How E-Commerce Helps Small Businesses
Article source from BGSU*
Disruptions caused by federal, state and local reactions to the pandemic upended what we knew about running a small business, forcing professionals to find ways to connect with consumers and keep their doors open.
E-commerce, which comprises buying and selling on digital platforms in business-to-business and business-to-consumer channels, became a lifeline. The benefits of buying online include convenience for the customer, increased selection and safety during the pandemic. On the other hand, potential costs to the customer include limited access to customer service, long delivery times and lost purchases.
How Did Pandemic Restrictions Affect Small Businesses?
The crushing impact of the government mandates on small- and medium-sized enterprises (SME) was sudden and devastating.
A survey of 5,800 SME conducted by the Proceedings of the National Academy of Sciences in the first months of shutdowns — before the trillions of dollars in federal bailouts became available — found that 43% closed at least temporarily because of government restrictions. The impact on SME employment, which accounts for half of all U.S. jobs, amounted to staff reductions of 30%.
Moreover, the survey found median monthly expenses of $10,000, combined with lost revenue and limited cash reserves, required SMEs to cut costs drastically (layoffs and shutdowns), take on additional debt or go out of business. Federal Reserve economists estimate that 200,000 excess SME failures (above the normal forecast for the period) occurred before states began lifting pandemic restrictions.
During all that, small businesses and independently owned franchises that cater to local clientele, especially those who need customers coming through the doors — food services, hospitality, arts and entertainment and retail — had to adjust their models to include e-commerce to survive.
How Did E-Commerce Help Businesses Manage the COVID-19 Mandates?
From global enterprises to local mom and pops, businesses had to re-think ways to leverage digital platforms and reach consumers in their homes. The film industry, for instance, began releasing motion pictures straight to subscribed streaming because theaters were closed. Likewise, specialty retailers in verticals from outdoor recreation to home workout equipment began offering free delivery and other perks through their e-commerce presence.
Groceries, convenience stores and restaurants joined the digital revolution by adopting online platforms that enabled customers to shop and pay online and pick up at the curb or request at-home delivery via gig-economy transportation.
It was a business revolution that took just three months.
McKinsey & Co. reviewed e-commerce data from 2009 through the first quarter of 2020. The curve of a graph representing the percentage of U.S. companies with digital platforms showed a moderate increase until December 2019, when it went nearly vertical, increasing from 15% to 35% by the end of Q1 2020.
“If you’re feeling whiplash, it might be the ten years forward we just jumped in 90 days’ time,” McKinsey said.
Is Ecommerce Now a Competitive Mandatory?
While e-commerce enabled small businesses to connect with consumers during the most severe pandemic mandates, the McKinsey report also noted that it allows customers to access more sellers and try new brands.
“Consumers and customers have begun to alter their buying patterns and shift to digital channels, products and services — opening up entirely new fronts in the competition for customers,” it wrote in an appendix to the report.
