COVID-19 decimated many independent and small businesses, particularly in the areas of restaurants, tourism, hospitality, fashion, and retail. Months of lockdowns and COVID-19 restrictions saw small and independent businesses strapped for cash, with many being forced to close or unable to pay their rent for months without any revenue.
While the lockdowns were particularly devastating, minority-owned businesses were hit disproportionately hard by COVID-19. These businesses, which were already considered vulnerable, employed over 8.7 million people, and are concentrated in the aforementioned business sectors were most immediately affected by the pandemic.
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Companies owned by Black or Hispanic people were already more likely to be classified as “at-risk” or “distressed” before the COVID-19 crisis, according to McKinsey.
Minority-owned businesses did offer an insight into how businesses had to seriously pivot during the pandemic, with 40 percent of minority-owned businesses adding new administrations to help their communities and workers, compared to 27 percent of overall businesses, according to McKinsey.
The number of working Black entrepreneurs declined 40 percent with the COVID-19 lockdowns, which was a larger drop compared with other ethnic groups, according to a report by the House Committee on Small Business.
Fashion designer Terese Sydonna was forced to shut down her business entirely. Many of her sales were based on pop-up events, trunk shows, and wholesale. When the lockdown happened, her revenue from pop-ups and trunk shows dried up and her wholesale accounts began canceling orders. For 8 months she didn’t sell a thing, temporarily closing her business down.
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In late May, she decided to relaunch her business doing face masks. This relaunch also accompanied her relaunching her entire website to process transactions.
“I like to say I was in COVID-18 University,” Sydonna said. “At this point, I think I’m on my third degree. I had to do a ton of upgrades to my website just to process orders, and that took almost three months. By September, order processing and checkout were finally flowing smoothly.”
Sydonna says that one of the issues that have long been a problem for Black designers that COVID-19 just further highlighted was access.
“I have watched white colleagues get into major department stores faster than myself and other Black colleagues just based on a connection who worked there,” Sydonna said. “With myself and my Black colleagues, not only did I have to go through more meetings, but I also had to be sold in other stores already, show the buyers what my sales were, and tell them who my publicist was before they would even consider carrying my line.”
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Sydonna’s saving grace in being able to restart her ready-to-wear business came via a PPE loan, which she used to invest in marketing and produce her holiday collection during quarter four of last year. However, the PPE loan took almost six months for her to receive.
She admits that there was a point where she was terrified her business would not come back. “I went two months without selling a single thing until I was able to sell the face masks at the end of May 2020,” she said. “By June 2020, people were starting to shop again, but I had no inventory to sell anyone anything. I couldn’t make anything but face masks because my suppliers for ready-to-wear were not even open. If it weren’t for that PPE loan, I wouldn’t have been able to survive as a business owner.”
Other Black fashion entrepreneurs found new ways to stay afloat. Mikaila Brown, founder of Sidewalk Safaris Cultural Shopping Tours, a company that gave tours of minority-owned local fashion boutiques, went from planning to expand her business to quickly needing to shift gears entirely.
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Brown, who has a Ph.D. in ethnography from Columbia University, gave her last tour in mid-March of 2020 just before the lockdown. At the time, the business had expanded throughout New York, especially in her home neighborhood of Harlem, as well as Atlanta, focusing on Black-owned businesses. Brown had plans to bring her business to California to focus on the Latinx community, but COVID-19 had other plans.
“My tours stopped in 2020 with the lockdowns, and since then I haven’t felt safe enough to reopen my business,” Brown said. “In the interim, I’m the associate director of inclusion, equity, and belonging for eCornell, Cornell University’s online platform, so I’m still working in the equity space, and I also work with Cornell’s online fashion program.”
Brown is also consulting for fashion brands on diversity and inclusion, but she says she misses running her tours because she was bridging the gap between customers and consumers and fashion businesses and artisans. She pointed out that a particular problem Black-owned fashion businesses face is more limited resources and manpower, making it hard to have both a strong online presence and brick-and-mortar.
“Most Black fashion entrepreneurs only have the time energy and manpower for one or the other,” Brown said. “When I saw brick-and-mortar spaces regularly before the pandemic, I found they struggled with their online presence with issues ranging from being slow on product updates and the UX was terrible. The pandemic was a double-edged sword for some of them because they were forced to update their digital footprint, but this has helped the businesses who survived in the long term as their SEO’s have improved and they are now seeing increased foot traffic.”
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One problem minority-owned businesses have compared to their white counterparts is the struggle to find investment dollars. Venture capital dollars rarely go to minority-owned businesses.
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According to a 2021 Forbes article, 40% of new businesses last year were started by women, and 47% of those were minority women. According to a Stanford University study, Latinos are the fastest-growing group of entrepreneurs in the U.S. The number of Latino business owners grew 34% over the last 10 years compared to just 1% for all others.
Additionally, there are 2.5+million U.S. Black-owned businesses. Despite the impressive and growing numbers for Black and Latinx business owners, barely 2.6 percent of venture capital dollars went toward minority businesses.
Brown has said that for minority-owned businesses that didn’t survive the COVID-19 lockdown, like some retailers in Harlem, longstanding members of the community, who are also people of color, have noticed the changing face of their communities and business owners, further advancing gentrification that was already taking place.
“This is affecting mental health, ambition, and generational wealth,” Brown said. “There’s the question left of if these entrepreneurs will have what it takes to give it another try, and the sad part is, many of them will go back to work for white-owned companies, at which they are more likely to face marginalization in the workplace.”
