Like many small-business owners in the Seattle area, Margo Engberg has taken a serious hit during the coronavirus outbreak.
Sales at the five local locations of her gourmet baking company, PinkaBella Cupcakes, have fallen so sharply since the first local virus cases were announced last month that on Wednesday she laid off 12 of her 15 bakery workers and cut hours for her 45 part-time staff.
The one bright spot, Engberg said, was news that local government agencies were rolling out emergency measures to help companies survive the outbreak.
But Engberg was painfully aware that such aid won’t replace consumer spending. If Engberg’s customers don’t come back soon, she said, “we won’t need any tax breaks.”
Engberg’s anxiety is familiar for many Seattle-area businesses. Even as governments at the federal, state and local levels swing into action with aid offers, many business owners say the impacts from the coronavirus crisis are snowballing. Plunging sales have led to cost cutting, closures and layoffs.
According to 60 responses in a survey this week by Fresh Chalk, a Seattle-based recommendations site, 60% of small businesses in the city are considering wage cuts or layoffs and 35% are considering closing altogether.
As the economic fallout mounts — and as proposed actions to contain the outbreak grow more severe —consumers are reacting not only to fears of infection but, increasingly, to worries about their own economic prospects by cutting back on purchases.
Customers are worried “not that they’re going to end up in the hospital, but that they’re going to be out of work,” said Adrienne Heuser, store manager at the Alderwood mall location of Michael Kors, where both sales and traffic have dropped in recent weeks.
“They’re saving their discretionary income,” added a clerk who requested anonymity at nearby Sephora, where sales and traffic were also down.
After a series of big event cancellations last week left many hotels in downtown Seattle with half or more of their rooms empty, a local hotel executive for a national chain said management was preparing to “scale down our operations” because “people won’t have full-time work.”
At the Nordstrom Rack in Kirkland, a midlevel employee said that the store had cut worker hours because sales were more than 30% lower than usual.
Large national retailers such as Nordstrom and Sephora can absorb such sales declines, at least for a while, but it’s often a different story for smaller firms, experts say.
Many are “lower-margin businesses that don’t have much of a cushion [and are now] seeing their customer bases dwindle,” said Jacob Vigdor, an economist at the University of Washington who has studied the regional job market.
To survive disruptions like the coronavirus, “you need some kind of reserve,” Vigdor said. “And some of them were kind of operating on a shoestring to start with.”
Mahmoud Alrikabi, a 53-year-old father of five, owns Neva’s Barber Shop in Northeast Seattle, where earlier this week he was seeing perhaps a third of the usual number of customers.
Alrikabi said he understands the fears of many of his elderly clients — he, too, would like to avoid public interactions and be home with his family. Yet the more that customer traffic declines, the more pressure he feels to stay open and capture whatever business remains.
“If I stay home, who pays the bills?” Alrikabi said.
Indeed, even as revenue falls, businesses must continue to pay their expenses, including rent, utilities, taxes and, often, loans.
As the challenges for small businesses have risen, so too have relief efforts from government agencies, philanthropies, employers, community groups and even individuals.
On top of $50 billion in low-interest Small Business Administration loans that President Donald Trump ordered Wednesday, federal lawmakers are reportedly debating a cut in the payroll tax and a bailout of travel and tourism-related companies.
The state of Washington is also offering relief measures aimed at businesses. The state employment security department has announced a series of changes aimed at helping workers and businesses impacted by the coronavirus outbreak. They include easing rules for unemployment insurance that will make it available to workers who have lost hours or who have been laid off due to the temporary closure of their place of employment.
In some cases, the state will also reduce the amount it normally charges businesses when employees file unemployment claims, said Nick Demerice, spokesperson for the state employment security department. The intent, Demerice said, is to ensure that employers and employees “weren’t getting penalized” for something that wasn’t “in their control.”
The state Department of Revenue will offer extensions for business tax payments and, in some circumstances, may waive penalties for late payments. The state is also creating a list of “local bankers, financial associations, telecoms, utilities and major employers that may be able to provide relief” through no-interest loans, debt forgiveness and other means.
State lawmakers are considering legislation that would help pay for additional unemployment claims and other business-relief programs with money from the state’s “rainy day” fund.
The city of Seattle is spending $1.5 million on grants of up to $10,000 to small businesses affected by the coronavirus outbreak. The city is also deferring business-and-occupation tax payments for businesses with revenue of less than $5 million, deferring utility payments for any business, and bolstering a small-business stabilization fund, among other efforts.
Government isn’t the only source of potential relief.
Earlier this week, Amazon created a $5 million fund to support small businesses around its Seattle headquarters that have struggled after the company instructed its employees to work from home.
Vigdor, the UW economist, said there are few precedents for today’s crisis, making it hard to know whether businesses will be helped by such relief efforts. He said programs that let businesses defer costs are likely to be the most effective.
“That might be just enough to keep some businesses afloat, but it won’t be enough for others,” he said.
In the meantime, many small businesses are doing what they have always done in tough times: improvising.
Rob Ahrens, owner of the College Inn in Seattle’s University District, said he has lost more than two-thirds of his bookings for March and April and is getting cancellations as far out as July.
So far, Ahrens said, he’s made do by cutting back employee hours and having three workers take temporary leaves.
“I haven’t had to lay anyone off yet, and am trying my best not to,” Ahrens said in an email to The Times. But that has left Ahrens covering those shifts himself. He said he’ll be “working almost 100 hours per week for the foreseeable future.”
Engberg, who launched her cupcake company in the depths of the Great Recession, survived that harrowing time by building a loyal following. To survive this time, she said, she needs those followers to return.
“We bloomed in the worst possible economy,” Engberg said. “We can bloom again, but we’ve all got to participate.”