Brand loyalty is one thing, but when that loyalty is aimed at a small business, it benefits the entire community.
The relationship between a small business and its customers is unique—rarely a pure transaction. In fact, 37% of Americans say they buy from a small business for a more personalized experience. Additionally, 30% are willing to pay more than a large retailer or chain store, according to a new NerdWallet survey of more than 3,000 U.S. adults conducted online Oct. 10 by The Harris Poll. 30% would be willing to wait longer at a small business. March 5-5, 2022.
So when a small business is feeling financial stress, it’s often experienced with its customers. Prices and products may change, and staff may come and go — and as a result, some customers may be less likely to visit.
In a recent survey of small business owners and consumers, we learned how these owners are managing the impact of the current economy and using their customers’ insights to provide timely advice.
“Small businesses can be hit especially hard when the economy is in turmoil,” said Kelsey Sheehy, a small business expert at NerdWallet. “Rising costs mean consumers are spending less, with many delaying purchases large and small. At the same time, everything is more expensive for business owners. Small business owners will need to get creative again to navigate the ongoing economic uncertainty sex.”
Small businesses are facing economic challenges. According to a survey of 906 small business owners, more than half (55%) said that one of the biggest challenges their business faces right now is finding and/or retaining customers. But the economy is also looking up – 37% of small business owners see inflation and 30% say finding inventory or supplies is the biggest challenge their businesses are facing right now.
Customers are witnessing these challenges. Four in 10 Americans (40%) say they have noticed a small business in their local community fail in the past 12 months, according to the survey. Four in 10 (40%) said they noticed price increases, and 38% noticed staffing shortages at the small businesses they supported during this period.
Small businesses are finding ways to cope. Over the past 12 months, the most frequently cited actions small businesses have taken in response to recent economic conditions are increasing their social media presence (33%) and raising prices on goods and services (33%). Nearly 31% said they adjusted their business hours during this period in response to recent economic conditions.
Americans support small business. More than nine in 10 Americans (92%) say they support (spend money) small businesses. According to the survey, three in 10 Americans (30%) say they are willing to pay more for products and services purchased at a small business than at a large retailer or chain store.
Small Businesses in the Current Economy
High inflation, congested supply chains, rising interest rates — tough times to be a small business owner, many of which are unlikely to be fully eased anytime soon. While 55% of small business owners say finding and/or retaining customers — a permanent hurdle — is one of the biggest challenges their business faces, other challenges they cite are directed toward the economy.
More than a third (37%) of small business owners say that rising prices for their inventory and supplies (i.e. inflation) is one of the biggest challenges their businesses are facing right now. These owners thrive in their relationships with their customers, so it’s no surprise that they care not only about their bottom line, but their customers’ bottom line as well. In fact, 27% of small business owners say passing on higher prices to customers is one of the biggest challenges their business faces right now.
According to the survey, three in 10 small business owners (30%) consider finding inventory or supply (i.e. supply chain) to be one of the biggest challenges their business currently faces. A quarter of small business owners (25%) say receiving these supplies and inventories in a timely manner is one of their biggest challenges. These are not new developments— supply chain constraints It has been going on for the past few years, starting with the shutdown early in the pandemic and continuing to this day due to ongoing global unrest.
After a period of job listings that far outnumbered workers willing and able to fill those roles, the labor market has begun to cool, albeit slightly. Still, nearly a quarter (23%) of small business owners say finding and retaining employees is one of their biggest challenges right now.
To reduce inflation, interest rates are rising, making it more expensive for small businesses To raise funds. About a quarter of small business owners (24%) say finding a business loan or other source to add to or cover existing costs is one of their biggest challenges right now. 82% said access to such funding (e.g. loans, grants, etc.) was important to their success; 59% said it was absolutely necessary or very important.
“Inflationary pressures from supply chain challenges and staffing issues are having a big impact on small businesses,” Sheehy said. “Owners need a lifeline, but many don’t have access to help — many have difficulty getting business loans, and those that do Approvals will face higher borrowing costs.”
Customers are already starting to notice the impact of these concerns:
40% of Americans say they have noticed small business closures in their local community in the past 12 months.
In the past 12 months, 40% of Americans have noticed price increases for the small businesses they support.
Thirty-eight percent of Americans say they have noticed staffing shortages at the small businesses they support in the past 12 months.
