'COVID-19 Direct Hit' Self-Employed... Half Earned Less Than 60 Million KRW in Annual Sales Last Year

Analysis of the '2021 KB Self-Employment Report'
'Solo Owners' Hit Hardest... 31% Decrease in Sales
34% Borrowed Money from Family and Acquaintances

[Asia Economy Reporter Jin-ho Kim] About half of small business owners in the Seoul metropolitan area reported sales of less than 60 million KRW last year. Hit hard by COVID-19, the actual income they took home was less than 20% of their sales. In particular, ‘solo owners’ experienced the largest blow with a 31% decrease in sales. Critics argue that the government’s complacency, believing that ‘things will get better if we just hold on a little longer,’ has led to the tragedy of self-employed businesses.

According to the ‘2021 KB Self-Employment Report ? Survey on the Impact of COVID-19 on Small Business Owners in the Seoul Metropolitan Area’ published on the 26th by KB Financial Group Management Research Institute, the total sales volume of small business owners was 209.98 million KRW last year, a 24% decrease compared to 274.28 million KRW in 2019 before COVID-19.

In particular, due to the overall decline in sales, the number of micro self-employed businesses with annual sales under 60 million KRW increased significantly. The proportion rose by 17 percentage points in one year, from 24% in 2019 to 41% last year. More than half (56%) of those working in the service industry reported sales under 60 million KRW. Retail and wholesale businesses and the food service industry experienced the sharpest declines in earnings. During the same period, their shares increased significantly from 20% and 16% to 35% and 27%, respectively.

Sales of self-employed ‘solo owners’ decreased by 31%, marking the largest drop. However, companies employing six or more people saw only a 10% decrease in sales last year. This indicates that the more employees a business has, the lower the relative sales decline, showing that micro self-employed businesses with fewer employees suffered more from the impact of COVID-19.

By industry, the service sector (-35%) was hit hardest by the COVID-19 crisis. Due to social distancing and travel restrictions, sales plummeted especially in performance and event agencies (-81%) and travel agencies (-68%).

Sales in retail and wholesale and food service sectors also recorded declines of -20% and -23%, respectively. Retail and wholesale businesses saw sales of stationery stores and watch and jewelry shops fall by 70% and 50%, respectively, due to reduced classes and fewer wedding ceremonies.

Due to strengthened social distancing measures, food service businesses not using delivery and ordering platforms (-24%) experienced a larger sales decline than those using related services (-19%).

Regionally, small business owners in Incheon (-33%) experienced the largest sales decrease, followed by Seoul (-26%) and Gyeonggi (-17%).

Small business owners cited ‘decrease in visiting customers (40%)’ and ‘operating hour restrictions (32%)’ as factors affecting sales and profits due to COVID-19. Eighty-eight percent of small business owners said COVID-19 impacted their sales and profits, with 57% stating the impact was very significant. Especially in the food service industry, ‘operating hour restrictions’ directly affected sales and profits.

After COVID-19, small business owners turned to family or acquaintances for financing rather than banks or the government. This is interpreted as an increase in those who find it difficult to use institutional finance.

According to the report, 34% of small business owners in the Seoul metropolitan area borrowed from family and acquaintances, exceeding the 31% who obtained dedicated loans from financial institutions as business operators. Only 37% used government policy fund loans targeted at small business owners. More than half (51%) of small business owners said they ‘mainly consult family and acquaintances’ regarding financial matters or funding issues.

Meanwhile, this survey was conducted targeting the Seoul metropolitan area, which accounts for 51% of small business owners nationwide. The number of small business establishments in the metropolitan area was 3.279 million, representing 51% of the national total (6.442 million), and the number of small business workers was 4.674 million, also 51% of the national total (9.219 million).

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