The bulk of Maine’s commercial sector has been reopened for months, but many small-business owners say they are hanging on for dear life amid low consumer demand, tough health and safety restrictions and the existential threat of a viral resurgence that has ravaged other states.
While companies report some sales stability, spending at contact-intensive businesses is far below what it should be, and some worry their very survival is at risk in poor economic conditions that show no sign of improving soon.
“It all comes down to the fact that the virus itself is still spreading in the country in a way that it is hard to do business and makes it hard for people to consider that anything could possibly be normal,” said Mary Alice Scott, executive director of Portland Buy Local, a merchant trade group that promotes local commerce.
A recent survey of 85 of the group’s members reflected a grim environment for retailers, restaurants and other locally owned businesses.
About a third of respondents said their revenue was 20 percent or less of what they made at the same time last year, according to Scott, and nearly as many said they were considering closing for good. Only a small handful said they were generating at least 80 percent of their normal revenue.
Every business faces different circumstances, but there is one constant: With heavy precautions and restrictions in place, and new COVID-19 cases reported daily in Maine, consumers haven’t resumed their pre-pandemic spending behavior. Still, protecting the community was the No. 1 concern for most businesses surveyed, Scott said.
“The thing we keep coming back to is the virus itself is the main problem,” she said. “We can’t move forward without addressing that first.”
Economists have for months tied economic success to tackling the public health threat. That appears no less true now than it was in April, even as Maine has done better than nearly every other state at containing the coronavirus and protecting its health care system.
“Our whole thing is to stay as small as we can and survive, to get through it so we can come out the other side and still be a viable entity,” said Adam Powers, co-owner of Elsmere BBQ and Wood Grill in Portland and South Portland.
Powers said he feels lucky that barbecue translates well to takeout and customers have gravitated to in-person patio service. But sales remain far below what they should be.
The restaurants are closed three days a week and have limited hours because they’ve had trouble finding enough staff. Powers doesn’t expect business to recover fully until sometime next year.
“This is not going away,” he said. “We are not on the way up; we have a long road ahead of us.”
A SHIFT IN SPENDING
Seasonally adjusted data for Maine consumer spending in mid-July show spending was just about even with the level in January, and small-business revenue was only down 20 percent from the beginning of the year, according to Opportunity Insights, a real-time economic tracker developed by Harvard and Brown universities using private credit card and payroll processing data.
But economic activity is uneven. Leisure and hospitality revenue was down 57 percent from January, while retail and transportation revenue was down more than 13 percent, according to the tracker.
Those findings closely match state spending records. Maine Revenue Services said last week that tax receipts for prepared foods in June were about 35 percent below the same time last year. Hotel and lodging tax receipts were down more than 60 percent.
Meanwhile, taxes on general merchandise recovered in June to the same level as in 2018 and 2019, building supply sales were at least 22 percent higher and other retail sales were at least 55 percent higher than the prior year between April and June.
Wealthier households with more discretionary income have reduced their consumer spending to a greater extent than middle- and low-income families, according to Opportunity Insights.
Some high-income consumers have converted much of their spending into savings and investment, said Sheena Bunnell, a business economics professor at the University of Maine at Farmington. Consumer reaction to the external threat of the virus now drives large parts of the economy, she said.
“There is a lot of changes in behavior going on, and everyone doing it at a different pace and adapting differently, and that is changing the economy,” Bunnell said. “It’s definitely a financial struggle for a lot of our small businesses as they are trying to cope with living in a pandemic. The reality is, they don’t know how long they are going to be able to survive in this environment.”
Despite the challenges, some business owners feel more optimistic now than they did in the dark days of stay-at-home orders, fear and uncertainty this spring. Businesses with fewer than 100 employees are an outsize segment of Maine’s economy, employing more than 56 percent of the state’s workforce, according to the U.S. Small Business Administration.
When Momentum barbershop in Portland opened its doors in May after being closed for more than a month, it was booked solid for weeks by customers desperate to escape their homes and get a haircut.
It took about a month for the “die-hards and the desperates” to filter out, and business slumped, said owner Jason Dodge. So far, his sales are down about about 25 percent from a year ago. His summer business is down 40 percent.
Dodge said it’s enough to keep his head above water, but not enough to repair the pandemic’s damage to his business or invest for the future.
“There’s just nothing extra,” he said. “We’re doing good for now; the tough part is making up for time lost.”
Downtown Freeport, normally a bustling retail epicenter, is noticeably sedate this summer. On a recent Friday afternoon, parking lots were half-full and scattered groups of masked shoppers strolled and shopped at outlet stores, as opposed to the usual throng.
Susan Culkins, owner of The Mangy Moose gift shop on Freeport’s Main Street, opened as soon as she could in June. Traffic slowly grew through the month, and even though things are better now, sales are still way down from a year ago.
