It was a rainy evening, as usual, Olga Kostikova, the owner of the beauty salon “My Master,” was returning home after work. In the back seat of the car were masks and antiseptics for her employees. It was the third month of the coronavirus epidemic that had not yet reached Russia, and everyone hoped that this would affect neither people nor private businesses.
“We faced a fatal crisis, the worst in a few years,” said Kostikova. While everyone is watching the growing numbers of people who have become infected and those who have died from coronavirus, economic issues are fading into the background. In what reality will surviving entrepreneurs be living in?
Coronavirus continues to spread around the world. In Russia, despite the preventive measures taken, more than 400 000 cases of COVID-19 have already been identified. In this regard, a danger regime has been introduced in all regions, many are switching to a remote mode of work, schoolchildren have shorter vacation periods and exams; mass events, as well as many trips, are canceled.
To resist the spread of COVID-19, cities around the globe have called for many non-essential businesses to shut down or at least modify their operations. Russian President Vladimir Putin said on March 25 that the state would help small businesses, but the president’s speech did not inspire everyone. On Thursday, March 26, Putin stated: ” We are well aware that small and medium-sized businesses are in the most challenging position.”
“On March 26, we learned that we have to close our salon because we do not sell vital goods,” said Kostikova.
“Clients call us with a question: ‘Are you closing?’ Putin said to close, but who will give us money for this?!”
“Those, who work remotely will survive, and most who have not done this before will go online, of course,” said Kostikova. However, it seems that two-thirds of enterprises will close or go bankrupt if their business does not survive for 2-3 months. “Therefore, business have to adapt to new conditions, and the state has to prevent it (the business) from dying,” added Kostikova.
About three million entrepreneurs in Russia may cease their activities due to the coronavirus epidemic if the crisis will be protracted, according to the Chamber of Commerce and Industry of the Russian Federation (CCI). Some economics experts assume that large companies will be able to hold out in the current conditions for no more than two months. Some will go bankrupt in the hope of then opening up again, but not all will return to the market. About 15 thousand catering establishments and more than 40 thousand stores were closed because of the unofficial quarantine in the state. “We were promised salary preservation, but this is ridiculous because I get the main income in the form of 50% from each client,” said Maya, a hairdresser from “My Master” salon. “We are not sure that after the holidays everyone will be back.”
Small and medium-sized businesses suffer due to the coronavirus pandemic and the depreciation of the ruble. Entrepreneurs do not exclude the possibility that they will have to choose whether to pay rent or pay employees’ salaries in the next month. Olga does not pay salaries due to the country’s crisis and because artisans work by 50 percent. “Naturally, we will not be able to work illegally, because the fines for an individual entrepreneur are 500 thousand rubles,” Kostikova added. One of the main points is that not every agency reduces rent prices. “Our owner did not make concessions, and we need to pay the full rent, although we are closed.”
It should be understood that a crisis is not only a decline but also an opportunity to reorient to the domestic market and to own production, refuse to purchase from abroad, and organize production within the country. It is especially true when considering that the Russian economy is less tied to globalization than the American, European, or even Chinese.
The example of China confirms that a return to ordinary life will not be easy. On the one hand, on the second weekend of April, which was festive in China, hotel reservations grew by 60% compared to the previous week, and train ticket purchases doubled. On the other hand, a decrease in demand for Chinese enterprises’ products does not yet make it possible to restore production volumes.
When quarantine ends, most businesses will not have to start life from scratch, but pull themselves out of a deep financial hole.
“We are like a fish pulled out of the water,” stated Kostikova.