SMBs Look for Leg Up in Competing on Digital Marketplaces

At the beginning of 2021, optimistic prognosticators said the U.S. would be out of the pandemic’s depths by the fall, but with vaccination rates slowed and the delta variant spreading across the country, only 24% of Main Street small and medium-sized businesses (SMBs) say their community is completely back to normal.

Kendrick Wong, co-founder and CEO of retail market intelligence platform Omnilytics, said that going into the pandemic, a lot of apparel retailers, in particular, were underinvested in eCommerce, which left them scrambling to move online when the physical world shut down.

“You went from basically having to compete in your physical locations, whereby your competitors are the people that are surrounding you, to having to compete literally everywhere else around the world,” he said.

Wong pointed to the difference between the performance of Nike, which was investing in digital capabilities prior to the pandemic, to that of Adidas, which is in the early days of its direct-to-consumer (D2C) and eCommerce-centric strategy.

Related news: Adidas Looks to ‘Own the Game’ With Focus on eCommerce, D2C, Women

“Every single retail company, every single brand … had to shift their mindset to see how to compete online,” Wong said. “That was the interesting part of the last 12 months for us.”

But the shift is perhaps more acutely felt by smaller companies that are accustomed to selling locally and relying on in-store sales, Wong noted. SMBs have historically not moved to selling directly online because they aren’t sure how to gain customers and build loyalty. Instead, they move into marketplaces such as Amazon, eBay or Mercado Libre.

PYMNTS research has found that 42% of Main Street SMBs that started advertising or selling on digital marketplaces in 2020 saw a year-over-year increase in revenues, as did 45% of those that invested in technology or software to support digital transactions.

Read more: Two-Thirds of Main Street SMBs Got 2021 Sales Lift From Digital Payment Innovations

“And within these marketplaces, now you’re competing for search ranking, you’re still trying to attract traffic, but you’re fighting for the same traffic that these sites have,” Wong explained.

Rather than telling brands exactly how to market themselves to attract traffic, though, Omnilytics analyzes trends in the market, what’s selling best on different marketplaces and in different countries, and what price points do well for different products, giving SMBs concrete steps for boosting their rankings.

“These kinds of things are sometimes a bit subjective, because as a brand, I will have a very strong opinion on what I should be doing next,” Wong said. “And that’s what enterprise customers do. But for SMBs, you don’t want to give them the 100 options. You want to narrow it down to the best possible five to 10 options so they’re not unsure how to move.”

A Brighter Future

The digital innovations that SMBs have adopted in the past 18 months could also be the key to future success, with those who have invested expressing much more confidence about their 2021 revenues than those who haven’t. Nearly 68% of businesses that invested in technology or software to support digital transactions say they expect revenues to increase year over year, as do a similar share of SMBs that started advertising or selling on digital marketplaces.

But even those who haven’t made the investments still think this year will be better than last year, for understandable reasons. Though COVID-19 remains a threat, the U.S. for the most part has avoided lockdowns on the scale seen across the country last year, bringing more customers into 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 sales online. In the U.K., he said, Marks & Spencer lost 5% of its market share “literally overnight” because it had a lackluster eCommerce presence.

“You have to sell online,” Wong said. “And when you sell online, you’re not competing within the surrounding space that you have because you own that jurisdiction. Online, you don’t own anything. Everything is basically open to the markets.”