Innovation

Why SMBs Need To Focus On Product Innovation And Adopt A Digital Business Model

Innovation And Digital-Focused Business Models

The acceleration of [digital sales] growth can be explained almost entirely by an influx of first-time buyers.”

When consumers fled to online shopping options in Q2, many businesses weren’t set up for digital-first commerce, but quickly figured it out. There’s a cautious optimism now as SMBs, in particular, discover that going digital itself has gotten easier. “It’s clear that there are very few business models that can’t have a successful online component, and that customers in many cases will view this as a real benefit — now and into the future,” said David Nachman, CEO at FastSpring. “If you are an offline business that isn’t figuring out how to develop an online offering, you will likely be left behind by competitors.”

The following is an excerpt from How 35 Execs Are Powering The Great Digital Shift Of 2020 (And Beyond), contributed by David Nachman, CEO at FastSpring.

The opportunities I see emerging in the second half of 2020 are centered around business reinvestment in growth, product development and business model adaptation. FastSpring provides a full-service eCommerce experience for sellers of digital goods, and we discovered that software sales have increased very meaningfully in this environment. On average, our customers are growing 50 percent faster during the pandemic than before.

Evidence shows that the acceleration in digital sales will not be temporary in nature. It wasn’t driven by promotional activity, and it wasn’t the result of existing customers “pulling forward” future demand by making purchases now that they would have made sometime in the near future. In contrast, the acceleration of growth can be explained almost entirely by an influx of first-time buyers.

We know from past data that a very high percentage of first-time buyers become repeat customers, so our customers likely have increased the overall market for their solutions. Given these trends, there is a strong case to be made for our customers to increase investment in product development in order to continue offering innovative products that are successful despite the recent upheaval. If the increase in the sale of digital goods is lasting, which I believe it will be, failure to invest and innovate will likely result in falling behind.

It is also critical that online sellers can create outstanding eCommerce user experiences. I believe one of the lasting impacts of the pandemic will be a dramatic acceleration in the move to frictionless eCommerce, with a greater focus on global payment capabilities. Every company that sells through both offline and online channels has seen a dramatic shift to eCommerce, which is definitely here to stay. Much of this shift in demand likely comes from buyers who historically have not been tech-savvy.

As a result of these two factors, the benefits of improving the commerce experience have gone up substantially. Companies utilizing an eCommerce model will be investing more resources and attention in optimizing their online experience to drive more online conversions because the economics of such investment is much more favorable. This will result in the “bar being raised,” and poor eCommerce experiences will cease to be tolerated by buyers.

The pandemic has highlighted the importance of product and business model innovation. We have seen incredible business model innovation in all forms of services in recent months. Previously, purely physical businesses like gyms and yoga studios have offered online courses with great success. I believe that for many, this hybrid delivery model is here to stay. Similarly, many restaurants and stores offer curbside or parking lot delivery by leveraging technology. This, too, is likely here to stay. It’s clear that there are very few business models that can’t have a successful online component, and that customers in many cases will view this as a real benefit — now and into the future. If you are an offline business that isn’t figuring out how to develop an online offering, you will likely be left behind by competitors.

Read more executives' insights in How 35 Execs Are Powering The Great Digital Shift Of 2020 (And Beyond).

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