The unpredictability of the coronavirus pandemic has had a ripple effect throughout the world. Personal health and travel have been greatly affected. Sports leagues have suspended play, with no official date to resume. And small businesses are struggling across the board.
The Hill reports 100,000+ small businesses have permanently closed, with CNBC adding that 7.5 million are at risk of closing. The challenges of doing business are being felt more than ever.
To further highlight some of these struggles, Facebook released a comprehensive 35-page State of Small Business Report. The report featured insights from more than 86,000 people who own, manage or work for small to medium-sized businesses, or SMBs (defined in this report as fewer than 500 employees). Another 9,000 participants qualify as “personal” businesses, or people who said they were “self-employed providing goods or services.”
Some businesses have found success with shifted business models. For example, some restaurants have efficiently shifted to curbside pickup offerings, while retail shops may have flexible operations from home. However, the report provides a sobering reality of the current situation.
“According to the survey, 31% of small and medium-sized businesses have shut down [entirely] in the last three months,” the report states. “The situation is worse for personal business (52% of which report shutting down), hotels, cafes and restaurants (43%), and services like wellness, grooming, fitness or other professional services (41%).”
Though the report is just a snapshot of all SMBs, the data points can help analyze the state of business as a whole. Here are some of the more interesting insights to unpack.
A significant impact on revenue
No matter the industry, the effects of coronavirus have greatly affected revenue. More than half of construction, retail, services, hotels, cafes, and restaurants reported their business sales for the past 30 days were lower than the same month last year.
Additionally, less than a quarter of businesses said their cash outflow was less than their inflow. Companies have already begun turning to institutions for assistance. Forty-five percent of operating SMB owners and managers said zero-interest loans or other financial help would be the most beneficial thing for their business as they adapt to the new normal of the pandemic.
Biggest challenges for SMBs
Per the report, SMBs are struggling with access to capital and customer demand. Twenty-eight percent said their biggest challenge over the next few months would be having enough cash flow. Twenty percent were worried about a lack of demand.
Additionally, 62% of respondents reported spending 1 to 4 hours on domestic or household care activities. And more than a quarter of respondents (26%) admitted their household responsibilities significantly affected their ability to focus on their work duties.
As Facebook notes, these results “highlight the close links between personal obligations and business operations and how the demands of home can affect the overall stability of the marketplace.”
During a time of social distancing, business and personal responsibilities are overlapping even further. That requires an entirely new mindset from an operations perspective, but there are reasons for positive thinking.
An optimistic outlook
Fifty-seven percent of SMBs reported they’re optimistic or extremely optimistic about the future of their business. And only 11 percent expect to fail in the next three months, if current conditions continue. These SMB owners may not know what the future looks like, yet they’re still holding onto hope.
They’re also adapting. Fifty-one percent of businesses report increasing online interactions with their customers and clients. And 35% report expanding their use of digital payments.
Personal businesses are trying new strategies, too. Thirty-six percent that use online tools reported that they’re conducting all of their sales online. The requirements of social distancing have caused us all to take a look at our home office setup, and that can provide flexibility that a workplace may not otherwise have.
Companies need to make critical decisions as we continue pushing into new digital areas for ecommerce. Last year, ecommerce accounted for 16 percent of total U.S. retail sales. That figure has been growing every year and shows no signs of slowing down.
With more ways to pay, improved mobile shopping, chatbots enhancing the user experience, and a growing volume of voice searches, customers want a unique experience catered to their personal tastes. The companies that can provide it for them will have the best chance for success.
The introduction of Facebook Shops
Facebook’s report goes hand-in-hand with another announcement: the introduction of Facebook Shops, as well as other ecommerce features like Instagram Shop and Live Shopping.
SMB owners can set up ecommerce storefronts right on their Facebook and Instagram pages. Owners customize their shops, choosing products to feature, adding a cover image and accent colors to highlight their brand. Future integrations will include artificial intelligence and augmented reality; making purchases directly through a chat in WhatsApp, Messenger, or Instagram Direct; and connecting company loyalty programs through an individual’s Facebook account.
Instagram Shop will allow users to search and browse products right from Instagram Explore. Eventually, it will be a permanent button on the navigation bar; customers only need to tap one button to get to Instagram Shop.
Facebook also announced a Live Shopping feature, which lets businesses tag products from their Facebook Shop or catalog before going live. During the video, those products will be shown at the bottom of the screen. This will provide customers with the ability to tap on a product, learn more about it, and make a purchase.
Finally, Facebook is working closely with partners including Shopify, BigCommerce, WooCommerce, ChannelAdvisor, CedCommerce, Cafe24, Tienda Nube, and Feedonomics. These third-party shopping services can provide additional resources for entrepreneurs running their business online, whether they’re pivoting to a new strategy or just getting started.
These announcements have been met with tremendous praise, and Facebook has already reaped rewards. Its stock price hit an all-time high after the ecommerce announcement.
How Facebook Shops can help small businesses
Will this latest announcement save small businesses though? Facebook has certainly been an advocate for SMBs. In March, the company unveiled a $100 million grant program for small businesses. More recently, they’ve released food delivery and gift card stickers for Instagram, as well as a Support Small Businesses sticker.
As Zuckerberg said during the announcement video: “This is the biggest step we’ve taken yet to enable commerce across our family of apps.”
A big advantage for SMBs is that Facebook and Instagram still have a stronghold on the social media landscape. And setting up a shop—which is free, though Facebook does take a commission from each sale—puts you in front of a ton of potential customers. Zuckerberg said more than 800 million people engage in live video daily across Facebook and Instagram.
Shopping with AI/AR
The AI and AR features should also provide a boost. If a business sells women’s clothing, for example, it could tailor the storefront for a visitor based on their location, age, style, or shopping tendencies. Visitors can also use AR to virtually test out products, from clothing to makeup to furniture. This ability to let customers try before they buy, all from the comfort of home, could be a gamechanger for a lot of small businesses.
Perhaps the biggest issue is the timing of these releases. They’re not all available to everyone as of this writing, and some of the upcoming features —such as Instagram Shop and Live Shopping—only have vague release dates of the summer or beyond.
These features also benefit certain industries more than others. Retail stores, particularly ones that sell clothing and beauty products, already have a built-in advantage with the number of tutorial videos available. A one-tap shop integrates fairly seamlessly with a user showcasing a certain type of makeup or mixing and matching styles of clothing.
That’s not to say other businesses can’t use these features. In fact, those SMBs might get to flex their creative muscles even more. There are lots of ways to creatively position their storefront, or they can offer relevant advice and resources via Facebook Messenger or WhatsApp chatbots.
It’s encouraging to see the social network offering a hand to SMBs across the globe, and there are a lot of cool opportunities here. Hopefully everyone gets the chance to take advantage of Facebook’s ecommerce tools.
What do you think about Facebook’s announcement? Are you an SMB owner and plan to use it? Let us know on Facebook, Twitter or LinkedIn.
Image by Speedy McVroom from Pixabay