By Kelly Devine, Divisional President, UK & Ireland, Mastercard
The introduction of lockdown restrictions forced many business owners to rethink their business models almost overnight. With consumers stuck at home and normal working practices ground to a halt, turning to digital technology became a basic means for survival for many small business owners. Now, although pre-pandemic normality is arguably nearly restored, digital business models are here to stay, and e-commerce remains critical for businesses in the post-pandemic economy.
At the height of the crisis, resourceful business owners who remained agile and adapted to meet the changing demands of the situation were the ones that survived. With 48% of all UK small and medium enterprises forced to refashion themselves in some way to cope with the coronavirus measures, e-commerce provided a lifeline for many.
Technology: a vital lifeline
The closure of physical retail was the catalyst for a dramatic spike in e-commerce, as consumers turned to the internet to buy goods, and many business owners responded by moving their organisations online. Throughout the crisis, technology acted as a vital lifeline for small businesses, with forward-thinking business owners capitalising on the surge in demand for online products and services to survive and beyond that, to thrive by creating new streams of revenue.
According to a Mastercard report – ‘Striving to Thrive: The state of play for micro and small businesses’ – nearly half of small business owners report that technology helped them expand their customer base, with another third attributing technology with helping to increase both turnover and profits. In fact, those small businesses that accepted e-commerce payments during the pandemic saw a 5.0% increase in customer spending and a 4.5% increase in transactions.
Having largely weathered the worst of the storm, the small businesses who were able to create, develop and maintain an online presence are now in a better position as a result. With Rishi Sunak’s recent budget announcement heralding a new age of optimism for the British economy and the Government’s continued commitment to its ‘Help to Grow’ digital scheme, which offers small businesses a vital source of funding for technology, there are no signs of things slowing down. As worldwide digital footfall is forecast to increase 27% year on year, small businesses need to leverage technology to give them the best chance of success.
One example of a small business embracing digital transformation to drive growth post-pandemic is the London-based M.Y.O studio . Set up by Diana Muendo and Sam Lehane in 2017, M.Y.O is a creative studio that offers adults a space to unwind. It experienced immediate success with strong growth in the lead-up to the pandemic but lockdown forced the couple to move to a hybrid business model, setting up ‘Creative Jungle’ – an e-commerce platform to sell their creative kits. Although their physical studios are now able to re-open, this move has allowed the business to scale exponentially. In fact, the business has now attracted a global audience through a new podcast series and a string of virtual workshops, both of which were set up during the crisis. This move to a more digital mode of operating has transformed the profitability of the business for the long-term.
Overcoming barriers to adoption
It goes without saying, however, that the story has not been so easy for all small businesses. Many are sorely in need of support to overcome the considerable barriers that are currently hindering their access to and adoption of new technologies and in turn, future growth. According to our research, cost and implementation were the most common barriers to digital transformation faced by small business owners.
Government grants can help support with the cost barrier but over a third of business owners felt overwhelmed by the vast amount of choice when it came to selecting the most appropriate technology for their business, a barrier that affected an alarming 49% of businesses owners from a minority ethnic background. Small businesses require support in making these decisions, and Mastercard’s Strive UK programme aims to do just that, offering tools to boost confidence and optimise digital skills, with a particular focus on female-owned businesses, and those owned by individuals from ethnic minority backgrounds.
Our research found that 43% of small business owners claim that they would benefit from a ‘one stop shop’ to provide guidance on the digital services available. This is one of the elements that Strive UK will deliver, providing centralised, tailored support which is vital in ensuring the continued recovery and growth of small businesses.
Although events over the past year have highlighted the benefits of digital transformation for small businesses, many have still not been able to do so whether through lack of time, money, or support – support which Strive UK aims to provide. Providing small businesses with the guidance needed to embrace the benefits of technology will not only benefit business owners but also have positive knock-on effects on the country’s economic recovery, as the UK gets back on its feet post-pandemic.