Lack of e-commerce hindered pandemic recovery for small businesses in Asian neighborhoods
SOURCE: The Mastercard Center for Inclusive Growth
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By now we know that, although COVID-19 impacted all of us, its real-world reverberations were not equally felt. Women lost more jobs, people of color faced disproportionate exposure and deaths, low-wage workers were forced to prioritize their jobs over their health, and as we reported in February, certain communities felt the economic impacts more than others.
As we showed then in a unique analysis of consumer spending in Asian American communities in New York City, not only were those communities harder hit than the rest of the city, but they felt the effects earlier than other communities. The early decline in spending could have been the result of xenophobia and a misguided fear of Asian establishments at the outset of the pandemic. Our analysis also finds that the rebound in these neighborhoods may have been hindered (and might still be) by a lack of e-commerce. While one-fourth of the transactions in grocery stores and restaurants citywide were digital in 2020, only 3 percent were digital in Asian American communities in the city.
The results of our analysis of New York’s Asian American communities was so disquieting that we felt compelled to expand to Asian American communities in three additional cities—Los Angeles, San Francisco and Chicago. The findings were sadly similar.
The Mastercard Center for Inclusive Growth regularly uses insights on spending trends derived from anonymized and aggregated Mastercard spending data to promote inclusive growth, improve financial security, and help city leaders and others build strong and resilient communities. Last year we partnered with the Asian American Federation of New York to better understand COVID-19’s impact on Asian American New Yorkers. We focused on five neighborhoods—three with heavy Asian American populations (Manhattan’s Chinatown; Flushing, Queens; and Jackson Heights, Queens) and two diverse, lower-income neighborhoods (East New York, Brooklyn; and Jamaica, Queens) that also have many small, family-owned businesses, including grocers and restaurants.
In the three additional cities, we used the same Mastercard insights on spending but focused on census tracts in which at least two-thirds of residents were of Asian descent. In San Francisco and Chicago, those neighborhoods included historical Chinatowns, plus Richmond Hill in San Francisco. In Los Angeles, the communities included Pasadena and Monterey Park. The census data is from the 2019 American Community Survey.
We compared changes in weekly spending in restaurants and grocery stores from January through September 2020 to the same timeframe in 2019.
Asian American communities felt the impact of COVID-19 earlier and more significantly
In all four cities, spending fell more sharply and began falling earlier than citywide patterns. As a whole, New York City saw consumer spending fall 65 percent beginning in late February and continuing to decline into March. However, consumer spending by early March in Chinatown—particularly in restaurants—had fallen by almost 82 percent. Spending had declined in Flushing by 71 percent and 73 percent in Jackson Heights.
Declining restaurant sales drove overall spending declines
In all four cities, the decline in restaurant spending was more pronounced in Asian neighborhoods than citywide by 2 to 4 percentage points.
Restaurant spending drove the decline in Asian American communities in part because of their strong stake in food services and dependence on tourism. Nationally, Asian-owned businesses make up a sizable share (26 percent) of accommodations and food service, according to a McKinsey report. Our own analysis confirms that food service is a cornerstone of Asian neighborhoods.
The effect of travel bans and tourist declines is particularly evident in New York City’s Chinatown, where restaurant spending declined by a striking 96 percent, versus 85 percent citywide.
The spending slowdown in Asian communities also started about six weeks earlier than citywide spending in all four cities. McKinsey found similar trends nationwide, attributing the early falloff to “misguided fears of the virus” that effectively shuttered businesses in Asian communities despite few reported cases.
A lack of e-commerce hindered restaurants in Asian American communities
Earlier reporting found that nearly one-third of Asian restaurants rely on cash, and only one in four has an online presence compared with 70 percent of restaurants in wealthier neighborhoods. As takeout and delivery became a lifeline, many restaurants in New York’s Chinatown were unable to pivot to online apps and sales as quickly. Citywide in New York, the share of digital transactions in restaurants and grocery stores doubled from a year earlier, to 24 percent. But in Asian communities, digital transactions inched up to only 3.2 percent.
A lack of digital tools also slowed access to government relief funds, according to the Asian American Federation of New York. Many businesses keep their books on paper, which made it difficult to provide the documentation required to apply for government relief funding. Language was also a barrier as many of the application forms were not available in translation.
Spending on groceries spiked early on, but tourist-dependent Chinatowns lagged
In each city, grocery store spending spiked beginning in March as people sheltered at home. Over the summer and fall, grocery spending remained higher than in the prior year as restaurants shuttered and social distancing continued.
However, the stock-up did not benefit Asian American grocers as much as other communities. In Chicago, Chinatown saw a grocery spending spike that quickly flattened and by August had dropped below 2019 spending levels. This compares to a more robust citywide uptick over 2019 spending (top panel). The trends were similar in Los Angeles and San Francisco.
Similarly in New York, the initial spike in grocery sales was much higher citywide than in Chinatown. Spending there saw a smaller (and earlier) spike and then never rose above 2019 levels.
These patterns may be because Chinatown grocery stores are frequented by tourists and others looking for specialty products. As travel declined, those stores were affected.
Data helps make the case for targeted resources to build an inclusive digital economy
At the Center, we recognize the critical role of small businesses in quickening the pace of economic recovery, especially in communities of color. Our analyses and insights shed light on the business sectors and communities that have been most destabilized, and potential opportunities to support them with digital tools, financial services and other resources to ensure local businesses survive and recover in an increasingly digital economy. As local, state and national policymakers formulate recovery plans, we hope our analysis and insights can provide an evidence base for decision-makers to ensure a truly inclusive recovery as they prioritize constrained resources.
This story has been updated and adapted from a previous posting published in February.
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