Rural Small Businesses Report Double the Sales Decline of Urban Counterparts

Urban small- to medium-sized businesses (SMBs) are the backbone of city economies. It’s been a volatile few years for them, with pandemic disruptions, inflationary pressures and shifting consumer behaviors all colluding to challenge big city small businesses.

Yet these businesses have endured, even thrived, and the latest March 2025 data from the PYMNTS Intelligence SMB Growth Report reveals that urban businesses are experiencing steady growth, with only 15% reporting declining revenue.

That’s compared to nearly one in three rural SMBs (30%) that report declining revenue. This disparity is fueled in part by the continued recovery of urban industries such as hospitality, retail and professional services.

For urban business owners, the post-pandemic recovery has been a tale of two realities. On the one hand, high foot traffic, economic reopenings and increased consumer spending have buoyed many businesses. On the other, rising costs and changing work habits present formidable hurdles.

Among the biggest beneficiaries of urban economic momentum are the hospitality and food service industries. Restaurants, cafés and hotels have seen an upswing as business travel rebounds and downtown districts regain vibrancy. According to the PYMNTS report, 56% of hospitality SMBs reported revenue growth, one of the highest figures across sectors.

However, this industry remains among the most volatile, with a significant share of businesses still struggling to recover from previous downturns.

Read more: Study Finds Cash Flow Crisis Deepening for Small Businesses Amid Tariffs and Consumer Pullback

One of the most pressing structural challenges for urban SMBs is the shift in workplace dynamics. Hybrid work arrangements have reshaped consumer behavior, particularly in central business districts where office workers were once a reliable customer base.

Foot traffic in major metropolitan areas remains below pre-pandemic levels, impacting businesses that depend on weekday office workers. Cafés, dry cleaners and lunch spots that once thrived on 9-to-5 routines must now contend with unpredictable demand patterns. The decline in daily commuters has forced many SMBs to rethink their business models, adjusting hours, diversifying offerings and investing in digital engagement.

Despite these shifts, many urban SMBs are adapting. Some are pivoting toward delivery-based models, subscription services or catering to residential neighborhoods where hybrid workers are spending more time. Others have capitalized on the growing trend of flexible workspaces, offering services tailored to remote professionals seeking a change of scenery.

In spite of these headwinds, urban SMBs remain relatively optimistic about their future. Confidence in long-term survival has strengthened, with the percentage of businesses expressing concerns about their two-year viability dropping from 5% in November to 4% in January.

Expansion-minded businesses are increasingly turning to digital commerce and omnichannel strategies. eCommerce integration has become a key growth driver, allowing urban SMBs to reach broader audiences beyond their immediate geographical footprint. Many are also investing in technology-driven payment solutions to streamline transactions and improve customer experience.

See also: 32% of SMBs Favor Community Banks Over National Banks

The urban SMB sector is, in many ways, a microcosm of broader economic trends. It encapsulates the challenges and opportunities of a post-pandemic world, one where agility, innovation and strategic foresight will determine which businesses thrive.

The urban-rural divide in SMB optimism and performance also has significant implications for payments innovation. Factors like increasing competition are particularly pronounced in small cities, where 43% of SMBs identified it as a primary concern.

Beyond competitive landscape trends, urban SMBs are feeling the financial squeeze from inflation and high operational costs. Rising wages, rent increases and supply chain disruptions have exerted sustained pressure on profit margins. Unlike their rural counterparts, city-based businesses must contend with steeper commercial real estate prices, making cost management a central concern.

Industries experiencing high volatility, like hospitality, may benefit from payment innovations that offer greater flexibility, such as dynamic pricing models and real-time payment processing, to better manage cash flow and respond to market changes.​

Many urban SMBs have implemented strategic pricing adjustments, renegotiated leases and sought alternative suppliers. Some have embraced automation and digital tools to enhance efficiency, streamlining operations in an effort to offset rising expenses. Others have leveraged government grants and local economic development programs to stabilize cash flow and secure growth capital.

For further reading, check out the full March 2025 SMB Growth Report, “The Urban-Rural Economic Divide: How Location Affects SMBs’ Outlook.”

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