An impossible comeback? The small New York shops trying to survive.
| New York
In a typical April at Pilates Reforming New York, 2,500 clients would be using special reformer machines, strengthening their abs and improving their balance. But this April, with the studios closed, owner Ann Toran instead conducted mat classes via Zoom. Just 433 clients joined in.
When Ms. Toran and her husband, Errol Toran, are allowed to reopen the studios, they doubt revenues will sustain them. The clients are not going to be thinking about exercise, Mr. Toran says. “They’ll be thinking about [their own] food and rent.”
Why We Wrote This
What will happen to all the businesses that have been shuttered? Even before the pandemic, many were operating on small profit margins – and now a host of changed economic realities means owners are facing tough decisions.
Pilates Reforming New York is one of 230,000 small and midsize businesses in New York City. It’s unclear how many of these establishments have closed because of the coronavirus shelter-in, but anecdotal evidence based on a swath of Manhattan’s Upper East Side suggests it could be half. That mirrors national research that estimates COVID-19 has temporarily closed more than 40% of businesses.
But many businesspeople are hardly ready to give up. Take contractor Aaron Bloom. He wonders if potential clients will prefer hiring him because he was already sick with the coronavirus. “There’s reason to be hopeful,” he says. “That’s all I can do.”
They’ve had no real customers since March. Bills are overdue, and landlords need money again. Savings are gone. Tens of thousands of small independent New York City businesses are hunkered down, trying to find a way through the most punishing economic calamity in generations. Many have already called it quits.
Unlike thousands of essential businesses in New York that have been limping through the coronavirus stay-at-home order, these nonessential shops have not opened their doors in two months.
While less populated areas of New York state began emerging from lockdown last Friday, city businesses know their rollout will be on pause for some time. Mayor Bill de Blasio said in early May that reopening the city “is a few months away at a minimum,” though last week he said nonessential businesses could begin opening in June if statistics continued to improve.
Why We Wrote This
What will happen to all the businesses that have been shuttered? Even before the pandemic, many were operating on small profit margins – and now a host of changed economic realities means owners are facing tough decisions.
The timing is brutal. Spring is the busiest season for many of these shuttered businesses, and they need these months to carry them through the rest of the year.
Editor’s note: As a public service, all our coronavirus coverage is free. No paywall.
It’s unclear how many of New York’s small businesses have closed because of the coronavirus shelter-in, though anecdotal evidence based on a swath of Manhattan’s Upper East Side suggests it could be about half. That mirrors national research that estimates COVID-19 has temporarily closed more than 40% of businesses. And another 3% of restaurants and almost 2% of other small companies are permanently closed.
Operating in one of the most competitive, expensive, regulated, and taxed cities in the nation has long kept New York’s small-business owners up at night. Now these barbers, antique shop proprietors, and bookstore owners must become instant experts on public health, new government regulations, and still-evolving consumer psychology. There are other challenges: Six-foot distancing will mean a significant financial blow if businesses counted on crowds to survive. And loyal customers may want to shop local, but may ultimately ditch the 10-person queue to shop online at home.
New York City has some 230,000 small and midsize businesses selling just about anything that can be had, from handmade hats and custom acrylic furniture to sari material and sheet metal. The question now is how many of these specialty shops can survive. Even in a city of more than 8.3 million people, there’s only so much demand, given that unemployment could top 12% this year and layoffs are likely to extend through March 2021.
Thousands of local businesses – arguably the heart and soul of the city – may not survive the COVID-19 shutdown, says Jonathan Bowles, executive director of the Center for an Urban Future, an independent think tank. The first closures should be apparent by Aug. 20, when the city’s temporary ban on evictions is expected to end.
“It’s bad enough already, but unless these small businesses start making money soon, I just don’t know how they’re going to pay the bills,” Mr. Bowles says.
Even before COVID-19, many small businesses around the country were fragile and missed out on the decade-plus economic expansion. According to a new report by the regional Federal Reserve banks, 30% of firms with fewer than 500 employees last year were classified as “at risk” or “distressed”; 64% reported financial challenges during that time; and 86% said they would need to cut salaries, incur debt, or take other action if they missed two months of revenue.
Living month to month – pre-coronavirus
Karen Dixon and her husband, Essam Moussa, are among those entrepreneurs who are up against it. Long before the coronavirus temporarily closed their Upper West Side shoe store, The Shoe Tree, Ms. Dixon says they had been living month to month.
Generally, the middle of May would find The Shoe Tree packed with families, and the storeroom overflowing with some 400 pairs of shoes. On average, they’d tally 40 sales a day. Instead, the couple are cleaning their store, postponing deliveries, and hoping suppliers will have shoes whenever they reopen.
As in the rest of the state, businesses in the city’s five boroughs will roll out based on how essential they are and how much risk their opening would pose. Shoe stores and other retail are likely to be in the second wave of openings, after businesses like construction and manufacturing. Regardless of when The Shoe Tree returns, Ms. Dixon worries about whether parents will bring their children. She also fears a further push toward digital sales.
“People are sitting at home online, working, so they can order shoes for their children online and not come into the store. We have a big concern that our customers won’t come back. Situations like this really push consumers in that online direction,” says Ms. Dixon, who is also a furloughed soprano in The Metropolitan Opera chorus.
When the store reopens, she says staff will institute protective measures such as wearing masks and sanitizing their hands after each customer. She hopes new signs will strike the right tone between welcoming customers and reminding them that only a few shoppers will be allowed inside at once.
