Operating Profit of Small Businesses Down 35.6% Due to COVID-19... Food Service Industry Losses Reach 230 Million Won, the Largest Ever

Tripartite Commission 'COVID-19 Small Business Crisis Response' Forum
Proposal of 3-Stage Support Measures: Survival → Compensation → Business Revitalization

Three days before the Lunar New Year holiday, on February 8, a merchant is delivering food in the restaurant alley of Namdaemun Market in Seoul. Photo by Hyunmin Kim kimhyun81@

[Sejong=Asia Economy Reporter Moon Chaeseok] A survey revealed that the average operating profit of small business owners has decreased by more than 35% compared to before COVID-19. The direct loss amount due to social distancing guidelines was found to be the highest in the food service industry, at 231 million KRW.

Professor Lim Chaewoon of the Department of Business Administration at Sogang University stated this on the afternoon of the 26th at the 18th floor of Post Tower in Jung-gu, Seoul, during the discussion forum titled "Small Business Owners' Crisis and Response Due to COVID-19." Professor Lim, who gave the keynote presentation that day, said, "The average operating profit, sales, and number of customers of small business owners all decreased by more than 30% before and after COVID-19," warning that "small business owners are directly impacted by the prolonged COVID-19 situation, and their difficulties could lead to a significant shock to the national economy."

According to the "Survey on Changes in Work and Life of Small Business Owners Due to COVID-19" conducted by the Korea Federation of Small and Medium Business in January, which Professor Lim cited, the average sales of small business owners in 2019 before COVID-19 was 35.83 million KRW, but it decreased by 25.9% to 26.55 million KRW last year. During the same period, the average monthly operating profit dropped by 35.6%, from 7.27 million KRW before COVID-19 to 4.68 million KRW afterward, and the average number of visiting customers also decreased by 35.4%, from 565.5 to 366.2.

According to the damage status by industry announced that day, the direct loss amount due to social distancing was highest in the food service industry at 231 million KRW. This was followed by PC rooms at 143 million KRW, karaoke rooms at 100 million KRW, and cafes at 31 million KRW. Wholesale and retail trade, as well as accommodation and food service industries, are overcrowded sectors for small business owners, and the survival rate within these industries is very low.

Professor Lim emphasized, "Since small business owners account for more than 93.3% of all companies and form the foundation of the national economy, multifaceted government support measures are necessary," and proposed a three-stage government support policy.

In the first stage, "Survival Support," he stressed the need to provide financial support so that small business owners can endure until business normalization. In the second stage, "Damage Compensation," he proposed a retrospective relief measure focusing on damage support or loss compensation for small business owners severely affected by social distancing. He suggested strengthening damage compensation for full-time and closed small business owners. In the third stage, "Business Revitalization," since stimulating consumption after the end of COVID-19 is considered the ultimate solution, he emphasized the implementation of consumption promotion measures. Professor Lim presented specific examples such as allocating budgets for nationwide disaster relief funds, consumption coupons, and local gift certificates.

Following Professor Lim, Nam Yunhyung, head of the Win-Win Cooperation Research Office at the Small and Medium Business Research Institute, and Professor Lee Jonghyun of the Department of Business Administration at Gachon University, presented opinions on damage support for small business owners and strengthening social safety nets, respectively. Director Nam said, "When applying social distancing, it is necessary to consider the business characteristics of small business owners by region, commercial district, and industry," adding, "It is urgent to establish reasonable standards for selecting loss items, retroactive application, and securing funding for loss compensation for small business owners who have already suffered damage." Professor Lee diagnosed, "Strengthening the social safety net for small business owners through programs like the Yellow Umbrella Mutual Aid is necessary," and noted, "As market power has shifted from manufacturing to wholesale and retail due to COVID-19, strengthening public linkage networks through organizing small business owners within regions and diversifying public distribution systems by industry will be important for securing the competitiveness of small business owners."

This content was produced with the assistance of AI translation services.