Retail: Santa Monica’s business community has been hard hit. Clara Harter

As the dust begins to settle around the economic carnage of Covid-19, it appears that small businesses are amongst the City’s greatest casualties.

A study by accounting software service QuickBooks, identified Santa Monica as one of the US cities where small businesses revenues plummeted the most during the first year of the pandemic.

Their team calculated that the median small business in Santa Monica experienced a $26,000 revenue decrease from April 2020 through March 2021. This ranks Santa Monica as the 5th hardest hit city in the nation, in terms of small businesses, following Manhattan, Brooklyn, San Francisco and Honolulu.

Each of these urban areas share similar characteristics to Santa Monica, including a dense population, a huge tourism sector, a large commuter population and desirable commercial leases.

Essentially everything that attracts businesses to these cities under normal circumstances, set them up to fail during the pandemic.

“Many of the strengths that we’ve had historically did make us particularly vulnerable,” said Deputy City Manager Anuj Gupta. “So the notion that small businesses in Santa Monica were especially hard hit from the impacts of the pandemic, as we see reflected in this data, is not surprising.”

Santa Monica used to receive around 8.4 million visits from tourists annually, who in 2019 injected an estimated $2.2 billion into the local economy. In addition, over 91,200 workers commuted to the City on a daily basis.

This vibrant and bustling population drove up the price of many commercial leases. When these people disappeared, so did a lot of the revenue that allowed businesses to afford sky-high rents.

“You are paying for the privilege of being in Santa Monica, and that is a good thing in good times and a really hard thing in hard times,” said Jessica Goldfarb, Owner of Limonaia gift shop.

Limonaia has been on Montana Ave. for over a decade and has been able to weather the Covid-19 storm because the building’s landlord was willing to forgive rent. Numerous small businesses owners cited a flexible landlord is the main reason they did not close doors.

“Obviously things are improving, but they are not at a place where I could pay normal rent, so it’s still very dicey,” said Goldfarb, adding that similar to the 2008 financial crisis, it will likely take years for businesses to fully recover from the pandemic.

She fears that there is a second wave of small stores closures still to come, if landlords grow tired of lowering or forgiving rents before businesses are back on their feet.

Even for small businesses with flexible landlords, the conditions of the past year often precluded turning a profit.

Monzerrat Brunkhorst had to close down her Mid City coffee shop Cafe del Mundo in January and is planning to reopen in June.

Prior to the pandemic, she derived around half of her business from office workers. Their absence, coupled with residents who left the Mid City area and those who felt unsafe leaving their homes, sapped her customer base almost entirely dry.

“Small businesses, we don’t have big reserves in the bank just to weather it out, especially in the restaurant industry you just sort of go day-to-day,” said Brunkhorst. Eventually, it was costing the cafe more to keep its doors open than to go into temporary hibernation.

Longtime Main Street clothing retailer Suji also hit a crisis point in January. Main Street was especially devastated by the second outdoor dining shutdown, which caused retailers to lose most of their foot traffic.

Having experienced a disastrous fourth quarter in 2020, Owner Susan Amenta sent out cards to her customers in January announcing that the store would be closing down. She was met by an outpouring of community support and the store then experienced an excellent month of business, prompting Amenta to reverse her decision for the time being.

“We’re just lucky to go month to month at this point,” said Amenta. “I’m just going to see what happens if I can kind of bring those numbers up to the point where it’s a viable business again.”

Amenta, who also owns Textures sweater store on Montana Ave, said she was able to keep both businesses open through a combination of landlord support, customer loyalty, money she had in reserves, and PPP funding.

The flurry of grant money that became available during the pandemic was a saving grace for many businesses. At the same time it was challenging for small businesses to access, as they often needed to submit their applications the moment the online portal opened.

“I feel like the medium to large companies benefited the most because they have super savvy accounting systems and were on top of receiving their $8 million, while here I am asking for $20,000 just to survive at least three or four more months,” said Brunkhorst.

The City of Santa Monica, which faced a $154 million budget deficit this fiscal year, has now managed to right its sinking fiscal ship to the point where it can send out lifeboats to struggling businesses. In partnership with the Chamber of Commerce, the City has launched the SaMo Small Business Recovery Grant Program and is providing up to $10,000 in funding per business.

For some small businesses this could be a lifesaving resource, for others it is simply too late.

Clara@smdp.com