Small Businesses in the Pandemic Lockdowns
by Vanessa Weihgold
24.06.2022 · In the last two years, people all over the world have experienced an exceptional crisis. The COVID-19-pandemic forced us among other things to social distancing: less face-to-face meetings with other people, working or schooling from home, wearing masks that cover facial expressions… The center of Tübingen – normally crowded with tourists and students from all over the world having a drink on the stairs in front of the town hall or the Stiftskirche, eating in one of the many small restaurants or just walking around and enjoying the beautiful architecture – was suddenly empty. While preventing higher outbursts of COVID, these measures, it has to be expected, must have had severe economic and emotional effects on the population in general. Bigger companies like Lufthansa or Daimler got media attention on their problems, but there was less talk about smaller businesses (except maybe for the gastronomy) as we have them in Tübingen.
Seeing this situation as a learning opportunity for students and the businesses likewise, Leticia Hoppe and I created a transdisciplinary Service-Learning course[1] that aimed to support these partners for the community of Tübingen. The course seeked to provide not only the theoretical bases for dealing with emotionally difficult situations such as the pandemic, but also to provide a service for the businesses. Students cooperated with entrepreneurs to learn from the situation and apply the theory in praxis.
In Germany, most businesses are small businesses (up to 9 employees and less than 2 Mio. € in turnover).[2] The particularity of a small business is the concentration of responsibility in the person of the owner. Even though these businesses are not responsible for the highest number of staff in Germany, it still is considerable. When the pandemic hit, most of these businesses were affected by the lockdown measures. Statistical observations show that unemployment rates heightened while the average of those who did keep their jobs earned less.[3] The losses were especially high in the food services that had also been most affected by the distancing measures. From the perspective of a citizen, it is especially the small restaurants, coffee shops and shops that are not part of a bigger chain, that create an identity of a lively and charming city. A smaller business does not have the same credit line as a big chain and is also more dependent on keeping employees and customers. A fair fashion shop that participated in our course reported that the financial help she had gotten did only pay for 10% of the clothes she had ordered and could not sell. Other than the bigger customers, the producer did not allow her to step back from her purchase.
From an ethical point of view, just blaming lockdown regulations is not a solution, because, as has been widely discussed in the beginning of this blog, there is a solidary responsibility for the whole of the population that calls for protecting those who are likely to be most attained by a COVID disease. On the level of society, since most of the businesses are small ones, they have to carry a big share of this responsibility. But apart from getting a momentary financial help for a liquidity shortage, these businesses did not get support for setting up an online marketing. What should be mentioned, is the help created from the business associations such as DEHOGA for the gastronomy businesses who did form support groups for discussing the situation and who also offered assistance with paperwork. This also shows how much our society is relying on institutions such as this one.
Following the research on crisis management, there are three phases to a shock such as the pandemic: the pre-crisis phase that should engage in preparing businesses for difficulties, the in-crisis phase that calls for an emergency response and the post-crisis phase in which the businesses should analyze the previous events, learn from them so that they can recover. (Giones et al. 2020) Since most of the distancing measures are now lifted, we should draw attention to what has happened during that time to be able to learn and recover.
Early research, that did not focus on small businesses, but the general aspects of work in the pandemic showed a gender aspect: not only did the gender pay gap widen because women also took over more care work, (Czymara et al. 2021) but they were also more affected by mental health issues due to exhaustion, while communication with the partner and job autonomy mitigated the effects. (Meyer et al. 2021) Parents in general shifted working hours in home office to take care of children and then felt less efficient at work. (Frodemann 2020) In a small business these problems cannot be compensated so easily. One of the business owners in our course has two children, one of whom has Asperger and even though her hairdressing business was closed, she had to try to sell at least the products so that she could pay the rent while at the same time taking care of her kids. As research showed, the most effective crisis management relayed on structuring work processes, an open, precise and regular communication, and anticipatory, goal-oriented and fast problem solving. (Thielsch et al. 2021) But this might be difficult to apply on a one-person-business.
