The COVID-19 pandemic challenges the resiliency of small businesses who are adapting their strategies in response to shifting market conditions and changing consumer preferences.
The COVID-19 pandemic continues to make profound changes in how we live, work and play. As a result, people are learning to adapt to remote working and social distancing norms that have become imperatives for personal safety. In a similar way, being able to adapt to an unpredictable and fluid environment is now an imperative for small business owners to protect the survival of their companies.
Adaptability is not a new concept in business. Even before the pandemic, adaptive companies demonstrated a stronger track record of success. In fact, analyst firm Forrester found that more adaptive firms grow three times faster than their competitors.
The coronavirus is testing the resiliency and adaptability of businesses like never before. Small businesses have been particularly hit hard by government-mandated closings and operational restrictions. While small businesses don't have the cash flow, capital and collateral of big business, they have the advantage of being more nimble and agile, which allows them to respond and adapt more quickly to changes than larger companies.
Small business owners are finding ways to adapt to the new reality triggered by the coronavirus. To weather the pandemic-driven economic crisis, many of the nation's more than 20 million small businesses are adapting their business strategies to drive sales and protect their bottom lines. Some of the ways small businesses are adapting to this challenging climate include:
Using digital channels
Adapting to the COVID-19 business climate for many small businesses means expanding into e-commerce. Prior to the pandemic, many small brick and mortars did not have online stores, but with lower foot traffic and reduced sales, leveraging digital channels to offer online shopping options is now key for generating revenue and maintaining connections with customers.
A recent survey by Verizon revealed that businesses are turning to digital channels to drive the bottom line. The survey found that 43% of respondents plan on expanding their businesses through digital and related technology, and 30% have already added ways to deliver their products and services digitally.
An expanded or new digital presence is helping keep businesses running. Gym owners are offering virtual classes, medical offices are providing telehealth and remote patient monitoring and grocery and retail stores are offering online ordering and delivery and/or curbside pick-up.
These businesses are adapting to online strategies in response to changing consumer behavior. Market research firm Ipsos and USA Today surveyed U.S. adults in March and again in April about actions they have taken in response to the pandemic. The survey found that consumers are shifting more toward e-commerce, with 41% of respondents saying they have shifted more shopping from physical stores to online compared to 13% who responded this way in March.
Changing operational models
Restaurants are probably one of the best examples of small business adaptability. Many restaurants shuttered by the coronavirus changed their business model to offer take out, curbside pick-up and delivery services.
To offer these services restaurants have changed how they process customer call-in and online order transactions. Payment processing company VizyPay is seeing increased demand from small business owners for mobile payment options to allow for curbside payments as well as online ordering. Processing volume for credit card transactions across VizyPay's restaurant merchants spiked in April with a 35% increase in processing volumes and a 38% increase in the number of credit card transactions.
Restaurants are also adapting to what the market wants by offering to-go meal kits, establishing food truck operations and even selling hard to find grocery items such as milk, eggs, pasta and rice.
Small business owners are re-examining their payments strategies and adapting them to consumer preferences.
Consumer concerns about touching surfaces and the coronavirus living on surfaces such as cash are leading to an increase in contactless and mobile payments. A report by Research and Markets showed that nearly one-third of consumers in the U.S. became first-time users of contactless payments during the pandemic, and the majority of these consumers planned to continue paying contactless after the pandemic.
Small businesses are also seeing this preference for contactless payments. Those businesses still accepting payments on premises reported a 27% increase in contactless payments, according to an April report from the Electronic Transactions Association and The Strawhecker Group.
The pandemic may also completely do away with credit card transaction signature requirements. Signature requirements have been on the way out with EMV migration that started in 2015. EMV technology provides the capability for merchants to accept chip cards with an EMV compliant point of sale system. This system reduces the rate of fraud and provides consumers with a safer payment alternative. Analyst firm 451 Research's report on the impact of COVID-19 on the payments industry advanced the theory that the growing focus on low- and no-contact payment experiences could be the impetus that finally puts POS (point of sale) signature collection to rest.
The increased use of mobile and contactless payments is also leading small business owners to re-examine their payment processing costs. Every penny counts in this challenging economic environment, and as credit card and mobile payment volumes increase, so do merchant's transaction and swipe fees. The small percentages processors take for every transaction add up quickly and when these transaction fees are combined with assessment fees, authorization costs and other monthly fees; the monthly credit card processing bill can balloon to an astronomical amount.
Small businesses are adapting by cutting expenses in payment processing, shifting to credit card processors that provide flat-fee unlimited monthly credit card processing. Businesses are opting for more certainty in an environment of uncertainty by turning to payment processing solutions that eliminate merchant worries about hidden fees, perpetually increasing interchange rates and unpredictable bills. Payment processing solutions that create a transparent payment environment where merchants not only understand the fees that come with credit card acceptance but also have the option to avoid them completely are helping businesses weather the economic crisis by conserving cash and strengthening the bottom line.
Participating in shop local campaigns
The pandemic and growing awareness of its devastating impact on small businesses is driving increasing consumer support of local small business and companies are adapting by getting involved in programs that give back. Programs like Look Local First, established before the pandemic, are now more important than ever for giving small business owners a voice in their community, helping people understand why supporting them is so important, and encouraging consumers to shop locally before looking to a national chain or online store. Participating in programs like these help small businesses by spotlighting them on social media and promoting their sales, new products and special offers.
In the face of pandemic-driven uncertainty and challenges, small businesses remain optimistic about the future. A Facebook and Small Business Roundtable survey found that 57% of small businesses report that they are optimistic or extremely optimistic about the future of their businesses. This optimism is fueled by the resiliency of small businesses and their ability to quickly adapt to shifting market conditions and changing consumer preferences.
To survive and thrive post-pandemic, adaptability will continue to be a business imperative for small businesses as the impacts of the coronavirus unfold in the weeks and months ahead.