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07/25/2022

Study: Nearly 60% of small retail businesses at risk of closing

Marianne Wilson
Editor-in-Chief
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Owners of small retail businesses are cutting back on their fourth-quarter inventory orders, according to Alignable.

The summer of 2022 isn’t shaping up as a particularly good one for most small businesses, particularly  retail.

Nearly half (47%)  of small business owners said their businesses are in jeopardy of  closing by the fall, according to a survey by Alignable, the largest online referral network for small businesses.  The figure is up 12% from last summer, when 35% of businesses said they were on the brink. The poll was conducted among 4,392 small business owners in June and July.

The risk of shutting down is particularly intense in retail, where 59% of small businesses said they are in danger of shutting down. It’s also high in restaurants, at 50%.

In other retail results, 50% of  small business owners said they have decided to cut back on their inventory orders for the fourth quarter. Of the 50%, 38% said they're reducing their orders by more than 20% compared to the quantity of products they ordered for the fourth quarter of 2021.

This is a significant and rather disturbing shift, as many in retail count on a strong showing during Q4 to survive into the next year,” stated Chuck Casto, head of public relations, Alignable.  “But by reducing their Q4 inventory orders, these retailers are more concerned with avoiding a big loss vs. surging ahead in December.”

In other findings from Alignable’s “Small Business Revenue Report,” the company noted that in June 2021, 33% of small business owners said that they were earning the same monthly revenues (or more) compared to what they generated prior to COVID.  But the figure dropped in the most recent poll: Only 26% of small business owners said they were fully recovered.

As to what is causing the owners’ concerns, Alignable pointed to the cumulative hurdles that have been confronting small business owners during the past year or more. The challenges include record-breaking inflation, higher-than-normal gas prices, rent hikes, labor issues, a still-broken supply chain, reports of reduced consumer spending, elevating interest rates, recessionary fears, and the fact that several businesses have not recouped losses from 2020-2021 yet.

By Region

In the U.S., small business owners in Colorado, Michigan, Ohio, Pennsylvania, and Texas top the list in terms of SMBs in jeopardy. 

Colorado is No. 1 at 54%, Michigan is a close second at 52%, and Ohio, Pennsylvania, and Texas all share the third spot with 51% of small businesses in those states fearful of potentially closing by the fall, if their economic conditions don't improve. 

Nearly half (49%) of North Carolina's small businesses are struggling to stay afloat, 47% of California's SMBs are in the same boat, along with 46% in Illinois, and 43% in Florida, New York, and New Jersey. And 41% of Georgia-based small businesses are at risk of closing based on their responses to this poll.

The Alignable poll was conducted among 4,392 small business owners from  June 10, 2022, to July 13, 2022.