The Cost of Doing Business: How Small Businesses Can Cope
These financial stressors are having a real impact on day-to-day business, and small business owners are taking action. In fact, many admit that their customers have taken notice: 33% of current small business owners say they have increased the prices of goods and services in the past 12 months in response to economic conditions.
Notably, a third (33%) of small business owners say they have increased their social media presence in the past 12 months in response to recent economic conditions.As in the early days of the pandemic, this may represent a tendency for entrepreneurs to online business as a way to diversify the customer base.
“Social media is a great tool for small businesses to reach new customers and follow existing ones,” Sheehy said. “Sharing new products or specials reminds people to shop with you. It gets them excited. Taking and sharing photos of customers — or reposting when customers tag you and your creations on social media — is a simple But effective tools can foster the kind of personal connection that draws people to small businesses in the first place.”
What matters to small business customers
Still, small business owners have reason to be optimistic: 92% of Americans say they support (i.e. spend money on) small businesses. This approval rating is especially pronounced among millennials (ages 26-41) – 96% of this generation support small business, compared to 92% for Gen Z (18-25) and 92% for Generation X (42%). -57 years) were 92% and 89% or Baby Boomers (58-76 years).
About half (52%) of Americans say they buy from small businesses to support their local communities, an encouraging sentiment that shows they know the potential impact of those dollars goes well beyond the business owners they spend directly with them.
Many small business supporters are even willing to sacrifice more time and money to support these establishments: 30% of Americans are willing to wait longer for small business services, 30% are willing to Pay more for purchases at small businesses with major retailers and chains.
This sentiment is particularly concentrated among millennials, 37% of whom are willing to pay more for a product/service purchased at a small business than at a larger retailer. Among other generations, 33% of Gen Z, 27% of Gen X and 24% of Baby Boomers would do so.
These findings may suggest that some consumers believe the benefits of supporting small businesses are worth the potential added costs.
Lessons from small business owners, from their customers
The old school method is still good. When asked how they found the small businesses they support, Americans pointed to a number of traditional ways: 56% through word of mouth, 41% through local advertising, and 40% through driving or walking to the business. These tried-and-true methods still work, even though 42% say social media is their way of finding the small businesses they support.
According to the survey, to understand other ways people are looking for small businesses, Click here.
Most small businesses may benefit from a strong social media strategybut these efforts should take place outside of traditional advertising and marketing methods.
Cultivate that personal style. Connecting with customers is doubly important to small business owners—37% of Americans say they buy from small businesses for a more personalized experience. In other words, it’s not just about the goods or services you trade.
Let your customers know they are valued. Consider small customer thank you events, remember their names and slow down for some small talk. This relationship building can encourage loyalty even when inventory is low or prices have to go up.
Be (not just) part of the community. If shoppers choose small businesses to support local communities, and if small business shoppers say they found these businesses through word of mouth, it makes sense that owners are active participants (rather than just entities) in those communities.
Being visible in your community doesn’t necessarily mean buying billboard space; it could be sponsoring a local 5K race or having a booth at a local fair.
Give your opinion on holiday shopping sales. While 35% of Americans intend to shop at a small business throughout the year, only 19% intend to shop at a small business on a Saturday.if special Holiday Shopping Sale (eg Black Friday, Small Business Saturday, etc.) is important to your business success, as 73% of small business owners say, make sure you communicate this to your customer base.
Consider hosting a shopping holiday event rather than just a sale – everyone loves free treats and giveaways. When you plan to make a sale, speak up. Whether it’s through local broadcasts or increasing your social media ad spend, make sure your customers know you have a plan.
Be transparent; communicate challenges. Your customers may rate your business differently than others. As the survey found, many Americans will wait longer and pay more at smaller stores than larger ones. They value community impact and personal touch.
If the state of the economy – whether it be pricing, supply chain or interest rate — Start to impact your bottom line, you can share that information. For example, it may be better accepted when price increases are communicated in advance as a difficult decision, rather than when their totals are finalized or invoiced.
“Focus first on what attracts customers to a small business: personal experience and a sense of community,” Sheehy said. “Don’t be afraid to lift the curtain and explain the ‘why’ behind changes in pricing, hours and inventory. Give your customers the opportunity to support you.”