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Yelp knowledge reveals that 60% of retailer closures as a result of coronavirus pandemic are actually everlasting

Pedestrians wearing protective masks walk past a sign outside a retail store in Harlem, New York City saying it will be closed.

Noam Galai | Getty Images

Yelp released its latest Economic Average Report on Wednesday, which found store closings in the US are increasing due to the economic fallout from the coronavirus pandemic.

As of August 31, 163,735 businesses reported on Yelp that they were closed. That's less than the 180,000 that closed at the start of the pandemic. In fact, however, the number of closures has increased by 23% since mid-July.

In addition to monitoring closed businesses, Yelp also takes into account the businesses whose closures are permanent. That number has grown steadily over the past six months and now stands at 97,966, which is 60% of closed stores that will not reopen.

"Overall, Yelp data shows store closings have increased 34% since our last report in mid-July," Justin Norman, vice president of data science at Yelp, told CNBC.

The September report marks six months since March 1, the date Yelp sees the start of the business crisis.

To collect closure data, Yelp monitors changes in business hours or descriptions on its app and provides an instant, localized view of the impact the pandemic is having on small businesses.

"Despite the strong impact that small businesses have had, we have seen private, local, professional and automotive services withstand the effects of the pandemic better than other industries," said Norman.

The data supports the trend that most consumers are choosing to stay at home rather than physically patronizing facilities, as private and professional services like landscapers, builders, and lawyers are seeing a much lower shutdown rate than clothing stores and even home decor companies. Car and towing services also reported a relatively low rate of closure.

"Consumers still need these services," said Norman. "With the increase in virtual consultations and contactless or socially distant services, these companies have been particularly resilient during this time."

In the past six months, restaurants, bars and nightlife have been hardest hit by the restrictions caused by the pandemic, with 32,109 restaurants closed as of August 31. The number of restaurants that have to close permanently is slightly above the total number of Yelp's average at 61%.

Yelp also found that businesses that are already good takeaway, such as pizzerias, cafes, and delis, step on the water better than other restaurants. The types of restaurants with the highest closings include breakfast and brunch restaurants, sandwich shops, and Mexican restaurants.

Norman noted that policy changes in the coming weeks and months could have an impact on whether these closings become permanent. "The continued rollout of indoor restaurants, especially in metropolitan areas like New York City, is worth watching as it's critical for businesses to strike the right balance between social distancing and other responsible safety measures to ensure they stay open. "

Bars and nightlife options have also had a big impact on the pandemic, as the business does not easily adapt to alfresco or take-away meals. Despite being a sector six times smaller than restaurants, 6,451 venues have closed. The rate of permanent closures has increased 10% since July and is now 54%.

Retail has seen a similar increase in permanent closures since July, increasing 10% to 58% overall. That's 30,374 closed retail stores.

The report showed a surprising increase in permanent closures for beauty companies from month to month – about 42% more companies have been reported to be permanently closed since July. The total number of closures for the beauty industry stands at 16,585, an increase of 22% since July.

Different states face different rates of closure as well, and it may not be surprising that Yelp sees a correlation between states with high numbers of closings and states with high unemployment rates. In the closings per 1,000 for each state, Hawaii is the hardest hit, followed by the states of California, Nevada, Arizona, and Washington. Hawaii's unemployment rate was 13% in July, and the state is also heavily dependent on tourism.

"Due to the pandemic, these states were severely affected by travel restrictions and also faced with high unemployment rates," said Norman. "These states are also home to the hardest-hit metropolitan areas like Las Vegas, Honolulu and some of California's largest urban areas like San Diego, San Francisco, San Jose and Los Angeles."

Yelp has also identified discrepancies between major cities, where closings are higher and businesses are not doing so well, and smaller areas, which have proven more forgiving to small businesses. Los Angeles and New York report the highest number of closings: Los Angeles has 15,000 closings, half of which are permanent, and New York has seen over 11,000 closings, with the high rate of 63% reported as permanent.

"Meanwhile, we're actually seeing bigger metros with fewer closings in the east, including Pittsburgh, Philadelphia, and Baltimore," noted Norman.

Ultimately, the data from Yelp shows that Main Street is still feeling the economic effects of the pandemic and many states and businesses may not see a recovery soon.

"While it is difficult to say when we can expect store closings to stabilize, over the past six months companies have continued to adapt successfully to these uncertain times thanks to their own hard work, innovation and changes in local politics," said Norman .

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