As Alaska starts to reopen, it’s already too little, too late for some small businesses

Last Friday, as state lawmakers heard from economists and analysts about the health of Alaska’s economy, a shop in downtown Juneau opened its doors for one final sale. 

This shop and a lot of others like it around the country are financially fragile, operating with just enough savings to cover one or two months of being closed. As the state takes steps toward reopening businesses, some are finding that the COVID-19 pandemic has already robbed them of that possibility. 

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Art Sutch Photography and Digital Imaging is a small camera shop just down from Alaska’s Capitol, on Seward Street in downtown Juneau.

Inside, there are big prints on the walls including an unreal, deeply blue shot from inside an ice cave. There’s a big printer in the back for Art Sutch’s imaging business. And, there’s usually a dog or two.

There were a handful of people in the shop on Saturday — looking to pick up a few pieces of gear. But, it really seemed like they came in to talk to Sutch. 

He was having a sale, getting rid of as much of his stock as possible, at cost. Because, whatever he doesn’t sell, he has to cram into his garage. After 25 years, Sutch was calling it quits. At least, on the retail side of his business. 

There are more factors in that decision than just the COVID-19 pandemic. It is not easy to operate a small town brick-and-mortar camera shop, Sutch said. 

“You know how people correlate everything to that movie the ‘Perfect Storm’? Well this was ‘The Perfect Storm,'” he said.

In the past few years, he’s seen cellphones wipe out his low-end point and shoot market and he’s competing with internet retailers who can undercut him on cost. 

“Unfortunately the internet isn’t taxed. So the internet can beat me by just not having sales tax,” he said. “People shop photographic equipment like you wouldn’t believe. I have people that stand in front of me with their cellphone, as I’m telling them the price of my gear, to compare it with everyone else’s.”

The bottom line is that his profit margins are slimmer now than they used to be.

Sutch said he was finding ways to make it work, and to change with the times.

“I had employees. When the business was doing really good, I could afford them,” he said.

But now, it’s just him. There are some months in the winter that he doesn’t take a paycheck. That’s one of the reasons he’s been able to stay open. 

But this year, everything just fell apart. He said he posted a loss for the first time in 25 years last year. Then, coming out of a slow winter season, he had to close his shop for an entire month. He’s had no income, and the COVID-19 pandemic shut down everything that was keeping him profitable.

“Prior to that, I was looking at a good summer. I had 26 cruise ship weddings booked and it was like watching dominoes fall. Everyone’s pretty much cancelled or (been) rescheduled for next year,” he said.

After that, the decision to close became just simple economics.

“I’d be digging myself in deeper by keeping the store open,” he said. “Because I incur like $1,500 – $2,000 a month in overhead. And, with no business, it just didn’t make any sense.”

Sutch is not the only small business owner with these slim margins. 

A team of researchers at the National Bureau of Economic Research surveyed nearly 6,000 businesses in April. They asked owners about their finances and the impact of the COVID-19 crisis. Three-quarters of them said they only had enough cash on hand to cover two months of expenses. 

That means the longer they’re closed, the more likely it is that they’ll need to take out loans — or cut deeply into things like payroll to keep from shutting down.

“I, as all of you, have been referring to the economy as either being frozen or in a coma,” said Institute for Social and Economic Research Economist Mouhcine Guettabi.

During a meeting with state lawmakers last week, he laid out some of the reasons the pandemic closures are expected to have long-lasting effects on businesses in Alaska. 

It’s disrupting the cycle of how some Alaska businesses generally turn a profit, because parts of the economy kind of freeze every year. Sutch, for example, always has a slow winter, but he adapted.

“I would bank all my wedding money and shoot money in a separate account from my checking account and that’s what would carry me through the winter,” he said.

The thaw is supposed to come with the waves of tourists. The state’s economy gets a big bump in activity in June, July and August. Sutch books destination shoots, weddings, underwater trips and more people come wandering up Seward Street into his shop. 

Guettabi says that’s probably not going to happen — at least not at the same scale this year.

It’s impossible to know exactly how much money is going to be lost this year. Or, to know right now how much was lost during the last month of closures. But, Guettabi pulled last year’s numbers and did some rough estimates about the state’s GDP.

Think of GDP as basically the value of all the goods and services produced in Alaska. 

“GDP for the second quarter, that’s April through June, would be $2 billion less than the previous year, just from the direct effects,” Guettabi said.

Direct effects are things like the immediate financial hit taken by retail businesses, hospitality, leisure and transportation. 

If you account for the indirect effects — that’s all of the places the people directly affected are now not spending money — Guettabi said the GDP is about $4 billion less than last year for the current quarter. Not July and August which, in Juneau, are huge months of economic activity.  

Guettabi also told lawmakers that he hadn’t accounted for the price of oil in his calculations. At last count, a barrel of Alaska North Slope crude was going for less than $9. Guettabi said losses in that industry are going to dwarf the impacts that COVID-19 has had on the state’s GDP. 

All that is to say that Sutch looked at the numbers and they didn’t add up anymore. 

So he’s packing up and moving out of the store this week. He’ll be working from his home studio. He said he’ll probably have one of the more fun summers than he’s had in years because he’ll actually have free time to go and play. Chances to go and shoot more too.

The thing is, the loss of the camera shop downtown is bigger than just the gear he sold.

Sutch is kind of a camera consultant. The phone rings throughout the day, or people just stop into the shop. They want to know how to tweak settings, or why they can’t do certain things. They want advice on which lenses to buy.

Right on cue, the phone rings while he’s talking about closing his shop. He answers. Pauses for a second, then settles in.

“No problem, what’s your question?” he asks.

He waits a minute or two. Then launches into a detailed explanation of how to change a setting on a lens to make it communicate better with a camera. Sutch knows how the industry works and how to advocate for customers when they need to get gear repaired. That’s gone too.

He said he and his family will still be in town and he has a message for the community:

“I’ll still be around. You can ask questions. You can stop me on the street. I’m not going to be unapproachable,” he said. “And I’ll miss you guys.”