An elusive financial cushion
Spring is also a busy season for Pilates Reforming New York. Any normal April would have 2,500 clients splayed out on special reformer machines, strengthening their abs and improving their balance. Owner Ann Toran and her 18 instructors would be coaching the in-person classes at four studios seven days a week.
But by this April, the studios were all closed, and most instructors were collecting unemployment benefits. Using Zoom, Ms. Toran was conducting mat classes from her New Jersey home studio, but just 433 clients had joined in. They did isometric and floor exercises, rather than working out on a machine with pulleys.
When Ms. Toran and her husband, Errol Toran, are allowed to reopen the studios, they doubt revenues will sustain them.
“Even if we were ready to rock-and-roll the first day we could open, that’s not necessarily what our clients’ priorities will be,” says Mr. Toran, a chiropractor. “They’re thinking, ‘How do I survive?’ They’re not going to be thinking about exercise. They’ll be thinking about [their own] food and rent.”
Like many small New York City businesses, Pilates Reforming New York didn’t have a financial cushion, thanks to high salaries, six-digit annual rent, hefty taxes, red tape, reinvestment in the business, and small margins. In January, however, the year had been looking good: Lengthy renovations were done, and all four studios were running. Now the Torans hope to stay afloat by Zoom teaching, online professional development, and the sale of used equipment they no longer need.
They’ve also canceled leases on two underperforming studios, thanks to a so-called good guy (or gal) clause that lets tenants who are current on their rent pay a fee to quit their lease early. As for the two locations the Torans are keeping, they paid what they could on one and are hoping for the best with the other.
The view from Hell’s Kitchen
Perhaps no single group of businesses has been hit as hard by lockdowns as have restaurants. Estimates are that anywhere from 30% to 75% of the country’s independent eateries could fail before the economy recovers. Two-thirds of American restaurant workers had been laid off by mid-April, and at least 40% of restaurants were closed, according to the National Restaurant Association. Dine-in restaurant service is in the third of New York state’s four-stage reopening plan.
Hell’s Kitchen restaurateur Daniel Assaf closed on March 15, and he has no idea when he might reopen the dining room at his fondue and tapas restaurant, Kashkaval Garden. Unlike many local owners, he didn’t bother with takeout or delivery because he worried about the risk to staff. Yet from a financial standpoint, he knows he needs to reopen soon.
“Our chef is 59. I don’t want on my conscience that we opened too early,” says Mr. Assaf, who has bought masks, gloves, and cleaning supplies and is considering using ultraviolet lights to disinfect the restaurant each night.
He says he expects to bring back a skeleton crew for takeout, delivery, and grab-and-go appetizers and salads. The dining room will have less than half its former 60-person capacity. Mr. Assaf does have one suggestion – that the city allow restaurants to open outside dining areas on streets that have been closed during the pandemic and turned into pedestrian walkways.
Like most other restaurateurs, Mr. Assaf is underwater. He owes more than half of April’s rent, all of May’s, and another $50,000 to $60,000 to companies that provide food, wine, and linens – though they are all working out terms. Like colleagues across the nation, he says the Paycheck Protection Program needs to change so businesses can use more of the proceeds to pay landlords and suppliers, rather than just staff.
For some restaurants, the way through COVID-19 is to go out of business.
Lower East Side restaurateur Stefan Jonot says that of the 300 or so local restaurant owners with whom he’s in touch, 20% have either closed or are preparing to do so. As for his Les Enfants de Bohème, the dining room may not open until September or later. Even then, it would be at 40% of its former capacity – and revenues.
Mr. Jonot plans to open on a limited basis soon to sell family-style, heat-and-eat meals. Chicken and sides for four will run about $50. Mr. Jonot needs the proceeds to help pay expenses, though he says he is current on the rent, thanks to crowdfunding.
The importance of flexibility
For many establishments, the importance of flexibility has never been more apparent. Logos Bookstore, a quaint, old-fashioned bookshop on a quiet strip on the East Side, has been in business for 25 years selling greeting cards, CDs, puzzles, and books. Like many independent companies, it’s primarily a brick-and-mortar setup, but owner Harris Healy is trying to bump up its online exposure. This month, Logos launched a virtual children’s story hour on Mondays, and it’s planning a similar book club for adults.
“If you don’t have the right technology, you might as well throw in the towel. Everything going forward in the world is going to be tech,” says Mr. Healy, who sold about 40 books online in the past two months, compared with 500 in the store in a normal two months.
An online presence allowed the venerable Strand Book Store to reopen early. After having been closed for five weeks, this granddaddy of New York’s independent bookstores began taking online orders on April 25 – weeks before any bookstore in the state was allowed to resume limited operations for on-site customers.
Despite the daunting challenges, many businesspeople are hardly ready to give up – such as contractor Aaron Bloom, whose Brooklyn company is Uncanny Creations. He was sick with the coronavirus for three weeks in March and April. But in the coming months, he’s hoping to get jobs from homebound workers who want designated nooks (or walls) where they can Zoom and do other tasks. He figures if he can show he’s immune to COVID-19, potential clients may prefer hiring him.
“I recognize that this is not a scientifically proven claim yet, but there’s reason to be hopeful,” he says. “That’s all I can do.”
Editor’s note: The part of this story about Mr. Jonot's rent obligations has been updated.
As a public service, all our coronavirus coverage is free. No paywall.
