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How small merchants can help drive sustainable consumption

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The COVID-19 pandemic dealt a heavy blow to small businesses, but a silver lining emerged amidst the shuttering of storefronts: a clearer understanding of the types of support small businesses need to survive, grow and compete in today’s digital economy

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It was just one year ago when we first heard of a new coronavirus in Wuhan, China, that was threatening to turn into a pandemic. Just months later it had spread to nearly every corner of the globe, leaving death and economic hardship in its wake.As we know now, the hardship was not equally shared. Black and Latino communities were disproportionately affected—both by illness and loss of employment.&nbsp;But they were not the only ones. Asian Americans saw&nbsp;<a href="https://fas.org/sgp/crs/misc/R46554.pdf" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">the second sharpest spike</a>&nbsp;following Latinos in unemployment rates in the first months of the pandemic, from 3.1 percent in February 2020 to 15 percent in May.&nbsp;<a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7543758/" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">Recent research</a>&nbsp;finds that among those with less education, the lockdown affected Asian Americans more than any other racial group in part because they are&nbsp;<a href="https://www.mckinsey.com/industries/public-and-social-sector/our-insights/covid-19-and-advancing-asian-american-recovery" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">overrepresented in businesses</a>&nbsp;with the steepest decline in sales.As we show in a new analysis of Asian American communities in New York City, not only were they harder hit than the rest of the city, but they were also hit earlier than other communities, likely due to xenophobia and a misguided fear of Asian establishments at the outset of the pandemic.The Center regularly uses Mastercard aggregated and anonymized data on consumer spending trends to&nbsp;<a href="https://www.mastercardcenter.org/insights/using-data-driven-insights-to-help-revive-a-historic-new-orleans-neighborhood" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">help city leaders and others</a>&nbsp;build strong and inclusive communities.&nbsp;In partnership with the Asian American Federation of New York, we again analyzed the data to better understand COVID-19’s impact on Asian New Yorkers.We compared changes in weekly spending from January through September 2020, as well as during the same timeframe in 2019. We focused on five neighborhoods—three with heavy Asian American populations (Manhattan’s Chinatown; Flushing, Queens; and Jackson Heights, Queens) and two diverse, lower socioeconomic neighborhoods (East New York, Brooklyn; and Jamaica, Queens) that also have many small, family-owned businesses, including grocers and restaurants, the focus here.&nbsp;Chinese American communities felt the impact of COVID-19 earlier and more significantly&nbsp;As a whole, New York City saw consumer spending fall 65 percent beginning in late February and accelerating into March. The spending decline, however, was far steeper for the predominantly Asian American communities. Consumer spending by early March in Chinatown—particularly in restaurants—had fallen by almost 82 percent. In Flushing, spending had declined 71 percent and 73 percent in Jackson Heights.&nbsp;

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Consumer spending in Asian American neighborhoods in New York City fell more sharply than citywide spending.Explore the data:&nbsp;click through to see detailed spending trends in NYC neighborhoods

Restaurant spending drove the decline in Asian American communities, in part because of their strong stake in food services. Nationally, Asian-owned businesses make up a sizable share (<a href="https://www.mckinsey.com/industries/public-and-social-sector/our-insights/covid-19-and-advancing-asian-american-recovery" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">26 percent</a>) of accommodations and food service, according to a McKinsey report. In New York’s Chinatown, the restaurant trade accounts for 40 percent of the overall spending compared with 24 percent citywide, according to our analysis.By March, consumer spending at the city’s restaurants had declined by 85 percent. At the same time in Chinatown and Flushing, spending cratered with a 96 percent drop.

Restaurant spending in Chinatown and Flushing were particularly hard-hitThe spending slowdown in Chinatown also started six weeks earlier than the city as a whole. Spending in restaurants began to fall March 2 citywide but January 20 in Chinatown and Flushing. McKinsey found&nbsp;<a href="https://www.mckinsey.com/industries/public-and-social-sector/our-insights/covid-19-and-advancing-asian-american-recovery" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">similar trends nationwide</a>, attributing the early falloff to “misguided fears of the virus” that effectively shuttered businesses in Asian communities despite few reported cases.&nbsp;Explore the data:&nbsp;click through to see detailed restaurant spending trends in NYC neighborhoods

Note: Restaurant spending in Chinatown fell 96 percent by March and began declining 6 weeks earlier than the rest of NYCA lack of e-commerce options hindered Asian restaurants&nbsp;Earlier reporting found that nearly one-third of Asian restaurants&nbsp;<a href="https://www.nytimes.com/2020/06/30/nyregion/chinatown-coronavirus-nyc.html?searchResultPosition=1" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">rely on cash</a>,&nbsp;and only one in four has an online presence compared with 70 percent of restaurants in wealthier neighborhoods such as the West Village. As takeout and delivery became a lifeline for many, many restaurants in Chinatown were unable to pivot to online apps and sales as quickly.&nbsp;Citywide in New York, the share of digital transactions in restaurants and grocery stores doubled from a year earlier, to 24 percent. But in Asian communities, digital transactions inched up to only 3.2 percent.A lack of digital tools also slowed access to government relief funds, according to the Asian American Federation of New York. Many businesses keep their books on paper, which made it difficult to provide needed documentation in online applications. Language was also a barrier as many of the application forms were not available in translation.&nbsp;

Only 3 percent of transactions were digital in Chinatown, hobbling sales in a socially distanced citySpending on groceries spiked early on, but tourist-dependent Chinatown laggedCitywide, grocery store spending spiked from March through June as people sheltered at home. Into summer and fall, grocery spending remained slightly higher than in the prior year.&nbsp;In New York’s Asian American communities, the initial spike in grocery sales was much higher and the drop-off deeper—except in Chinatown.&nbsp;Spending in Chinatown saw a smaller (and earlier) spike and then never rose above 2019 levels in part because Chinatown’s grocery stores are frequented by tourists and others looking for specialty products. As travel declined, those stores were affected.&nbsp;In Jackson Heights, another diverse neighborhood but one less dependent on tourists, grocery spending was slightly higher than in 2019.&nbsp;Spending in Flushing rebounded sharply by comparison and remained well above 2019 levels for much of the summer and fall.&nbsp;

When travel slowed, tourist-dependent grocery stores in Chinatown also slowed and sales dropped below other Asian neighborhoods.Explore the data: Click through to see detailed grocery spending trends in NYC neighborhoods

Data helps make the case for targeted resourcesAt the Center, we recognize the critical role of small businesses in quickening the pace of economic recovery, especially in communities of color.&nbsp;Our analysis and insights shed new light and nuance on business sectors and communities that have been most destabilized. These businesses, particularly in Chinatown, will need support and resources if they are to survive and recover.&nbsp;After 9/11, another devasting disaster affecting Chinatown and Lower Manhattan, federal, state and local resources helped local businesses persevere while the area rebuilt, leading to a slow but strong rebound.&nbsp;As city policymakers formulate recovery plans, we hope our analysis and insights can provide an evidence base for decision-makers to ensure a truly inclusive recovery as they prioritize constrained resources.

It was just one year ago when we first heard of a new coronavirus in Wuhan, China, that was threatening to turn into a pandemic. Just months later it had spread to nearly every corner of the globe, leaving death and economic hardship in its wake.

NYC Asian communities hit earlier and harder by COVID-19