From a well-being perspective, the planning and financial insecurities of the lockdown period created a lot of stress for business owners and employees equally. As is widely known from research on Burn Out, stress calls for coping strategies to be processed in a healthy manner. Richard Lazarus evaluated the different stress reactions and distinguished two different tactics: problem-focused coping that aims at a change in the situation and the emotion-focused that changes the feeling about the situation. Following him, the most effective strategy when it comes to addressing stressful situations is a cognitive problem-focused strategy that is directed towards rational analysis and actively engaging with the events as to gain influence on them. In the scope of this article, this raises the question how small business owners in particular can actively act on a crisis like the pandemic, when state regulations are cutting their autonomy and fail to provide them with adequate support?
One possibility, many small businesses engaged with, is moving online. The research showed that businesses with a high level of digitalization had been more resilient than others. (Bertschek & Erdsiek 2020) While bigger chains normally already had used social media and online marketing tools before the pandemic, the smaller businesses had the opportunity to react faster, but had to cope with a lack of knowledge in this area. We have seen an important increase in internet sales through aggregators and online shops.[4] This is what the fair fashion shop tried but they struggled with more competition than in Tübingen. Marketing through social media or the telephone has become more important, and the business model of some smaller shops changed considerably. The hairdresser and make-up artist in our course sold her products this way but had a hard time accepting that she could no longer provide a relaxing pause to her guests.
Another possibility can be diversifying and adding another branch (maybe more apt to online sales) to the existing business. But in any case, we should not forget that owning and running a small business normally is not only about making money, but that there is a great deal of idealism involved in wanting people to get access to some very special product and feeling. And feeling is something that we have a hard time conveying at a distance.
To give a conclusion, we had created this course to give a voice to the small businesses in Tübingen who are creating the face of our town and support them with know-how on social media. On the other hand, we wanted to offer an insight for students in these businesses to let them learn from the experiences the business owners reported. We saw that the research we had studied did not align completely with what the business owners reported but both sides, businesses and students, benefited: while the business owners were mostly just glad that they could share their situation and that the students listened to them, the students took home that leading a business is not only about selling a product, that it comes with a lot of responsibility and that the emotional implication in such an endeavor is very important.
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Bertschek, I., & Erdsiek, D. (2020). Soloselbstständigkeit in der Corona-Krise. ZEW-Kurzexpertise, 19.
Czymara, C. S., Langenkamp, A., & Cano, T. (2021). Cause for concerns: Gender inequality in experiencing the COVID-19 lockdown in Germany. European Societies, 23(sup1), S68–S81. https://doi.org/10.1080/14616696.2020.1808692
Frodermann, C. (2020). Online-Befragung von Beschäftigten: Wie Corona den Arbeitsalltag verändert hat. Aktuelle Analysen aus dem Institut für Arbeitsmarkt- und Berufsforschung, 13, 12.
Giones, F., Brem, A., Pollack, J. M., Michaelis, T. L., Klyver, K., & Brinckmann, J. (2020). Revising entrepreneurial action in response to exogenous shocks: Considering the COVID-19 pandemic. Journal of Business Venturing Insights, 14, e00186. https://doi.org/10.1016/j.jbvi.2020.e00186
Meyer, B., Zill, A., Dilba, D., Gerlach, R., & Schumann, S. (2021). Employee psychological well-being during the COVID-19 pandemic in Germany: A longitudinal study of demands, resources, and exhaustion. International Journal of Psychology. https://doi.org/10.1002/ijop.12743
Thielsch, M. T., Röseler, S., Kirsch, J., Lamers, C., & Hertel, G. (2021). Managing Pandemics—Demands, Resources, and Effective Behaviors Within Crisis Management Teams. Applied Psychology, 70(1), 150–187. https://doi.org/10.1111/apps.12303
[1] Service Learning focusses on learning while providing a service to the community. In the case of our course, the service was to support small local businesses that create Tübingen’s identity.
de.statista.com/themen/4137/kleine-und-mittlere-unternehmen-kmu-in-deutschland/
www.destatis.de/DE/Themen/Querschnitt/Corona/Wirtschaft/kontextinformationen-wirtschaft.html
[4] Ibid.