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One big difference Brown noticed with how minority-owned, independent businesses versus larger, white-owned corporations weathered the pandemic was the timeline for PPE loan distribution from the government. Large companies, like Shake Shack (who later returned their PPE loan), received funds very quickly, whereas she said minority entrepreneurs she knows were waiting over six months to receive their PPE.
“Fans started asking me when I was going to make masks”
Some minority-owned brands were lucky enough to quickly turn around and keep their businesses fairly thriving despite COVID-19. M. Tony Peralta, the founder of Peralta Project, an e-commerce platform that brings together the worlds of fashion and art, found himself in a lucky position because his shop is predominantly a workshop where orders are designed, fulfilled, and shipped, and the brick-and-mortar portion only makes up a fraction of the space.
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“The pandemic helped my business because people who are fans of my work started asking me when I was going to make masks,” Peralta said. “At first I said no, but as people kept asking and the pandemic seemed to be getting worse, I decided to do a trial run of 300 masks, and they sold out in 30 minutes.”
While Peralta said the loss of his brick-and-mortar business for several months did cause him to briefly cut some shift hours, he never had to lay off any employees. He admits at first, he was nervous about how lockdowns would affect his business because without a lot of people being able to bring in income there would be less discretionary spending on clothing. While he was able to pay his store rent and employees on time despite COVID-19, he did notice many businesses in his neighborhood of Washington Heights, where 67.9 percent of people identify as Hispanic, shuttered their doors permanently.
“There are a lot of vacant retail spaces and restaurants here now,” Peralta said. “There was some scaling back for me, but if something like this were to happen again, I don’t know if my business would be able to survive. I have learned the importance of putting money away for a rainy day, but I’m hoping we never see another lockdown.”
While Peralta was in a lucky position, Keith Fraley, a Ph.D. in strategic management and leadership in fashion business from Cornell University, said, “Many minority-owned fashion businesses have been forced to close during the pandemic and the effects of COVID-19 have had a dire impact on fashion businesses. Many were in financially insecure positions even before COVID-19 lockdowns. Already vulnerable, minority-owned fashion businesses were disproportionately impacted compared to their non-minority counterparts.”
According to McKinsey & Company, two reasons minority-owned businesses are disproportionately affected by COVID-19 are because they tend to face underlying issues that make their businesses harder to run and scale successfully, and they are more likely to be concentrated in industries most immediately affected by the pandemic. For fashion and retail, they weren’t considered essential businesses, and for companies that didn’t have a solid digital presence already, it was practically a nail in the coffin.
Fraley echoed Brown’s sentiment that lack of investment continues to be a large problem for these businesses. “The pandemic has made business even tougher for minority-owned fashion businesses worldwide,” he said. “The ongoing challenges facing minority-owned fashion businesses looking to develop profitable businesses include struggling to find investors and financial support.”
Fraley remains optimistic that these businesses will rebound though and says that some things customers can do to ensure these businesses thrive are as simple as buying from them, making a purchase, or giving a positive review online. He also suggests that when going to large retailers seek out minority-owned fashion brands.
“I have personally taken part in the 15 Percent Pledge program which is a US-based non-profit organization that encourages retailers to pledge at least 15 percent of their shelf-space to Black-owned businesses,” Fraley said. “I brought that into my personal space to have 15 percent or more of my closet space to be 15% minority-owned fashion brands.”
“Where were people even going to wear my dresses?”
Some fashion designers who were forced to close their businesses due to non-existent sales have had astounding comebacks.
Maxie James, founder and CEO of Ellaé Lisqué, was forced to dissolve her Los Angeles-based business in April of 2020 when sales completely dried up and the manufacturers she used temporarily closed. Her sequin and party-inspired cocktail dresses and evening wear while beautiful were not a necessity when people couldn’t go anywhere beyond the grocery store. She had to lay off her entire staff, but she was able to keep her business space open with the amount she had in savings.
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In September 2020, she relaunched her business but had to completely start over. She had to rehire an entirely new staff, as many of her previous staff found new jobs. She admits that when she relaunched her business, she was very nervous about it.
“I was very insecure when I relaunched because so many brands pivoted to doing other products during the pandemic,” James said. “My brand wasn’t one where I could pivot and do something else. I’m known for making dresses. Half of the world was still on lockdown in September 2020. Where were people even going to wear my dresses? I had no confidence in relaunching because I didn’t think I had a product people needed right now while we were sitting at home.”
James said she went ahead and relaunched and thought people could wear their dresses in their living rooms on Zoom parties, but she didn’t realize how popular Zoom parties became when she relaunched. Although she relaunched in fear, she said she had to go back to doing what she loved. Unfortunately for James, she didn’t receive any PPE.
“I was behind on rent, and I had to lay off my entire staff, I was in definite need of PPE, and I didn’t receive one dollar,” she said. “When I relaunched, I started with one sewer to make my dresses and I started with 50 pieces. I used to manufacture thousands of units a week, and any money I made off sales from September through the following eight months went right back into the business because it took that long to turn a profit again.”
The more revenue increased, the more she began hiring and making investments in marketing and increasing inventory. She said that before COVID-19, she felt that neighboring stores on Melrose, which were majority white-owned, made it more difficult for her to do business as the only Black-owned store on the street, but since the pandemic and more people shopping online, and after the spotlight put on Black designers after the murder of George Floyd, more Black designers are being given a chance by consumers and buyers. Now, her business revenues are at an all-time high.
“It sadly took two very unfortunate situations, both the pandemic and the death of George Floyd, to get Black people the recognition they need,” James said. “It did finally open some eyes, and now other races and ethnic groups are giving Black designers a chance. I do still feel like Black designers have to work harder than our non-Black counterparts, but Black people have more of a platform now to show we are equally as talented and capable as everyone else.”