Coronavirus-Driven Digitisation is Bringing Power to Small Businesses
Spurred on by the coronavirus, a drive to digital is levelling the playing field for small retail businesses. But can it last? Lucy Ingham explores how technology and a shift towards local could change the game
Anyone who has spent any amount of time in China will know that across the nation, the QR code is king. Perched on everything from slick, big-budget ad campaigns to the stalls of small traders, QR codes can be seen everywhere across Chinese cities.
Serving as the most popular payment option in the country, via apps WeChat Pay and Alipay, QR codes are not only intriguing to Western visitors because of their unexpected prevalence, but also because of how much of a leveller they are.
In the West, the varying technological sophistication of payment systems – the result of a myriad of providers and decades of iteration – speak silent volumes about the nature of a business, be it long-established with high turnover, small and ticking over or on the cutting-edge of cool with questionable long-term prospects. In short, payment systems apply a class system to Western businesses, where each additional payment type applies a cost that a business owner must consider against the additional profits it will bring.
This means that while in the West a trader on a market stall will want cash or may, in rare cases, have invested in a card reader connected to their phone, in China the vast majority will allow you to instantly pay via your phone in exactly the same way as you would in a Starbucks by simply scanning a QR code. The same levelling can be seen online, where, through WeChat, traders operating out of markets in Shenzhen can serve customers across the world.
Of course, much of this levelling is the result of the heavy state control that sits over fintech – and much of the rest of the technology industry – in China, and underpinning it all are two of the biggest companies in the world. However, one of the side-effects of this is a level of accessibility in the open market that the West does not match, and while we are not likely to want to replicate the Chinese model given its trappings of suppression and human rights abuses, this access is something we should aspire to.
The barrier to entry for taking payments in the West is one of a wide selection of hierarchies that decades of technological iteration have given businesses, playing a key role in the overall challenge small businesses face when it comes to competing with larger counterparts. With globalisation and the ongoing march of major brands, it has, over the last half century, become increasingly challenging to compete as a small business in the West.
However, the rise of technology, and particularly the web, has begun to turn the tables. The dot-com boom unleashed the many-to-many business model, and with it gave small businesses the potential to reach new customers and so create new revenue streams.
Ecommerce lowered the barrier to entry for retail-focused businesses, while social media changed the nature of customer outreach beyond recognition. For savvy, digital-focused small businesses, the online world has begun to provide an environment that, while not level, is at least not quite as mountainous.
And then the coronavirus happened.
How the coronavirus has changed ecommerce forever
The lockdowns enacted across the globe saw around half of the global population instructed to stay home, and businesses big and small temporarily closed.
But shopping didn’t stop. Instead, it moved online, and took on new and evolving focuses.
“We’ve seen dramatic shifts in how people are buying, what they’re buying and who’s doing the buying,” says Ed Whitehead, MD EMEA of ecommerce fraud prevention technology provider Signifyd.
“Ecommerce sales are up 50% since about the time the World Health Organization declared the global pandemic and stay-at-home orders began rolling out.”
Signifyd has been tracking how the world has been shopping online since before the lockdowns were enacted through its Ecommerce Pulse data. And it has revealed how consumers’ online shopping habits have evolved as the pandemic has unfolded.
“In the week before stay-at-home orders started being issued in the US, the UK and Europe, sales in most verticals were up or down by single-digit percentages, so typical increases. But business supplies, including office equipment that people would need to work from home, increased 79%,” says Whitehead.
“The following week, with stay-at-home orders in place in parts of the world, we saw a sales spike in categories that indicated consumers were looking toward survival, safety and security.
“Groceries, baby products, the category that includes toilet paper and paper towels and the category that includes gold bars were all up well over 100%. In the US, we saw a 69% increase in the sales of weapons and accessories the week that the country’s first stay-at-home orders were issued, rounding out a run on groceries, gold and guns.”
“We believe the shift to online shopping has advanced by a year or two because of the pandemic.”
However, this began to shift as consumers began to move away from survival mode and explore ways to keep themselves busy in lockdown.
“In the following weeks, sales in the survival, safety and security categories moderated, while sales increased in categories that provide a distraction — leisure and outdoor, which includes games, puzzles, video games and home exercise equipment, saw a couple of big spikes and is up 112% since the end of February,” he explains.
But as the first month passed, Signifyd has seen a further change that Whitehead believes may be the result of consumers adjusting to “what is a new — albeit temporary — normal”.
“We’ve seen increased sales in the luxury goods category, which had been battered early in the pandemic,” he says, adding that this segment saw a 35% rise in the week beginning 4 April.
