Small businesses are seeing the biggest shift in how we shop since the Great Depression. Here's how entrepreneurs can reach the morally minded, Instagram-oriented customer.
- This holiday season, consumers are shopping differently, using their dollars to reflect their values and have a greater impact.
- Experts argue that just as one day in the year doesn't define a company's success, one unofficial holiday is no longer the key to making your end-of-year sales.
- Business Insider spoke with economists and business leaders about what the holiday season means for
small businesssurvival and the U.S. economy.
Over the past several months, Tal Zvi Nathanel has noticed customers adopting a different mindset when they shop in-person and online at his New York City retail store and art gallery, Showfields.
Located in Manhattan's Lower East Side neighborhood with a second store in Miami, another crucial Showfields location is on customers' smartphones, where they can walk through the front doors, browse curated collections of beauty, art, and lifetsyle products, and check out with a swipe and a click.
Nathanel told Business Insider that he noticed instead of browsing by product or price, customers are spending their dollars based on criteria like where the product is made, the cause behind the brand, and who's selling it. They, like many American consumers, have become more mission-driven.
"It's less about, How much does it cost?" Nathanel said. "It's more about, What's the impact?"
If there's one thing 2020 has taught entrepreneurs, it's to prepare for change. In just six months, the pandemic has forced nearly 100,000 small businesses to shut down for good, and customer preferences have shifted even more to ecommerce, delivery, and virtual business models.
Now that the holiday season is upon us, business owners that have weathered the storm thus far are wondering what moves they should make next.
It's not so simple this year, and what happens in the last six weeks of 2020 could have major impact on America's economic recovery. Small businesses with fewer than 100 workers account for 98.2% of employers and businesses with fewer than 20 workers account for 89% of employers, according to the Small Business and Entrepreneurship Council. According to the National Retail Federation (NRF), more than 98% percent of all retail companies employ fewer than 50 people. Without a revival on Main Street, the American economy won't right itself any time soon.
Business Insider spoke with economists and business leaders about where small businesses are headed in America's economic future, and they stressed that entrepreneurs will need to examine how their customers' experiences have shaped their buying behaviors — and be prepared to make changes to accommodate them.
The key takeaways for business owners: Identify and appeal to the value-conscious consumer, and set up as many points-of-sale as possible.
The largest shift in consumer values since the Great Depression
This shopping year is unlike any other.
In practice, consumers have adapted their purchasing habits to the times by shopping online earlier to avoid pandemic-induced shipping delays. The data indicates that culturally, shopping local has become a sign of one's values, humanity, and morality. Seven out of 10 holiday shoppers find it more important to support small businesses than to get a good deal — 43% said they were willing to spend $20 more on an item to support a small business rather than save $20 at a large retailer — according to a survey by Union Bank and research firm Edelman Intelligence.
An anaylsis by communications agency Zeno Group found that the most important values among consumers this year are protecting family, self-reliance, simplicity, honesty, and duty — rather than the sentiments of ambition, experiences, travel, and adventure that have ruled behavior and preferences in years passed.
Alison DaSilva, the managing director of purpose and impact at Zeno Group, said this shift in American values is unlike any since the Great Depression.
"They want to have an impact with the decisions that they make when they're shopping — an impact on society, on their family, on the world at large," she said. "This notion of people wanting to use their dollars to have a greater impact and saving small business is very top of mind."
That's good news for entrepreneurs who can find a way to get customers to connect with their purpose or founding story. Leon VanGelder, the VP of small business advertising for music streaming platform Pandora, said that in a survey of 2,000 listeners, more than half of holiday gift-givers planned to shop local. VanGelder pointed to millennials, Gen-Z women, and households with incomes of $100,000 or more as the key groups most likely to shop local.
Consumers want to support small businesses — you just have to meet them where they are
Given the loss, uncertainty, and tragedy that have marked 2020, experts argue that just as one day in the year doesn't define a company's success, one unofficial holiday is no longer the key to making your end-of-year sales. For many, Small Business Saturday is a symbol of the season on which they pin their hopes of meeting revenue goals.
Ann Cantrell of Annie's Blue Ribbon General Store in Brooklyn, New York, said 37% of her 2019 sales came in the last two months of the year. Kaylin Marcotte of JIGGY Puzzles and Jelani Memory of A Kids Book About in Portland, Oregon, both expect to make a third of their 2020 revenue in that time. For Ali Rose of Genusee Eyewear in Flint, Michigan, it's nearly half.
Despite all the changes in 2020, the NRF expects total US retail sales to grow between 3.6% and 5.2% in November and December, compared to a 3.5% average increase over the past five years. Even for business owners desparate to attract customers this year, it's not the time to slash prices on everything in the store, said Fred Hurvitz, a marketing professor at Pennsylvania State University. That's because he expects to see more people stick to necessities this holiday season.
"People don't have to make those purchases," he said. "Anything that's discretionary will probably be put on hold."
Even for the smallest businesses, experts agree there is one strategy entrepreneurs can employ to protect themselves: Sell wherever possible.
"If you don't have online offerings for people, you're in trouble," Prisinzano said.
Penn State marketing professor Fred Hurvitz expects omni-channel businesses with multiple purchasing and payment options will see the best holiday sales.
Showfields is just one example of a business taking such an approach, offering contactless payment, an app that enhances customers' in-store experience, virtual online tours, an ecommerce site, and curbside pickup.
Nathanel said the pandemic has provided his business with an excuse to innovate. For example, Showfields' Magic Wand app escorts customers through its store and gallery, and presents a mobile payment screen at checkout.
"It pushed us to redefine many things we know how to do very well physically," he said, "and try to figure out if there are other ways to do that."
Emily Canal also contributed reporting for this story.
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