2023 hasn’t been an easy environment for small and midsized businesses (SMBs).
Business bankruptcy rates jumped 30% between September 2022 and September 2023, as macro factors like record-high interest rates and the end of pandemic relief increasingly battered small businesses’ prospects.
That’s why it has never been more crucial for Main Street SMBs to identify and act upon new tactics to protect their bottom lines.
“We went through one of the most volatile macro environments … and I think many [SMBs] are now starting to think about going on the offensive,” Charles Zhu, VP of product at Enigma, told PYMNTS.
“Investing in eCommerce and omnichannel experiences are key in differentiating those that grow and those that lag behind,” Zhu said. “If you have an online channel, it’s another way of going on the offense as the economic environment stabilizes.”
Main Street SMBs relying on eCommerce or omnichannel sales displayed a higher level of optimism (57%) compared to those primarily relying on in-store purchases (38%), according to joint research by PYMNTS Intelligence and Enigma, suggesting that SMBs are recognizing the importance of digital channels in a stabilizing economic environment.
Zhu sees parallels between the current emphasis on eCommerce and the historical tactics used by businesses in the 1960s, ’70s, ’80s and ’90s, such as sending out mailing lists or getting into the catalog business.
However, he noted the modern spin involves leveraging online platforms not just for sales but for collecting valuable customer data. The ability to understand customer behaviors and preferences has become a significant boon for SMBs.
As the landscape for SMBs advances, payment providers can play a crucial role in supporting evolving and emergent eCommerce strategies.
“We find that payment providers or payment platforms will have either an offline channel but not the online channel, or vice versa,” Zhu said. “When it comes to the online channel in particular, payments providers that offer services around data analytics have a real chance to win over SMBs with investments in the features that SMBs care about.”
He said that one of the more important features of an eCommerce platform, typically speaking, is a low-cost offering, along with ease of use around intuitive and straightforward payment processes, followed by helping SMBs onboard more quickly.
However, Zhu said that in some ways, the low cost of use becomes potentially less important for top performing SMBs who are looking to use multiple platforms to strengthen their online presences and expand their market reach.
Heading into the new year, SMBs have diverse needs depending on their industry. Financial institutions looking to serve SMBs must understand the specific verticals and tailor their services accordingly.
Zhu emphasized the importance of high-level, industry-specific granularity, suggesting that small business data providers like Enigma can assist financial institutions in targeting and onboarding SMBs more effectively.
As for how SMBs should balance their eCommerce and brick-and-mortar efforts, rather than seeking a balance, Zhu advocates for creating a seamless experience between online and offline channels. Understanding the ideal user journey and differentiating based on that journey is key for both SMBs and financial institutions.
Moving an element of their stores online not only helps SMBs generate new revenue streams but also provides additional benefits by offering a more holistic view of customer behaviors and preferences and establishing a bulwark of channel diversification.
“What is the ideal customer journey? Sometimes it is fully offline, sometimes it is fully online, but increasingly we’re seeing that it’s got to be a mix of the two,” Zhu said. “The most important reasons by far for moving sales online were expanding customer reach and collecting customer data … the online dimension gives you an entirely new and different and complementary insight to your own in-store shoppers.”
Addressing concerns about the perceived complexity of eCommerce, Zhu said advancements in payment technologies have made it accessible to businesses of all technical proficiency levels. Ease of use has become a fundamental factor in selecting payment processors, with innovations making it easier for SMBs to set up and benefit from the analytical capabilities of these platforms.
Looking ahead to 2024, Zhu predicts that artificial intelligence (AI) assistance and engagement could revolutionize the SMB space, especially for complex transactions requiring a more consultative approach. The ability to have one-on-one tailored conversations with customers online could transform the way small businesses engage with their clientele, enhancing customer service and driving sales.
But one thing is certain for the future: In the face of ongoing challenges, SMBs continue to evolve, leveraging technology and strategic thinking to not only survive, but also thrive in the ever-changing business environment.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More