The last 18 months have been marked by incredible challenges and adjustments within the nation’s small business community. Digitization went from being an option to a necessity nearly overnight — and business owners and entrepreneurs of all stripes were forced to rewrite their models in response.
While resilience and adaptation have allowed most businesses to survive — and in some cases even thrive — U.S. Small Business Administration Administrator Isabella Casillas Guzman told Karen Webster that the effects of the pandemic have been widespread but uneven. Webster and Guzman were part of a PYMNTS roundtable discussion that also included the National Federation of Independent Businesses (NFIB) Executive Director Holly Wade and TD Bank’s Head of Small Business Specialists Jeff Fazio.
“That impact on certain entrepreneurial communities has been even more profound, with women and people of color being hit so hard because historic inequities set them up to suffer disproportionately from the pandemic,” Casillas Guzman said. “Some 40 percent of Black-owned businesses have closed permanently, so the pathway to wealth creation and business ownership has been cut off to so many Americans.”
But the flip side of that coin, the panel agreed, is that the surviving/thriving small- to midsized businesses have emerged from this trial by fire more prepared than ever to take on the future. In fact, some studies have shown that business owners are increasingly confident about the future and are also thinking more about expanding.
“There’s optimism out there as we move forward through this pandemic,” Fazio noted.
But for all the strides they’ve made, SMBs still have one fundamental obstacle to overcome as the world reopens. According to a national study of 1,247 U.S. consumers that PYMNTS conducted with the support of Pollinate between Feb. 25 and March 5 of this year, 39 percent of consumers say that it is very or extremely important to shop with small and local yet only 13 percent cite small businesses as their primary shopping go to.
Closing The SMB Action-Intention Gap
Consumers clearly appreciate small businesses and understand their role in supporting local jobs and the economy. However, Fazio noted, the pain of the pandemic has made communities more aware of the collective influence that success or failure has on local business districts, noting that no one wants to go to Main Street and see local shops and restaurants with boarded-up windows.
“I think nationally, people really do recognize that those small businesses enliven their Main Streets and define the community,” Administrator Guzman noted. “They see their neighbors and the impact it has on them. They’re starting to recognize the impact that they have – and hopefully the economic impact – as they see they are drivers to all the shops and types of activities on Main Street.”
PYMNTS data confirms this; consumers understand that supporting local shops improves their local economies. Forty-eight percent of U.S. consumers believe it is important to purchase from small businesses because it will keep money in their communities; more than a third (38 percent) say that it helps expand the job opportunities in their communities.
Rethinking SMB Loyalty
Even today, the closest that many Main Street shops get to making a loyalty offer involves a paper punch card with a reward based on a certain number of visits or purchases. Although there is pressure to up the ante and expand those offerings, doing something different and digital requires more time and technology than most businesses have to give it.
It’s also not how consumers see the small business loyalty landscape evolving. Not every consumer shops with enough frequency at enough local shops to make enrolling in individual merchant loyalty programs worthwhile. Even if they do, managing multiple loyalty programs across multiple loyalty program modalities is viewed as a hassle by 1,247 of the consumers surveyed by PYMNTS.
Most of all, consumers are wary of giving those local merchants their data. Even though
139 million U.S. consumers would like to be rewarded for shopping local, only 8 percent of them say they trust their neighborhood shops enough to hand over the data needed to enroll in a merchant-directed loyalty program. At least as they are currently architected.
That finding comes at the same time that businesses, even small ones, have begun to rethink their customer relationships and expand their communication channels beyond their physical interactions with the customer. SMBs, NFIB’s Wade noted, have nearly universally expanded their social media footprint and view it as a tactic to create more interactive experiences.
“I see all of these new technological ways of connecting over the last year happening with restaurants that are local to me, and that it is certainly making a difference,” Wade noted.
But beyond technology’s ability to help merchants forge more direct, data-rich pathways to their customers, there is another opportunity for merchants to get the best of all worlds — the loyalty of those who live and shop in their neighborhoods, with the digital tech that offers a better and more secure platform that allows local merchants to act collectively in their loyalty offerings to local consumers.
Banks, PYMNTS data finds, could be the hub spot from which those programs could launch. Thirty-nine percent of U.S. consumers say they would trust banks to operate and manage a small business loyalty coalition network that allows for a tailored, personalized loyalty experience at the shops that line the main streets and side streets of their local communities.
Because perhaps, more importantly, Administrator Guzman noted, is the fact the merchants themselves might just be the faster movers who drive this new kind of third-party managed loyalty collaboration play forward, as they are now ready to work collectively to convert those good customer intentions into spend in their stores and their local economies.
COVID-19, she said, was the catalyst for technology adoption, followed by the spirit of comradery that, in her view, is unprecedented.
“They’ve come together and formed partnerships, and I think now more than ever, there’s a willingness to join and be part of a larger whole. It is definitely something that small businesses would be willing to engage in.”