SMEs are looking for a head start in digital markets
In early 2021, optimistic prognosticators said the United States would have emerged from the depths of the pandemic by the fall, but with vaccination rates slowed and the delta variant spreading across the country, only 24% of Main Street Small and Medium Enterprises (SMEs) say their community is completely back to normal.
Kendrick Wong, co-founder and CEO of retail market intelligence platform Omnilytics, said that at the start of the pandemic, many clothing retailers, in particular, were under-invested in e-commerce, which forced them to scramble to get around online when the physical world shut down.
“You’ve gone from having to basically compete in your physical locations, your competition being the people around you, to having to compete literally everywhere else in the world,” he said.
Wong highlighted the difference between the performance of Nike, which was investing in digital capabilities before the pandemic, and that of Adidas, which is only in the early days of its direct-to-consumer (D2C) and focused strategy. on e-commerce.
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“Every retail business, every brand… has had to change their mindset to see how to compete online,” Wong said. “It was the interesting part of the last 12 months for us.”
But the change is perhaps felt more by small businesses that are used to selling locally and relying on in-store sales, Wong noted. Historically, SMEs have not opted for direct selling online because they do not know how to gain customers and retain. Instead, they move to marketplaces like Amazon, eBay, or Mercado Libre.
PYMNTS research found that 42% of Main Street SMEs that started advertising or selling in digital marketplaces in 2020 saw their revenues increase year over year, as did 45% of those who have invested in technology or software to support digital transactions.
Read more: Two-thirds of Main Street SMEs achieved increased sales in 2021 thanks to digital payment innovations
“And within those markets, now you’re competing for search rankings, you’re still trying to get traffic, but you’re fighting for the same traffic as these sites,” Wong explained.
Rather than telling brands exactly how to market themselves to attract traffic, Omnilytics analyzes market trends, what is selling best in different markets and in different countries, and what prices are working well for different products, giving customers SMEs take concrete measures to boost their rankings.
“This stuff is sometimes a little subjective, because as a brand, I will have a very strong opinion on what to do next,” Wong said. “And that’s what corporate clients do. But for SMEs, you don’t want to give them all 100 options. You want to narrow it down to the five to 10 best possible options so they don’t know how to get around.
A better future
The digital innovations that SMEs have adopted over the past 18 months could also be the key to future success, with those who invested expressing much more confidence in their 2021 earnings than those who did not. Almost 68% of companies that have invested in technology or software to support digital transactions say they expect their revenues to increase year over year, as do a similar share of SMEs that have started to advertise or sell in digital marketplaces.
But even those who haven’t made the investments still think this year will be better than last year, for understandable reasons. While COVID-19 remains a threat, the United States has for the most part avoided the scale lockdowns seen across the country last year, attracting more customers to Main Street businesses.
Still, Wong said it’s crucial for brands to take the digital shift seriously and start looking at how to best compete with online sales. In the UK, he said, Marks & Spencer lost 5% of its market share “literally overnight” due to a lackluster presence in e-commerce.
“You have to sell online,” Wong said. “And when you sell online, you’re not competing in the surrounding space that you have because you have that jurisdiction. Online, you don’t own anything. Everything is basically open to the markets.