Main Street SMB Optimism Fueled by Digital Tech Investments

As Main Street small- to medium-sized businesses (SMBs) go, so goes the economy at large here in the United States.

And, if the sentiments expressed in the Main Street Merchant Index, done in collaboration between PYMNTS and Melio, are any indication, a sanguine attitude abounds, but inflation is a force to be reckoned with.

Continued investments in advanced technologies — with emphasis on modernizing payments and back-office functions (which can, in turn, boost margins) — can help these SMBs navigate whatever lies ahead.

The one constant seems to be the pandemic, which now rages into its second full year, but which seems to be taken in stride, so to speak, by the 765 business owners that PYMNTS surveyed in the waning weeks of 2021.

At least some things remain the same as we get firmly rooted in 2022. The optimism that marked last year carries into the current year, where a significant majority of companies are looking for top-line torque (in other words, growth), at 64% of firms. That outpaces the 53% that had expressed similar sentiments last year, as measured toward the end of that year. Less than a third of companies expect sales to be “unchanged” in the current year; a minority are eyeing a decrease.

To get there, to maintain that top-line growth, depends in part on modernizing operations in a way that gives end customers choice even as these SMBs have been able to wrestle and wrangle pandemic-related headwinds. Through the past year, restrictions were lifted across large swaths of the economy, which in turn led many companies to see at least some rebound in their brick-and-mortar operations in 2021.

No surprise: Inflation remains top of mind as a key challenge over the near term. PYMNTS notes that the latest government readings on this metric show inflation at about 7%, a multi-decade high. A full 54% of companies see inflation as a significant obstacle ahead in achieving goals (and by extension, revenue growth).

Inflation and uncertainty are the biggest caps to optimism in Main Street USA. Firms at risk are particularly concerned about increasing costs.

Fifty-four percent of Main Street SMBs cited inflation as a relevant obstacle in their outlooks, trailed only slightly by uncertainty about economic outlooks — concerns that tend to be more prevalent among brick-and-mortar-centered companies than their more digitally-oriented brethren.

Meeting the Challenges With High Tech

In order to meet challenges ahead, SMBs are investing the money and time needed to continue to modernize operations — with particular focus on payment-related activities. Meeting consumers where they want to be met and managing buyer-supplier relationships with less friction in the mix can speed the way toward continued revenue growth through 2022 and beyond.

Broadly speaking, those initiatives include contactless payments, digital wallets and buy now, pay later (BNPL). As to the latter, nascent payment method: Roughly a quarter of firms surveyed see investing in BNPL through the current year.

Beyond the payments-related investments, it should be noted that many of these companies have also been busy modernizing a range of back-office functions. Many firms have said they are investing in ways to make operations more productive, where 51% are buying new equipment or upgrading existing equipment, and nearly a third are investing in new ways to automate manual tasks.

The investments and the optimistic attitudes about sales growth — with the caveat that no one knows the twists ahead in the pandemic — indicate that we may see a resilient ripple effect through the economy as the year plays out.