San Jose merchants in fight of their lives with COVID-19’s second wave

Less than two months ago, consumer experts predicted shoppers, diners and patrons of bars and nightclubs would return to their favorite brick-and-mortar shops by the end of this summer in numbers that matched 2019.

Zenreach — a San Francisco tech firm that sells marketing software to traditional retail outlets, hospitality and entertainment venues that allows those businesses to track customer behavior the same way online retailers do — made that bold prognostication July 1.

“What we didn’t know at the time was that we would see a second wave of infection and the return of government restrictions,” said Zenreach President and CEO John Kelly.

Meanwhile in Silicon Valley, local business owners told San José Spotlight they are taking desperate measures to make ends meet with as little as 10% of the revenue they had before the coronavirus pandemic wrecked the economy.

“The circumstances are dire,” said Ryan Summers, owner of Good Karma Artisan Ales & Café and Pizza Flora, both on South 1st St. downtown.

Summers took a Paycheck Protection Program (PPP) loan from the the federal Small Business Administration (SBA). But he burned through it quickly and he’s sunk of ton of his savings into keeping his pizza joint and ale house open.

“I’m fighting for my life,” Summers said. “I feel like I have a chance to survive but right now I’m just treading water.”

Consumers started to return to their old habits this spring, Kelly said, and “a slow, but steady” increase in foot traffic “looked like the beginning of a recovery.” So Zenreach, based on its coast-to-coast analysis from May and June, speculated that a year-over-year parity for restaurants, bars and retail would begin on the first day of autumn.

If the trend had continued on that trajectory over the summer, the storefront economy would be in much better shape. But a recent analysis led Zenreach to draw a more harrowing conclusion.

“It is going to be very difficult for us to return to 100% traffic without a vaccine,” Kelly said.

A new analysis by Zenreach last week found foot traffic at retail businesses in California was down by more than 64% as compared to the same time in 2019. That’s up from a low-point in April when the year-over-year comparisons showed only 29% of the consumer traffic from 2019. But it’s also down from a peak of about 39% in July.

Ken Kelly, president of the Winchester Business Association, told San José Spotlight many of the retail shops in his business district were forced to shutter in March. Most will never reopen.

“Most of them won’t return,” the business association president said. “The rents on Winchester Boulevard are becoming horrendous and without a steady stream of customers to bring in revenue it’s too risky to sign a lease.”

The hospitality industry in the state is experiencing a similar pinch with business down more than 63% at restaurants and 60% at bars and nightclubs, according to the analysis from Zenreach.

Eric Nielson, owner of 55 South, a craft cocktail bar on South 1st St. downtown, and SP2, a communal bar and restaurant at San Pedro Square, said he’s seen a decline in revenue as much as 85 to 90 percent. They’ve been selling craft cocktail kits, offering drinks to-go and providing patio seating at 55 South for as long as the state has allowed it, but customers are still afraid, he said.

“People are still really scared and uncomfortable being out,” Nielson said.

That’s not likely to change until there are more safe options for patrons, he said, or until government officials give the go ahead for restaurants and bars to start serving customers indoors again.

“After there is permission from public health officials to allow more businesses back inside there should be a shift in that mindset,” Nielson said.

Like Summers, Nielson quickly blew through a PPP loan. And now he’s holding on to the proceeds of an Economic Injury Disaster Loan (EIDL) from the SBA in the hopes that it will help him stay in business until March or April.

That’s similar to the situation Dan Phan is in. He’s a co-owner of Miniboss, a video arcade bar on Santa Clara St., Paper Plane, a cocktail lounge on South 1st St., and Original Gravity, a pub on the same block. Phan also took PPP and EIDL loans. He’s allocated the PPP funds to last him through the end of this month and he’ll be using the EIDL money after that.

But all three of Phan’s businesses have been closed for 170 straight days and he had to lay off more than 100 people.

“We’re looking forward to the day that we can return to normal,” Phan told San José Spotlight.

But he doesn’t expect that day to come before 2021.

“It’s become a marathon,” he said. “We just want to make sure that next year we have a building to operate out of.”

And if that day doesn’t come soon enough, Phan said he’ll need another round of federal stimulus to stay in business.

“I hate being the guy who is waiting on a government check to stay in business but that’s what we need,” he said.

Contact Adam F. Hutton at [email protected] or follow @adamfhutton on Twitter.