“It has definitely gotten better, but it is nowhere near a regular year,” she said. Under state restrictions, Culkins can only have 15 customers in her store at a time. She’s shortened her hours and retained only three full-time and two part-time workers. In a normal year, she’d have at least a dozen people working for her right now.
Culkins said she feels confident even with a huge question mark hanging over her winter business.
“I feel cautiously optimistic,” she said.
Nearly every one of the retailers at The Maine Mall in South Portland is now open, and although customer traffic has been lower than normal, it is not the doom-and-gloom scenario some predicted, said General Manager Craig Gorris.
“That’s not what I see – when I talk to our tenants their sales numbers are really meeting their expectations,” Gorris said, adding that sales of athletic shoes and teen apparel skyrocketed right after stores reopened. “They are pleasantly surprised with what they see and what the numbers are – I am optimistic more than I am pessimistic.”
But consumer habits have changed significantly from earlier times. Gorris said shoppers now tend to come to the mall to make specific purchases instead of browsing for deals.
“People are shopping more for a purpose than they would just to go out and waste some time,” he said.
Still, not all is well at the mall. In July, department store Sears announced plans to close its Maine Mall location in September after nearly 50 years of operation, part of a nationwide downsizing effort. Many large, national retail chains have reported dismal financial results in recent months, and some have declared bankruptcy.
AN UNEVEN RECOVERY
While economic activity is sluggish in Maine, consumer spending outpaces the national average. Maine and New England also show higher spending at restaurants, entertainment and retail outlets compared with states such as Texas, Florida and Arizona, which are facing massive outbreaks and fresh business closures, according to Opportunity Insights.
Overall consumer spending in Maine was almost 1.5 percent higher in mid-July than it was in January, after adjusting for normal seasonal changes. Apparel and general merchandise sales were up more than 16 percent, and spending on health care and groceries was slightly higher than at the beginning of the year.
But adjusted spending is still down from January in contact-intensive categories such as entertainment and recreation, where it is down almost 50 percent, and at restaurants and hotels, where spending is off about 22 percent.
Older Americans at higher risk of serious illness from COVID-19 comprise a critical portion of Maine’s consumer base, said Julieta Yung, an economics professor at Bates College. People over 55 years old contribute 40 percent of consumer spending in the U.S. and have an outsize impact in Maine, the oldest state in the country, Yung said.
“The fact that this vital segment of Maine’s population is at higher risk really emphasizes the need to prioritize containment strategies to allow Maine’s economy to reopen and people to feel safe and be able to go out, work, socialize and resume their normal activities,” Yung said.
Business success depends on multiple factors, such as cash reserves and government restrictions. The service sector, including tourism, restaurant, event and retail businesses, was hit particularly hard in the early days of the pandemic and will take longer to recover, said David Clough, Maine state director for the National Federation of Independent Business, a national trade group. In a recent NFIB national survey, more than 40 percent of respondents said it has been difficult to get customers to return.
“Unfortunately, some won’t make it at all depending on when restrictions on their operations are lifted, whether customers return, or if they run out of cash,” Clough said. “The direction things go in the next few months related to government policy and whether there is a resurgence of the virus are tied to their survival.”
Five Coffee By Design cafes are reopened now in the Portland area, and customer response has been positive, said co-owner Mary Allen Lindemann.
Reopening was hard. Lindemann laid off more than half the company’s 60-member staff after keeping them on initially when the business shut down this spring.
“The goal was to stabilize, to make sure we understand how much cash is coming in, taking time to cut everywhere we can and invest in ways that are important, and see as business starts to build back, to bring people back,” Lindemann said.
The company invested heavily in safety equipment and delayed reopening for anything beyond takeout until the staff felt comfortable, she said. But Lindemann said she’s nervous every day that she is putting staff and customers at risk.
“It is scary – what if we make a bad decision?” she said. “These are really life-or-death choices in many cases.”
An ongoing public health crisis is what has caused and deepened the recession, said Larry Wold, commercial markets president at TD Bank in Maine. There is no playbook for economic recovery in a situation almost no one has faced in their lifetime.
“This is not anything businesses owners did or didn’t do; this is something that descended on them completely unexpectedly,” Wold said.
Measures to stabilize the economy, such as loan payment deferrals, an added $600-per-week unemployment benefit and forgivable loans through the federal Paycheck Protection Program have run out or are nearly expired. Workers, businesses and local governments are desperate for more assistance, but political jockeying in Washington makes it uncertain when more aid will arrive.
In the meantime, Maine consumers need to make spending choices that help local businesses, Wold said. The money that goes into local economies stays there and will help prop up communities until the state gets to safer, better days.
“I hope it helps everyone appreciate just how challenging running a small business is in this world, let alone when something like this happens,” he said. “They deserve a ton of credit and a lot of support and a lot of admiration from our entire community.”