Mastercard Economics Institute: New Small Business Formation in APAC Grew 35% Year-Over-Year

To shed light on the impact the global health crisis – and ongoing recovery – has had on small businesses globally, Mastercard released its latest report: Recovery Insights: Small Business Reset. Looking at 19 markets around the world, including Australia, Hong Kong, Japan, Malaysia, New Zealand, Philippines, Singapore, and Thailand, the report reveals that sales at small- and medium-sized businesses (SMBs) lagged larger companies by up to 20 percentage points at the peak of the crisis.  However, 2021 indicated an upward trend. Total sales at SMBs rose 4.5% through August 2021 year-to-date compared to the same period in 2020, and e-commerce sales grew 31.4% globally.

“While businesses of all size were adversely impacted by the pandemic, reliance on local SMB support and lack of digital infrastructure saw SMBs in APAC experiencing far greater hardships at the outset.” said David Mann, Chief Economist, AP and MEA, Mastercard Economics Institute (MEI). “Against a backdrop of mobility restrictions and zero covid strategies, e-commerce was a lifeline for organizations to ride out the pandemic. However, the accelerated shift to digital has paved the way for the next generation of entrepreneurs, and we’ve seen a surge in newcomers seizing an opening amidst the disruption.”

Drawing on the MEI’s new Small Business Performance Index* of aggregated and anonymized sales activity within the Mastercard network, Recovery Insights: Small Business Reset identifies several key trends:

• Closures: In APAC, small businesses that closed early in the pandemic were about twice as likely as larger businesses to remain closed long term, demonstrating greater resilience than elsewhere in the world. Globally small retailers were on average three times as likely to remain closed after 6 months, vs. large retailers, with one-third of small businesses that closed in April 2020 remaining closed after 6 months, and about one-fifth still closed after 12 months.

• E-Commerce: Following lockdowns, the number of businesses going online each month tripled from pre-pandemic levels, peaking in July 2020, reflecting increased demand for online sales channels. The shift to digital has persisted at an elevated level since. In Australia, 60% more merchants accepted e-commerce sales in 2020 for the first time vs. 2019.

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• Entrepreneurship: Roughly 35% more small retailers in APAC established operations in 2020 than in 2019, a slight increase on the global average of 32% new SMBs formed, and over 8 times the 4% of large firms created. This trend is most strongly reflected in Australia (+ 73%), Japan (+38%) and Thailand (+29%).

• Location: As tourists and workers stay closer to home, small businesses in commercial districts are seeing sales suffer, while sales within more residential neighborhoods grow. Singapore has surpassed pre-pandemic spending outside of the business district, with both SMBs and large businesses seeing spending at 107% and 104% of 2019 levels respectively. In Sydney retail spending is down roughly 14% in the business district, but up 24% in the outer city.

• Sectors - Restaurants & Lodging: In APAC, small lodging businesses outperformed large by a wide margin through 2020 and 2021. Where people are traveling, the trend to stay local has benefited small lodging companies (and hurt big cities’ big hotels). Restaurants were a different story, with SMB eateries underperforming large ones globally by roughly 17 percentage points in 2021 YTD. A notable exception is in Hong Kong, whose SMB eating places have seen increased outperformance over large businesses in 2021.

Supporting small business owners is a continued priority for Mastercard, which pledged to bring 50 million small businesses and 25 million women entrepreneurs into the digital economy by 2025. Mastercard’s Digital Doors curriculum helps businesses get online and stay protected, ensuring they have the right tools to maximize their digital presence and integrate e-commerce seamlessly, including the free Small Business Digital Readiness Diagnostic.  Most recently, Mastercard committed $25 million to help more than five million micro and SMBs digitize through the Strive initiative.

Mastercard also works closely with governments, businesses, and other organizations around the world to create environments, programs and policies so small businesses can flourish. Mastercard provides high-frequency, local spending insights to dozens of city, state and federal governments as part of our City Possible and Recovery Insights programs, as well as content such as the recent policy paper addressing ways governments can support SMB recovery.

You can view the full Recovery Insights: Small Business Reset here. This is the fifth report in the Recovery Insights series; other reports can be found here.  

*Methodology
The Mastercard Economics Institute developed the Mastercard Small Business Performance Index as a more universal classification system for SMBs. The Index leverages a comprehensive AI-driven algorithm to identify unique indicators, such as number of locations, sales volume, and number of transactions, drawing on aggregated and anonymized sales activity within the Mastercard network.

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Disclaimer
This presentation and content are intended solely as a research tool for informational purposes and not as investment advice or recommendations for any particular action or investment and should not be relied upon, in whole or in part, as the basis for decision-making or investment purposes. This presentation and content are not guaranteed as to accuracy and are provided on an "as is" basis to authorized users, who review and use this information at their own risk. This presentation and content, including estimated economic forecasts, simulations or scenarios from the Mastercard Economics Institute, do not in any way reflect expectations for (or actual) Mastercard operational or financial performance.

About Mastercard Economics Institute
Mastercard Economics Institute launched in 2020 to analyze macroeconomic trends through the lens of the consumer. A team of economists, analysts and data scientists draws on Mastercard insights - including Mastercard SpendingPulse™ - and third-party data to deliver regular reporting on economic issues for key customers, partners and policymakers.

About Mastercard (NYSE:MA) www.mastercard.com 
Mastercard is a global technology company in the payments industry. Our mission is to connect and power an inclusive, digital economy that benefits everyone, everywhere by making transactions safe, simple, smart and accessible. Using secure data and networks, partnerships and passion, our innovations and solutions help individuals, financial institutions, governments and businesses realize their greatest potential. Our decency quotient, or DQ, drives our culture and everything we do inside and outside of our company. With connections across more than 210 countries and territories, we are building a sustainable world that unlocks priceless possibilities for all.