Small business, big shifts
SMEs had to make extraordinary changes in 2020. And many of those innovations are here to stay, writes Alison Boleyn.
Even with the power of hindsight, you still might find it hard to fathom what 2020 did to everyday business. Along with seismic technological transformation – remote workforces, digitised, cashless experiences and electronic surveillance – it was a year when companies reeled from the COVID-19 pandemic just as customers demanded more action on the social and environmental problems the crisis laid bare.
Smaller enterprises faced pressure to pivot, too, but with far less working capital and at a higher relative cost. As a McKinsey & Company report put it, SMEs confronted exactly the same pandemic as big business, “much as Ginger Rogers danced the same steps as Fred Astaire – only backwards and wearing high heels”.
Turns out small business is pretty quick on its feet. Here are the emerging trends for SMEs in 2021, from supply-chain mapping to modelling good mental-health practices (and which heels to choose when it’s time to dance backwards).
Social commerce
Until a few months ago, social media platforms were swarming with engaged consumers whose conversations were interrupted the moment they decided to shop and the platform directed them away to the company’s catalogue site. Now technology architecture has emerged that allows headless commerce – the separation of the front and back ends (the content the customer sees versus commerce functions, such as order tracking) – and this has switched social to an earnings powerhouse.
Facebook was the first out of the social-commerce gate, launching Facebook Shops in May in the United States, followed by Australia in August. TikTok partnered with ecommerce platform Shopify in October to enable shoppable video content. Bloomberg reports that Google is testing a feature that allows users to buy products they see on YouTube. Snapchat is piloting virtual branded profiles with native stores, while WhatsApp is rolling out a shopping button. IGTV and Instagram Feed began offering online purchasing in October.
“Right now, businesses of all sizes are being forced to change their model and adapt to selling online so we’re accelerating our commerce work,” says Melinda Petrunoff, director of small and medium business at Facebook Australia and New Zealand. “Through 2021, we’ll continue to see the mass adoption of mobile, messaging, ecommerce and social commerce by businesses as a necessary strategy for growth.”
Investing in reputation
The online-reputation management industry has some muddy depths given it’s designed to bury bad news. But different studies show that close to 90 per cent of consumers base their purchasing decisions on online reviews. Small businesses will increasingly rely on online tools to track and manage customer feedback.
On that, the Harvard Business Review analysed more than 20 million online reviews across four different platforms and found, counterintuitively, that a company’s customised response to a positive review negatively impacted future reviews because it read as “disingenuous”. The study’s authors advised business owners to instead post a simple “thank you” for a positive comment only when it appeared on the second page of reviews.
Gigging professionals
Watch for the rise of fractional CFOs, as small business owners hire high-level strategic financial advice for short-term stints or specific projects. As 70 per cent of the 800 executives polled for September’s McKinsey Global Institute report said they expect to use more contractors and freelancers than they did before the crisis, likewise Forbes’ small-business advisory panel predicted SMEs would also outsource and hire temporary workers more.
Live demonstrations
People watched 5.12 billion hours of content on live-streaming platform Twitch in the second quarter of 2020, according to analytics company Stream Hatchet and streaming software firm Streamlabs. In the wake of live-streamed political protests and exercise classes comes live-streamed product demonstrations, where viewers can ask questions of the business owner or influencer before purchasing.
Regarding influencers
Exploding Topics, a platform that analyses search and chat data to reveal trends, has
detected a resurgence of interest in nano-influencers (those with 1000 to 5000 followers). They represent an opportunity for SMEs because, according to a study by software company InfluencerDB, these influencers get 2.4 times higher engagement per post than those with more than 10,000 followers (and they charge a lot less).
Voice-optimised content
Voice-based shopping using smart home devices is expected to rise to more than US$164 billion (AU$221 billion) worth of transactions in 2025, according to Juniper Research. Something to note: marketing platform BrightLocal says upwards of 20 per cent of voice search queries are triggered by a combination of only 25 keywords, the top three being “how”, “what" and “best”.
Personal branding
As more bricks-and-mortar stores expand online, owners need to shine. “People buy from people,” says personal branding expert Catriona Pollard. “It’s essential to understand the power of this concept in the current online marketplace when offerings are hard to differentiate except for the person offering them.” The CEO of CP Communications experienced this firsthand when she wanted to buy a doublewalled water bottle that was all over the internet. Pollard chose a seller who shared her backstory with customers. “The personal brand of the owner of a site – who they are, what they stand for – will push the buyer to purchase every time.”
Buy now, pay later
Australia has become the kid with the most hot chips in the global buy now, pay later (BNPL) playground. A Reserve Bank of Australia and IBISWorld report showed Australians spent $700 million through products such as Afterpay, Zip and Klarna in 2019-20. And a report by Worldpay from FIS shows the number of Australian BNPL users more than doubled when almost two million people here utilised it last year. As the sector’s industry body develops a code of conduct, SMEs should take heed of
PYMNTS and PayPal’s finding that 48 per cent of consumers who prefer BNPL wouldn’t buy from merchants that don’t have it. Compare that to the 37 per cent who won’t shop where their contactless card isn’t accepted.
Luxury commodity
Exploding Topics has declared “luxury commodity” – the reworking of a mass product into an affordable treat – to be a meta-trend. Call it the latest take on the Lipstick Effect, where consumers buy small indulgences (such as lipstick) during recessions. Entrepreneurs are bypassing traditional retailers and online marketplaces with a direct-to-consumer model to sell top-end commodities, such as bamboo straws and PrettyLitter, which changes colour based on the pH level of a cat’s urine and is sold exclusively via subscription.
Supply-chain mapping
When supply-chain risk management company Resilinc surveyed organisations immediately after the initial COVID-19 outbreak in China in January last year, 70 per cent of the 300 respondents reported they were still in “data collection and assessment mode, manually trying to identify which of their suppliers had a site in [China’s] locked-down regions”. Supplychain mapping – detailed knowledge of a company’s suppliers and shipping down the line – is resource-intensive, complex and definitely not something to do at the time it’s most desperately needed. SMEs might consider including in new contracts that suppliers participate in supply-chain mapping on an annual basis.
AI to fight cybercrime
A survey last year of 154 Australian and New Zealand organisations commissioned by cloud-data management company Rubrik found that while 88 per cent of those surveyed declared they wouldn’t consider paying cybercriminals, 29 per cent of the companies that had suffered ransomware attacks over the previous two years had paid the money to regain access to their data. And it seems cybercriminals like to maximise an investment. Cybercrime-asa-service – where operators sell access to malware-infected computers to other criminals and state actors – has intensified as a threat over the past five years.
More small businesses will employ AI to fend off cybercrime. Cybersecurity firm Darktrace reports that its Cyber AI Analyst product carries out an average of 1.4 million investigations every week, scanning for attacks and generating reports that nontechnical staff can action.
Mental health
According to Allianz Workers Compensation data, workers compensation claims relating to mental health have increased by 80 per cent – an average rise of 22 per cent yearon-year – since 2017. Allianz’s Future Thriving Workplaces report, released in October, shows 80 per cent of workers believe their employers should take steps to address workplace mental health. Psychologist Mitch Jordan, who works at mental health services provider 2OP Health, says small businesses can use size to their advantage here. “Leaders in large organisations often have a disconnect due to the layers of direct reports between upper, middle and lower management and staff on the ground,” he says. “SMEs are in the unique position of having senior leaders close enough in their interactions to have a grasp across their workforce.”
He urges business owners to lead by example regarding their personal health and to “prioritise conversations and activities that proactively engage in each pillar of wellbeing – physical, emotional, financial and career. It’s all intertwined.”