As we’re in year three of the global COVID-19 pandemic, now facing severe inflationary pressures and an ongoing war in Ukraine, it’s a good time to look back—and ahead—to examine the challenges small businesses continue to face and explore the available solutions.
First, we must acknowledge, as much as we’d all like to believe COVID-19 is in the rearview mirror, it sadly isn’t. This uncertainty, compounded by new economic rumblings, will continue to impact customer behaviors. This makes it more important than ever for SMBs to capitalize on the savings and ROI from digital transformation (whether in progress or just beginning).
Looking Back and Showing Resilience
COVID entered most Americans’ consciousness in March of 2020 and had an almost immediate impact on many small businesses. A survey from PNAS taken from March 28 to April 4, 2020, revealed how quickly economic shock set in, showing that 43% of the businesses surveyed had already closed due to less demand for their products and services and employee health concerns.
The economic impact was severe. Fortunately, one year later, a Bill.com survey showed that 75% of SMBs took actions ranging from price changes, new business models, new customer outreach, and new product offerings and services. SMBs’ resiliency should not be underestimated.
Change in Consumer Behaviors
Looking back, we can see how consumer behaviors changed during the pandemic, with many now baked into the way customers act.
Here are a few areas that were impacted.
The rise of e-commerce. Customers didn’t stop shopping during the pandemic; they shifted how and where they shopped, embracing online purchasing. The biggest swing was among Americans aged 65 and up. These baby boomers had been loyal in-store customers, but by January of 2021, they became the fastest-growing category of e-commerce shoppers.
This surge of new customers surprised entrepreneurs as well. As their potential customer base widened to include these new customers, smart business owners tweaked their inventories and website design (readable fonts and easy-to-navigate pages).
Cashless society. Before we understood that the coronavirus was mostly airborne, many people worried about handing cash or a credit card to a cashier. As a result, the in-store mobile payment app usage soared, reaching 101.2 million among Americans ages 14+ in 2021. That started the movement toward a cashless society—a Futurist Group study shows that about 38% of consumers perceive contactless as a basic payment feature.
Digital Virgo says COVID-19 accelerated customer adoption of digital wallets as mobile payments became the norm. It reports, “Digital wallets are expected to become the most popular in-store payment method. The number of mobile wallets in use is on track to reach 4.8 billion by 2025 (up from 2.8 billion in 2020)—nearly 60% of the world’s population.”
And according to a report on the Payment and Security Market reported by GlobeNewswire, FIS, a financial services technology group, expects digital wallets will account for more than half of all e-commerce payments worldwide by 2024. Plus, WorldPay’s 2020 Global Payments report predicts that, by 2023, 52.2% of e-commerce transactions and 29.5% of all POS transactions will be done through digital wallets.
Companies have introduced new cashless payment options like Bill.com Pay By Card, allowing SMBs to make vendor payments with a credit or debit card, even if the vendor doesn’t accept card payments.
Overcoming New Challenges
There are always new challenges to face when growing a business. Right now, one of the primary hurdles SMBs are trying to navigate is the rising inflation rate. CNBC reports that the consumer price index rose to 8.6% in May, the highest level since 1981.
For SMBs, a focus on pricing power is mission-critical. But first, a business must identify its key differentiators and lean into that product, service, and marketing message. This could entail improving the uniqueness of your offering through enhancements, bundling, de-bundling, or branding.
Then, an SMB should run “what-if” financial forecasts that address the potential impact of inflation, such as:
- Wage increases of 25-50%
- Raw material prices doubling
- Supply chain disruptions causing 25% or greater revenue delays and inventory build-ups
Then, you should answer the tactical questions:
- Will I have enough cash in all scenarios?
- What evasive maneuvers will I take in each scenario?
- Can I manage risk now with preventative measures?
- What metrics will I measure for a leading indicator that one of these scenarios is occurring?
Future of Finance
It is now more urgent than ever that SMBs find savings wherever possible. With new digital tools like Bill.com, small businesses can significantly reduce costs, giving them more time to focus on pressing matters like fighting inflation and managing cash flow.
The right trusted digital tools hold the key to greater operational efficiency and increased savings. A comprehensive technology platform can combat inefficiency and make the difference in freeing up time to focus on revenue and growth. The economic risks are great today; the rewards from choosing the fintech tool have also never been greater.
In partnership with Bill.com where SMBs can gain better financial control over their businesses, automate accounts payable and receivables, reduce costly errors, and lessen the risk of fraud. Learn more about their affordable solutions here.