Fifty local businesses close down every day in Spain

According to data from the Ministry of Labour and Social Security, last year almost 19, 699 small businesses, more than fifty every day, permanently closed their doors, most of them due to the unfeasibility of businesses, in a trickle which had its greatest impacts in Andalusia (3,973) and Catalonia (3,345), which account for more than two thirds of the closures together with the Valencian Community (2,274), Galicia (1,600), Madrid (1,528), Castilla y León (1,236) and Castilla-La Mancha (1,163).

The census of companies with staff from the Ministry of Labour, whose heading includes retail trade, wholesalers and vehicle repair shops, also points to a puncture in the sector, with 4,200 fewer companies in one year and a record of 290,553 which is almost 10,000 below the level prior to the pandemic (300,159 at the end of 2019) and which is lower than that of 2020, when despite the impact of the health crisis, 291,079 remained operational.

And the balance of the Social Security Contribution Account Codes, which include companies and the self-employed, registers a negative balance of 1,762 (197,780 without workshops or wholesalers) in the year, another of more than 14,000 compared to the eve of the pandemic. and one more than 24,400 in the decade.

The data points to the chronification of the decline of local commerce, whose loss of units exceeds in volume that of years of strong decline prior to the health crisis such as 2017 and 2018 despite being mitigated by the trickle of store openings that continues to occur.

“With the real estate crisis, it was seen how the trade bubble had reached its ceiling. It was a refuge for workers who were being expelled from the labour market during the crisis, but it is not a simple sector, rather it is oversized,” explains Eduardo Abad, general secretary of UPTA (Union of Professionals and Autonomous Workers). ” We are not talking about isolated cases but about a sum and continues in which there are more and more small businesses that close the door.”

“There is a market in electronic commerce that is blocked by manufacturers, and there is no room for small businesses if they do not specialise, especially in textiles and food,” explains Abad, in the face of the debacle that is taking place in the fabric of neighbourhood and town stores outside chains and franchises.

It happens in the city, where competition from chains and franchises that manufacture and distribute their own goods is more than complicated for stores, especially in sales periods  like the current one, and also in rural areas, where administrations end up being forced to mobilise resources to keep open the multi-services that prevent the residents of small towns from being left without something as basic as access to the purchase of food.

Two other pressure factors are added to this picture. On the one hand, the excessive prices of electricity, which establishments such as bakeries and pastry shops suffer with special intensity due to the use of ovens, but also butchers, fishmongers and greengrocers due to the need to refrigerate the goods and use tools to handle them.

And, on the other, the advance of electronic commerce or e-commerce, whose turnover already exceeded 60 million euro a day in the first half of last year after tripling its business volume in just seven, according to data from the CNMC (Commission National Markets and Competition).

Electronic commerce reached a turnover volume of 18,1 billion euro in 2021 for operations with Spanish buyers and sellers, a figure that rises to 20,8 for the last mobile year with data, from July 2021 to June 2022.

These figures triple the 6,6 billion of 2014 and are close to doubling the 11,5 of 2017, which helps to get an idea of ​​how this sales channel is gaining domestic market share.

By sectors and for internal operations, the data for the second quarter of 2022 reflect purchases of food for a value of 4.3 million euro per day, of household appliances for almost three, and of clothing and footwear for nearly two, to which are added other items such as 750,000 euro in perfumery and 1.2 million in furniture, operations that, obviously, are no longer carried out in physical stores.

To this figure we must add another of Internet commerce that generates a negative trade balance of more than 25 billion a year: it is the difference between what Spanish firms place in other countries (29) and what consumers Spaniards buy companies from other countries (107 million daily).

This last record, which includes twelve million in clothing and footwear, almost one in perfumery, more than 1.3 in food and 23.5 in tourism, travel and hospitality, can also be recorded as a decrease in sales that was previously managed by local face-to-face businesses, regardless of its size. This places the deviation at around 170 million per day.

“The advance of electronic commerce is due to the evolution of society and of the consumer, in view of which the distributor has gone ahead of the marketer”, indicates the general secretary of UPTA, who notes another pressure factor for retailers: “This is added to the concentration of the distribution sector, especially food and textiles, with which large brands have taken 80% of the market and leave no room” for other operators.

In this scenario, the main communicative effect of the Internet, which is the elimination of intermediaries between sender and receiver through its mesh of networks, ends up having devastating effects for retailers when combined with certain commercial practices of manufacturers and distributors, which now have the option of direct sales, the same as wholesalers.

“Through e-commerce, small businesses are dumped by selling products at a lower price than what is offered to stores, as happens when manufacturers and distributors make sales,” says Abad, who is also critical of second-hand sales platforms, through which, according to his organisation’s estimates, around 600 million in taxes vanish at the end of the year.

“Small businesses have to implement systems to be able to deal with e-commerce, and there they have to play the trick of proximity with logistics”, with formats to take the customer’s purchase home, says the secretary general of UPTA, which criticises the abandonment of the sector in aspects such as the activation of these support structures by the administrations and chambers of commerce: “the management of resources to boost trade has been a failure. Or models are implemented based on proximity and digitisation that allow competition or there is nothing to do”.