Small businesses are fundamentally changing business models by taking on new delivery channels, services, and products, as well as customers.
Ninety-two percent of small businesses have used the pandemic crisis to reinvent themselves, according to GetApp’s new research, America’s Small Businesses Have Reinvented Themselves. Small businesses are changing operating hours, revamping pricing structures, and adding new payment methods, as well as adding new delivery channels, services and products.
A June survey of 577 small business leaders reviewed how small businesses transformed their business models as a response to changing customer behaviors due to the global COVID-19 pandemic.
SEE: Coronavirus: Critical IT policies and tools every business needs (TechRepublic)
Surviving a major crisis is not easy, so the survey identified five key survival techniques for small businesses propelling changes, according to the report:
New online delivery channel: Go virtual, because with a new online delivery channel a company can sell through an online marketplace or take orders online.
New virtual service: Two of five small businesses are creating a new virtual service, such as a yoga class offered online. In lieu of the conventional open house, real estate agents are offering virtual home tours, and even professionally shot videos for the most expensive homes for sale. A virtual version of services or products can also enhance an existing business model as it attracts new customers, and more. Virtual services are a fact of life in the coronavirus-affected world.
New offline delivery channel: A new offline delivery channel (such as curbside pickup or home delivery) is among the most popular business model survival techniques (also called “pivots” in the report). Online consumers quickly discovered the convenience of curbside pickup, and it’s likely to remain the new normal long after social distancing needs have eased. Home delivery service is a more an accepted sign of the times. Small businesses began offering home delivery service, and others choose to partner with third-party platforms to extend customer reach and streamline orders.
The report found that companies that added a new offline delivery channel were the most likely to report higher-than-expected revenue and the least likely to report lower-than-expected revenue. Companies that applied survival techniques to an existing business model were three times more likely to report higher-than-expected revenue than those that did not.
New products: Companies with the means to develop and manufacture new products, which are then subsequently taken to market, are jumping on the initiative.
New customers: Small businesses that have used marketing software discovered it helps them identify new customers and have those customers return. It also continues to foster relationships with existing customers. Nearly half (49%) of small businesses needed marketing software to support business model changes, the report noted. To communicate the latest updates, businesses turn to social media.
Two-thirds (66%) of small business respondents that made changes used social media platforms to alert customers. And those posts are not just updates: 85% of all small businesses are paying for social-media advertising. Nearly a third (32%) of small businesses said they have increased spend on paid social media marketing during the past few months.
Continued adoption of changes
Small business leaders who made changes in response to the pandemic, the report said, “are resolute in their decisions, with 96% planning to keep at least some changes and 43% planning to keep all the changes made.
The report found that “a lack of employee skills required for a new approach is the single greatest challenge small businesses are facing” while applying survival techniques, ahead of other obstacles, including being cash-poor. The report acknowledged the practicality of the finding: “This makes sense. New offerings such as an online store, a virtual service, or new delivery channel aren’t effective if you don’t have the skill sets needed to operate them.” Businesses can either hire new skilled employees or train existing employees and give them additional responsibilities.
During the transition, businesses face ongoing challenges. Here are the top five challenges businesses face during transformation, according to the report:
- Employees lack skills required for the new approach
- Scarcity of funds or cash
- Setting up new online delivery channels
- Developing new products
- Implementing new health and safety practices
How to recover and reopen
Small businesses are adopting many health and safety measures, from mask requirements to enhanced sanitation standards.
The report recommends small businesses take the following action:
- Make adjustments and changes necessary to succeed during the crisis, including a move to establish an online presence design through existing commerce platforms.
- Maintain business continuity and connection with new and existing customers.
- Accommodate customers who aren’t comfortable returning to a brick-and-mortar store by adding an offline delivery channel.
- Innovate by reevaluating resources, the creation of new products, brainstorm for a new service, and bring it all to market.