Last Year, 130,000 More Small Businesses... But 870,000 Employees 'Disappeared'

310,000 Jobs Lost in Wholesale and Retail... 250,000 Decrease in Accommodation and Food Services
Annual Sales Down by 11 Million KRW Each... Operating Profit Also Drops by 1.17 Million KRW Monthly
80.5% of Small Business Owners Are 'Tenants'... Average Debt Amounts to 169 Million KRW

On the 17th, when the government announced strengthened social distancing measures until the end of the year due to the rapid increase in COVID-19 confirmed cases, a closed store is locking its door on Myeongdong Street in Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Junhyung Lee] Last year, the number of small business establishments increased by 130,000 compared to the previous year, but the number of employees decreased by 870,000. During the same period, the average annual sales per establishment decreased by 11 million KRW.

According to the preliminary results of the '2020 Small Business Survey' announced on the 28th by the Ministry of SMEs and Startups and Statistics Korea, the number of small business establishments in 11 industries reached about 2.9 million last year, an increase of 130,000 (4.7%) compared to the previous year, following the spread of COVID-19. By industry, accommodation and food service businesses increased by 49,000, wholesale and retail trade by 24,000, and manufacturing by 13,000.

On the other hand, the number of employees significantly decreased. The number of employees in the 11 small business industries was 5.57 million last year, down 870,000 (13.5%) from the previous year. The decrease was particularly notable in wholesale and retail trade and accommodation and food service industries. The number of employees in wholesale and retail trade and accommodation and food service industries decreased by 313,000 and 252,000 respectively compared to the previous year.

Current Status of Small Business Operators.
[Photo by Ministry of SMEs and Startups]

The average annual sales per establishment also shrank. Last year, the average annual sales per small business establishment was 224 million KRW, down 11 million KRW from the previous year. This means sales decreased by an average of 920,000 KRW per month. During the same period, operating profit dropped from 33 million KRW to 19 million KRW, decreasing by an average of 1.17 million KRW per month.

The Ministry of SMEs and Startups sees the causes of the income decline among small business owners as including the impact of COVID-19 and insufficient response to the transition to the digital economy. In fact, only 8.9% of businesses had e-commerce sales performance. The products introduced to respond to digitalization were smart order systems (50.6%), kiosks and signage (16.3%), and access authentication and self-checkout counters (13.6%) in that order.

The age group with the highest proportion of small business owners was those in their 50s at 32.2%, followed by those in their 40s (25.5%), 60s and above (22.6%), 30s (13.5%), and 20s and below (6.3%). The top reason for starting a business was 'wanting to run my own business' (64%). The average preparation period for starting a business was 9.7 months, and the total startup cost was 90 million KRW, including 69 million KRW of personal funds.

Number of Small Business Establishments and Employees by Industry, and Sales Revenue and Operating Profit per Establishment.
[Photo by Ministry of SMEs and Startups]

Among all small business owners, 60% had debt. The average debt per establishment was 169 million KRW, down 2 million KRW from the previous year. Among business premises, 80.5% were leased, an increase of 1.2 percentage points from the previous year. The deposit and monthly rent of leased premises with security deposits decreased by 6.9% and 6.6% respectively compared to the previous year.

The management difficulties perceived by small business owners included intensified competition (38.3%), decline of commercial districts (37.6%), raw material costs (28.7%), and quarantine measures (21.0%).

The Ministry of SMEs and Startups stated that this survey confirmed the worsening business environment for small business owners due to the impact of COVID-19. Accordingly, the ministry plans to actively establish and implement support measures for small business owners. Meanwhile, the government provided 43.1 trillion KRW last year and 51.4 trillion KRW this year through disaster relief funds and other means to support small business owners' income preservation.

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