More than a year has passed since the first Covid-19 case was identified in my hometown of NYC, and in what felt like no time at all, the city quickly became the country’s initial epicenter of the pandemic. Small businesses in NYC and throughout the U.S. were hit particularly hard as the global health crisis caused sudden and devastating fallout in the form of reduced revenues, temporary lockdowns, mass layoffs, and supply chain disruptions, forcing hundreds of thousands of businesses to close their doors. Economists at the Federal Reserve recently found that around 200,000 more U.S. establishments permanently as a result of the pandemic than in a typical year.
In the face of this extreme uncertainty, small business owners made commendable efforts to survive, demonstrating tremendous resilience and adaptability, rethinking traditional ways of doing business, and rapidly pivoting to meet the needs of their customers, which had quite literally changed overnight. Most notably, across all sectors, businesses accelerated their digital transformation efforts in both their internal operations and customer- and supply-chain interactions by three to four years, according to a recent McKinsey study. With that in mind, I spoke to business owners throughout the U.S. about the benefits of going digital, as well as insights and lessons that other leaders can adopt as we all move forward into this new normal.
Small Businesses Turn to Ecommerce
Diversifying revenue streams for resilience
Small businesses everywhere had to rapidly adapt when statewide lockdowns went into effect followed by partial reopenings—and for many, that meant focusing on establishing an ecommerce presence and building out digital channels. In the B2B sector, 93 percent of companies are now conducting some portion of their business online, up from 90 percent in December 2019, and 43 percent are utilizing ecommerce, an 8 percent increase in the same time period, according to an Alibaba.com study. For service businesses, diversifying revenue streams by incorporating an online component became critical to mitigating business interruptions when they couldn’t operate at full capacity and provide their primary services in-person.
“We had a statewide mandate here in North Carolina in March of 2020 to stay closed until June,” says Necia Boston, the founder of BAABS Beauty, an allergen-free cosmetics company based in Greenville, North Carolina. “However, I wasn’t comfortable re-opening for services yet, so we stayed closed for another month. When we did reopen in August, it was only at 40 percent capacity on our service side. I am so grateful that we have the product side of the business, which we were able to sell through ecommerce to sustain us while the salon was closed.”
Maintaining staff employment
Expanding an online presence also allowed some businesses to keep their staff working during a time of record unemployment by shifting their responsibilities.
“Because of the way we train our staff, they were able to work in different areas of the business during the shutdown,” said Boston. “Our front desk and service staff were still able to come in and help with behind-the-scenes work on our ecommerce business, like photoshoots, inventory, and website order fulfilment. And because we’re still not at 100 percent capacity on the service side, some of our staff is still working partially on the ecommerce side, providing customer service on our website. We’re not seeing the same number of shoppers face-to-face, but our digital presence has definitely picked up and maintained since the initial lockdown.”
Embracing digitization of products and services As I always emphasize, digitization even in the best of times is critical to the success of small- and medium-size businesses. Right now, in the late stages of the pandemic, flexibility is integral to that success more than ever. The ability to follow the customers’ lead and pivot to meet them where they are—online—will ultimately position small businesses to grow amid uncertainty.
“Before the pandemic, I was splitting my time 50/50 with in-store and online sales, and now it’s closer to 75/25,” said Boston. “We’ve even been calling our customers to encourage them to shop online, and have been doing more online one-on-one sessions and classes with customers about how to use our products. Nowadays, clients are much more open to virtual sessions.”
Leaning into the silver linings
For certain industries, stay-at-home orders translated to increased sales. As people stayed close to home, they started turning more and more to services and products such as workout equipment, education software, and games and entertainment. Forward-thinking businesses that had already established an ecommerce presence were better prepared to benefit from this surge in demand, and are much closer to figuring out how to keep it going when the pandemic eases.
