Small businesses have one big thing going for them heading into Small Business Saturday this year: Consumers are voting with their dollars for local merchants, as 58% plan to buy from independent retailers this holiday season, Accenture research found.
The hyper-local movement is one of several pandemic-fueled trends reshaping how we shop this holiday selling season and beyond — from the rise of TikTok commerce to the boom in buy now, pay later purchasing plans.
“Because of COVID, shoppers have created new habits,” and marketers are taking heed, said Rory Mitchell, executive managing director, Americas, for online advertising platform Criteo, during eMarketer’s holiday outlook webinar this month.
Here are five trends shaping the retail landscape and consumer spending that indie merchants should consider when devising their Small Business Saturday strategies.
The rise of hyper-local commerce
The buy-local movement kicked into overdrive amid the pandemic, as homebound shoppers rallied to support their neighborhood stores.
Now hyper-local commerce appears to be here to stay: Today, 56% of consumers are patronizing stores in their community or buying locally sourced products, according to Accenture’s findings on post-COVID purchasing behaviors that are poised to stick. And although offices are reopening, 86% of consumers plan to continue working at home, Accenture found, which means they’ll continue to patronize local businesses.
The hyper-local trend is also reflected in a range of emerging business platforms designed to help small businesses succeed. Tech startups such as Cultivate and Nearby, for example, help local brands get their products in front of consumers, and in turn, help consumers find local brands.
And when the nation’s biggest online retailer jumps on the buy-local movement, attention must be paid: Amazon this month rolled out Local Selling, a suite of services that allow small- and medium-sized businesses that sell on its site to offer in-store pickup and fast delivery to shoppers who live near their physical retail stores.
Amazon’s move “confirms the need and business opportunity for retailers to meet consumers where they are, particularly as consumer preferences continue to be redirected in an omnichannel environment,” Harvey Ma, senior vice president of omni, consumer and retail performance of North America at NielsenIQ, told CO—.
The buy now, pay later opportunity
Buy now, pay later (BNPL) platforms, essentially layaway for the digital era, have become an increasingly popular way for retailers and brands to drive sales, particularly among younger shoppers.
A growing list of retailers from Macy’s and Sephora to small- and mid-sized merchants are adding the pay-in-installment option via tech platforms like Afterpay, Klarna and Affirm, wooing credit-averse millennials who came of age during the Great Recession and are now the nation’s biggest buying group.
Indeed, 16% of millennials have used BNPL at least once in the past year, compared to only 5% of baby boomers, according to payments industry research company PYMTS.com. BNPL shoppers also tend to spend more, studies show.
Now BNPL players like Klarna and Afterpay are positioning their platforms as a new way for small businesses to reach customers with targeted ads and promotions.
Klarna, for one, wants to take the success it has had with large retailers “and replicate that for smaller brands,” David Sykes, head of North America for the platform, told CO— this month.
The rise of first-party, business-led data collection and usage is a trend that will definitely lift businesses’ growth across all sectors.
Owen Frivold, co-founder of customer experience firm Hero Digital
TikTok becomes a bona fide revenue stream for brands
While big brands like Kohl’s are tapping TikTok to drive sales this holiday selling season, small businesses are also leveraging the video-sharing app to broadcast their authenticity, create brand communities and ring up revenues. They’re tapping the site’s features, such as video editing capabilities and marketing tools like in-feed ads, to engage with their audience.
While the app is linked with Gen Z (now more of them use it than they do Instagram), its popularity has grown across demographics, as online activity soared during the pandemic. According to estimates from social media analytics firms App Annie, TikTok is set to reach 1.2 billion active users in 2021.
Small business Artesana Soaps, for one, credits TikTok with helping the brand succeed throughout the pandemic. Not only did the brand’s behind-the-scenes content boost sales, but it also helped the company grow with a new generation of consumers. “The younger generations that compose much of the TikTok community require a lot of interaction, which is why I believe the engaging features of the app have helped us to become successful on the app,” Cecilia Davoren, founder of Artesana, told CO— in May.
Consumers reward purpose-led business strategies in the ‘values economy’
Consumers are increasingly rewarding businesses that share their beliefs and value systems, a trend that has only accelerated post-COVID and has been dubbed, “the values economy.”
Of course, conscious capitalism, like buying products from minority-owned brands and supporting companies with eco-friendly practices, is not new.
But amid global unrest and the spotlight on racial injustice amplified by pandemic-exposed inequities to intensifying concerns over the environment, purpose-driven business initiatives have increasingly moved from the margins to the mainstream.
“The pandemic has made it clear that consumers want meaningful change rather than a return to the status quo,” according to a report by retail intelligence firm PSFK on reinvigorating brand loyalty. “Having redefined their core values — health, family, finances and social causes — consumers are looking to brands to provide solutions and support.”
That shift is showing up in their shopping inclinations: Most (72%) U.S. consumers now believe it is “more important than ever” to purchase from companies that reflect their values, with millennials going even further, saying they’ll pay more for a product or service when they know some of the profits will go to a charity, according to data from cause marketing consultancy ShoppingGives.
Retailers and brands know this, too: It’s why CVS, for example, offers shoppers the opportunity to donate to Feeding America at their mobile checkout kiosks, and why Sephora allowed its Beauty Insider members to use their rewards points to donate to the National Black Justice Coalition last year, enabling its consumer base to apply their purchase to a purpose.
“Through this pandemic, one of the big lessons we’ve learned is we are actually stewards of the communities we operate in,” said Vivek Sankaran, president and CEO of supermarket retailer Albertsons Companies, during a National Retail Federation webinar attended by CO— this year. Going forward, “our customers are going to expect us to behave that way,” he said.
Affordable customer data collection tech democratizes the playing field for small businesses
Small businesses can now access meaningful and actionable first-party customer data, like shopper buying patterns, as data-collection costs decrease.
The result is that small businesses are increasingly equipped to offer personalized marketing, products and services to their audiences akin to their big brand counterparts.
“The rise of first-party, business-led data collection and usage is a trend that will definitely lift businesses’ growth across all sectors,” said Owen Frivold, co-founder of customer experience firm Hero Digital, which counts companies like Sephora and Salesforce among its clients.
Traditionally, small- and medium-sized businesses faced higher barriers to entry in crafting and building in-depth customer profiles because of the affordability and intricacy of sourcing data from third-party vendors, he said.
“With the cost and use of these technologies decreasing over time, businesses can now set up their own data collection and storage methods. With more businesses able to join in on the data and personalization game, there will be greater opportunity for tailoring offers and messages in order to increase customer loyalty.”
That said, businesses should also keep a close watch on data protection, privacy risks and using the collected data “judiciously, as customers will be highly selective in who they give their data to moving forward,” Frivold said.
“This Small Business Saturday, it’s vital that retailers and business owners pay keen attention to and act on their first-party customer data,” he said. “Retail is bouncing back.”
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Published October 29, 2021