While this may sound like simply a blip in wider ecommerce trends that will return to normality once lockdowns end, Whitehead argues otherwise.
“What all this means is, we believe the shift to online shopping has advanced by a year or two because of the pandemic,” he says.
“Pre-coronavirus projections had 2020 ecommerce sales growing 16.1% worldwide. Comparing sales from the same storefronts on our Commerce Network, Signifyd saw more than double that year-over-year growth: 34.4%, in March — the month the World Health Organization labelled Covid-19 a pandemic.”
And he does not expect that online shopping will notably cease once the lockdowns end.
“We expect a good part of that increase to hold, even once stay-at-home orders are lifted and the world begins its return to normal,” he says.
“We believe that because we have seen an influx of new online shoppers — shoppers we hadn’t seen on our network before. Not only are they buying once, but they are returning in short order, indicating they are building an online shopping habit.
“In fact, the number of new shoppers we are seeing now is on a par with what we see during the winter holiday season.”
Agility in crisis: Bringing power to small businesses during the coronavirus
Of course, much of this ecommerce boom has gone straight into the pockets of major companies. Amazon CEO Jeff Bezos, for example, has seen his wealth climb by more than $24bn during the coronavirus as the company’s share price skyrocketed.
However, responding to a sudden surge in demand has proved a problem for many retailers. Online supermarkets and major essential goods retailers were overwhelmed, with UK brands such as Ocado and Boots instigating online queueing to cope with the phenomenon. Amazon, meanwhile, has been forced to significantly increase delivery times for many items to prioritise essentials over luxuries.
For consumers, this has meant that brands they would have otherwise been able to rely on to provide next-day delivery have in some cases let them down, forcing them to look elsewhere. And small businesses have increasingly been filling the gap.
Businesses that would ordinarily operate as restaurants and cafes are running food delivery services, innovating in this space through a mixture of ready-to-eat, cook-at-home and store cupboard offerings. Others that previously focused on their physical retail presence selling homeware or leisure goods have gone entirely online, beefing up their online presence in the process.
It has certainly not been easy for small businesses, and many are struggling, but for those that are succeeding in this changed environment, they all have one thing in common: the ability to be agile and quickly adapt to these new market conditions.
“Small businesses are at the forefront of adapting and are keen new-to-firm innovators.”
“Small businesses are at the forefront of adapting and are keen new-to-firm innovators,” Mike Cherry, the national chair of the Federation of Small Businesses, told The Guardian.
“Whether it be offering increased or new delivery or collection services or offering virtual guides to products or stores when premises aren’t accessible to customers, small businesses are trying to make this work.”
For Ciaran Bollard, CEO of ecommerce platform Kooomo, this embracing of technology has been key for small businesses, but is most pronounced in the food sector.
“It’s evident in most places you look during this pandemic – technology is being used to bridge the gap between everyone, be it B2B, B2C or on a more personal level between individuals,” he says.
“Online food delivery services and ordering systems like JustEat are absolutely thriving at the moment. People are not able to eat out or even collect their food, so take-out is the only option and this technology has saved countless businesses who now rely on it as their only source of income.
“Other examples such as charitable campaigns like the GoFundMe in which people are donating to local restaurants who then provide meals for health workers – we’ve never had that ease of donation and connection in times of crisis previous to this. A great initiative that’s fuelled digitally.”
The shift to local amid Covid-19
While small businesses are embracing technology to quickly adapt to the new online-dominated world, they are also being buoyed by the already established shop local movement.
Initially launched in response to how both large out-of-town shopping complexes and rising ecommerce were taking business away from the high street, the shop local movement has many arms, including a campaign from the British Independent Retailers Association (Bira).
However, with the lockdowns in place, the already growing online shop local movement has become particularly pronounced. With consumers and members of various retail industries acutely aware of the harm the situation will bring to small businesses, social media has quickly become thronged with posts on the subject.
Accounts have sprung up collating the various services offered by small businesses in different areas; individuals are tagging their posts using variations of the #shoplocal hashtag and targeted ads have become filled with local businesses promoting their wares.
Notably, Google Trends shows that search traffic for the term “shop local” has climbed dramatically during the lockdown, at its peak reaching almost three times the average for the previous year.
Some small businesses have even begun selling products through social media, a practice that ia most notable in the food sector, but which has also been seen among artists, designers and furniture retailers, particularly through Instagram through online ‘fairs’.
Instagram has clearly taken notice of this trend, adding support for UK restaurants to sell food through its Stories feature.