“When people couldn’t go to bars, concerts, or other social events, we saw a major uptick in the purchases of boats, and people also wanting to try the relatively new sport of wakesurfing,” said Casey Heim, the founder of WAKE 10, a watersports accessory company based in Kansas City. “During the pandemic, we launched two new products and we had to place multiple orders last summer because our sales were so high. Not only did our sales increase, but our product reviews quadrupled, which will help us long term as customers continue to visit our site. Because of shipment delays, we’ve had to stay on top of ordering and are now much further ahead, which will help our supply chain as we continue to scale in the future. We’ll stay focused on this so we don’t run out of inventory or not have our new products ahead of any of our major selling seasons.”
Putting data and insights to work
By growing their online presence, small businesses are no longer limited to a local customer base and are able to expand their audience of potential customers. A notable benefit of this shift is the ability to gain more data and insights into customer shopping behaviors and needs.
“One silver lining of the pandemic is that we are able to see what our customers want from us on the ecommerce side,” said Boston about her growing ecommerce line of products. “Before the pandemic, our business was half online and half in-person, but when we were shut down, we were operating completely online. That gave us the tools to get near real-time insights into what our customers wanted. Thanks to going digital, we’re now able to anticipate and plan for what our customers want. The pandemic definitely had pluses and minuses, but we were able to learn more about our customers and clients and will be able to use that going forward to plan out how we interact with them in the future.”
And the future is starting to look bright. Heim and Boston’s optimistic sentiments are seemingly echoed broadly by small business owners, whose optimism rose in March, with more than half surveyed saying they were hiring, according to NFIB’s Small Business Optimism Index.
Small Businesses are Accelerating Digital Transformation
We’re no longer in fight or flight mode—so where does that leave America’s small businesses? Now is the time to shift from surviving to preparing for the future. Bolstering digital channels can drive sales, widen customer bases, and provide businesses with valuable data and insights into what customers want and don’t want. The impacts of going digital will only get stronger with time and business owners and leaders should prepare for customers’ preferences and expectations to continue to shift toward ecommerce.
As companies look to the future, following the tips from the business owners I interviewed can help them navigate next steps:
- “Get your ecommerce systems up and running if you haven’t already. Over the past year, the bulk of retail walk-ins have declined, and companies now have employees in the back rooms packing boxes and shipping out ecommerce orders. People still and always will want to purchase products, but the route they’re going to purchase them is switching to online. Small businesses in today’s market need to find the ecommerce platform that works for them and has the functionality they need to help them improve. There have been supply chain hiccups—as often is the case with manufacturing—so prepare for any delays, whether you’re purchasing from overseas or in the U.S.” – Casey Heim, Founder of WAKE 10.
- “The best advice I can give is to diversify your offerings and streams of income. In the beauty industry, we unfortunately saw many salons and barbershops suffer tremendously during the shutdown because they were solely service-based. You should focus in your area of expertise and try different models within that area, like a retail line or educational side for your customers. It’s about diversifying your income so that if one part of your business isn’t doing well, you can still survive. And it’s important to get your cost of goods as low as possible without sacrificing quality—that’s what will give your business the longevity to sustain itself.” – Necia Boston, Founder of BAABS Beauty
Ecommerce is here to stay. Customers who weren’t already regularly shopping online have had more than a year to familiarize themselves with ecommerce, realize its convenience, and form habits around it. The numbers speak for themselves: U.S. consumers spent 32 percent more online in 2020 than in the year prior, according to the U.S. Department of Commerce. In the fourth quarter alone, ecommerce sales hit $245 billion, up from $185 billion in the fourth quarter of 2019, with $1 in every $5 spent on retail purchases happening online. And a similar shift is underway in B2B trade with an 18% jump in B2B sourcing and selling conducted online between late 2019 and late 2020, according to Alibaba.com’s survey of 5,000 B2B companies, largely driven by ecommerce platforms.
Although vaccines are becoming more widely available and folks are returning to stores and offices, it’s clear that the pandemic has made a lasting impact on accelerating the preference for ecommerce. And as small businesses navigate their way to the new normal, they’ll need to recognize that ecommerce is an expectation customers will have from businesses big and small.