees load produce onto crates at the Fresh Goods warehouse in Long Island City, N.Y.
Employees load produce onto crates at the Fresh Goods warehouse in Long Island City, N.Y. - Photo for The Washington Post by Calla Kessler.

Still, it may not be enough. Many small businesses were already struggling as Walmart and Amazon have become go-to destinations for shoppers. OpenTable predicts one in four restaurants won't reopen. More than 100,000 small businesses have shut down permanently since March, according to a study from the University of Illinois, Harvard Business School, Harvard University and the University of Chicago.

According to research firm eMarketer, sales at physical stores in the U.S. will drop 14%, or $4.2 trillion, this year, and it could take five years for the industry to bounce back completely. Online sales, while up, aren't enough to make up for that.

Small business owners, in particular, said it's not enough to make up for their closed physical retail spaces. Online sales are typically less profitable, in part because of costs for fulfillment and delivery, plus returns. Instead, many are relying on loans, donations and an upswell in public support.

"We see Gen Z and the young people put their money where their mouths is," said Barbara Kahn, professor of marketing at the Wharton School. "Now people think of the entire transaction of what they're paying for. That there's value in sustainable transactions, in supporting the local community, that's over and above the value of the goods."

Many businesses have had to get creative to take advantage of that sentiment.

In Oakland, Calif., wine bar and store Ordinaire realized listing its extensive inventory of natural wine online wasn't practical. Instead, it added an option for customers to fill out a form with their desired number of bottles, a budget, and what style wine they are "in the mood for." The store's staff picks the best wine for that order and sends an online invoice to the customer.

"It's kind of how we always operate as a wine shop. If someone comes in we have a dialogue and conversation about what they're looking for," said Alex Leopold, a manager there. The wine bar has seen a slight bump in retail sales, but not enough to make up for the closure. It plans to keep the online options after the bar and store reopen.

Stepping into the void, tech companies are coming up with new tools for small businesses. Square is best known for its credit card reader that plugs into mobile phones, but it now offers tools for website-building and invoicing. When the pandemic started, the company added new options to its software such as curbside pickup and contactless delivery.

"We saw a lot of people get online in two days, three days," said Square's Rusenko. "Now that some areas are reopening, they're actually able to manage both."

Bookshop, the site Uncle Bobbie's and more than 700 independent bookstores use for sales and fulfillment, launched in February. It sold $50,000 worth of books that first month. Now it averages about $250,000 in a day and has gone as high as $500,000 in a day, according to founder Andy Hunter. That includes a significant boost from the increased interest in books about systemic racism.

The site also handles the physical work of selling and shipping books. Independent bookstores set up a page on Bookshop.org with the titles they usually sell, and Bookshop works with a large national wholesaler to package and ship them directly. The bookstore itself doesn't have to touch the books or worry about inventory, but it pockets about 30% of the cover price. Bookshop also has options for stores that want to handle their own inventory. Hunter says the company doesn't take a cut of the profit from those sales, instead making its money on affiliate sales or people buying directly from its main site.

Like many small businesses, Uncle Bobbie's was concerned about its employees when it shut down. Moore, the manager, set up a GoFundMe to help the store's 18 workers get by, and he applied for various grants and loans. The GoFundMe has surpassed its $50,000 goal and the loans including the paycheck protection program are available. The online sales have been set up for only a few weeks are helping tide the business over. The store is planning to reopen soon.

"We all want to kind of return to the normalcy of human interaction; we're just not going to rush back into that," Moore said.

Others are creating entirely new websites. Shopify, which offers prebuilt websites to sell products online, said it had a 53% increase in people creating new online stores in April compared to March.

Joseph Boo and his father Kian Tai Boo at the Fresh Goods warehouse in the New York borough of Queens.
Joseph Boo and his father Kian Tai Boo at the Fresh Goods warehouse in the New York borough of Queens. - Photo for The Washington Post by Calla Kessler.

Asian-Veggies.com is one of them. Joseph Boo created the site in April to help his dad's wholesale vegetable business, selling produce that's difficult to find, such as snow-pea shoots, yu choi, and watercress.

His father, Kian Tai Boo, has sold vegetables in New York City for more than 28 years, most recently as a wholesaler, using pen and paper to track changing prices. When the pandemic hit, 90% of his revenue was gone. His company, Fresh Goods, was left with a warehouse in Queens filled with more than 70 types of fruit, vegetables and dry goods popular in Asian cooking.

Joseph Boo used Shopify to make the website, software called OnFleet for the delivery logistics, his iPhone for product shots, UpWork to hire help, and Instagram and Facebook for marketing. In the past two months, Asian Veggies has had roughly 1,200 orders and brought in more than $100,000, enough to help the business but not replace its income entirely. They see it as a profitable addition they will keep running after the pandemic and are already looking for more warehouses to expand.

One challenge with selling vegetables virtually is gaining the trust of customers who are used to carefully picking out their own. While it might have been impossible to build that customer base before the pandemic, the limitations of closed stores and new rules about touching vegetables while shopping has left them with fewer options, and Joseph Boo says many are pleasantly surprised.

"For the older generation, they want to feel the veggies before they buy it. They need it to talk to them and say 'I'm the one,' " Boo said. "This 100% would not have happened if the pandemic hadn't happened."

Not all closed stores have physical goods they can sell. Many businesses and professions have moved to offering paid versions of their usual services online. On Zoom and FaceTime, physical trainers are running clients through drills, hairstylists are talking people through cutting and dying their own hair, and therapists are fulfilling the increased need for their services on video.

Gerrae Simons Miller has owned Philadelphia's Mellow Massage & Yoga for 12 years and has 22 employees. The business was primarily focused on the massages, but a few weeks into the pandemic she offered online yoga classes over Zoom. She's considering adding paid telehealth-like appointments to guide people through practicing massage therapy on themselves and releasing pressure points.

Video classes don't bring in enough money to make up for what the company is losing.

Miller has worked hard to secure loans to keep her business afloat. City regulations will require her to pay for more extensive cleaning while operating at half her usual capacity for a period of time.

"For me, the online classes are not going to get me to the other side, they're a way to keep me connected to community," Simons Miller said.

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