“As social media usage increases during lockdown, social commerce is a way for businesses to tie social media engagement to actual sales – and could help keep their business afloat.”
“The launch of Action buttons for a restaurant’s profile, and Food Order stickers they can use on Stories, shows that Instagram is clearly aware of the growing interest in ‘social commerce’ in the UK,” said Yuval Ben-Itzhak, CEO of Socialbakers, when the move was announced in late April.
“Since the launch of Instagram Shopping last year, we know that users are invested in what they see on the platform: today 60% of users say they find new products on Instagram.
“But in the last few weeks, the Covid-19 pandemic has opened businesses’ eyes too. As social media usage increases during lockdown, social commerce is a way for businesses to tie social media engagement to actual sales – and could help keep their business afloat.”
There has also been a greater focus on collectivism as businesses and individuals work together to help those struggling amid the coronavirus. This is a trend that Frances O’Grady, general secretary, TUC highlighted, saying that there was a need to find “a new role for collective bargaining, to protect livelihoods”
“It means making sure businesses aren’t just profit-making machines but instead have a social purpose,” she said.
Kooomo’s Bollard believes this mentality will prevail beyond the coronavirus itself.
“The pandemic has certainly opened up a conversation on collective bargaining and the value in local business as a livelihood – and I believe when this has come to pass people's attitudes will shift from notably successful companies and desire a social purpose from the brands from which they are buying,” he says.
Why technology is vital for retail businesses to survive the recession
However, lurking beyond the end of the lockdown is, of course, the recession. Exactly how severe it will be is so far unclear, but signs suggest it will be intensely damaging to the retail sector.
“We don’t yet know how it is going to affect business big or small. Debenhams, Warehouse and Oasis are some of the businesses already hit and entering administration. More will come and we know that,” says Bollard.
However, technology and the ability to be agile is – as with the coronavirus itself – expected to be a vital tool for survival.
“I believe technology is playing an essential role in the survival of retailers – whether in terms of providing a service or an active part in the lives of their audience,” he adds.
“We recently spoke with a member of the marketing team at a large retailer who does not trade online - they said that right now their focus is on putting out content that is more entertaining and relatable as opposed to sales-driven, in order to maintain audiences on social media.
“Primarily, they are focusing on comedy/entertaining videos and how-to tutorials using a few of the company’s products. The videos are recorded by staff members from their own homes – tapping into the sense we’re all at home together.”
“Technology is playing an essential role in the survival of retailers – whether in terms of providing a service or an active part in the lives of their audience.”
Notably, this is not just a matter of a single online channel, but a plethora of options that capture customers through multiple means.
“From a longevity point of view, we certainly believe that an omnichannel solution is the key to surviving the pandemic and bringing people back to physical shops when the time is right,” says Bollard.
For some retailers, surviving the recession is also set to include increased use of automation, to overcome the warehouse and delivery bottlenecks that occurred when the pandemic hit.
“The current situation has also accelerated the adoption of certain technologies that reduce the need for human interaction, whether that is automated warehousing and stock picking, click and collect, including a surge in the use of drop boxes where stores are closed or the postal services have been disrupted,” says Signifyd’s Whitehead.
He also sees this extending to order automaton, which overcomes the problems that occur when lockdowns scatter staff, making it intensely challenging to continue to keep up with order spikes while also complying with data protection.
“Order automation solves those problems. A machine-learning system that screens orders from fraud and consumer abuse doesn’t require large teams, dispersed in the pandemic, to review orders,” he says.
“The constantly learning machines will do the work instantaneously. It will scale up as the number of orders scale up. It will comply with all privacy and security regulations as it does so.”
Future-proofing small retail businesses for the post-coronavirus world
Amid surging ecommerce and a scaleup of technology that retail has witnessed during the coronavirus, there have been glimmers of hope for small businesses. But can these be maintained as we rebuild from the pandemic?
For Bollard, the advice is for small businesses to ready themselves now for what lies ahead.
“Now is the time for local businesses to future-proof their business.”
“Now is the time for local businesses to future-proof their business and mitigate risk by diversifying their sales channels, which is something we are starting to shout about more and more,” he says.
“Local businesses not utilising online sales channels have always faced the issue of technology advancements and ecommerce solutions becoming more and more powerful. It’s one of the reasons we have now broken down one of the barriers of entry to ensure our services are more accessible to these businesses.
“Coronavirus is going to have a huge impact globally and no one really knows by how much yet, or what new trends will come about as a result.”
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