Taking on Fourth-quarter Challenges
As small to medium-sized businesses gear up for the all-important fourth quarter and holiday shopping season, they’re facing some prominent challenges this year. In this post-pandemic period, labor shortages, supply chain glitches and inflation are some of the headwinds merchants and brands face.
In this report, WWD hears from solution providers who share strategies for small to medium-sized businesses, SMBs, to deploy to engage shoppers and drive conversions (online and in-store).
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Shipping Trends
Ritu Khanna, Shopify’s managing director of North America, noted that for small businesses to succeed this fourth quarter and holiday shopping season, they need “to be prepared with the best tools to optimize for customer satisfaction, shopper retention, and, of course, sales.”
Khanna said consumers shopping online expect quick shipping. “But they also want to know when they can expect to receive a product and see that information directly in the online store or social channel where they’re shopping,” Khanna told WWD. “To compete with big-box retailers, independent businesses must enable this level of delivery transparency — it’s now a non-negotiable.”
To help SMBs on that front, Khanna said retailers who are tapped into Shopify’s fulfillment network could tout a “Shop Promise” badge on their websites, which tells consumers of two-day and next-day delivery. Khanna noted that merchants who use the feature could see average sales rise about 33 percent, according to data from Deliverr.
Other tips for small businesses to win the holidays, Khanna said, include making sure the online and offline shopping experiences are aligned and also leveraging content creators. And yes, Shopify has tools for that too.
Shopper Engagement
The holiday shopping season is also a chance to acquire new customers, which puts a spotlight on consumer engagement. Alex Song, founder and chief executive officer of data science company Proxima, said as retailers and brands head into the fourth quarter, “they should have a bit more balanced approach of not just trying to acquire customers and sales but also spending for engagement. Can I get potential customers to my website? Can I engage with them on Instagram? Can I drive them to my content on YouTube? Engage first, convert second.”
“As conversion rates typically triple during holiday time, you can invest more than you normally would to engage people, Song told WWD, adding that focusing on brand positioning is also essential. “This is the noisiest, most competitive time period. Look into partnering with a new ambassador or influencer — something that will make you unique. Find a way to own the conversation.”
Katherine Shappley, vice president of the commerce business group at Meta, said social media could help retailers and brands identify loyal customers as well as inform product development. “By using ads and social tools like photos, groups, live videos and comments, new forms of small businesses in the retail space are able to identify their most loyal customers and develop products that meet their communities’ needs and wants,” Shappley told WWD. “If brands might have once prioritized the widest possible audience and biggest addressable market, in the era of ‘direct-to-community’ marketing, they’re engineering authenticity and virality into their product development and how they reach both new and existing customers.”
Similarly, Shappley said, SMB retailers and brands in apparel, beauty, luxury goods and other categories “can take advantage of behaving more like creators, using a mix of organic social content and personalized ads to drive sales by finding niche, loyal audiences with authenticity at the center of their strategy.”
Acting Fast
Vic Drabicky, founder of digital consulting agency January Digital, cautioned that time is of the essence. Drabicky said just 29 percent of shoppers are “waiting until November/December to begin their shopping — which means the opportunity for brands to drive revenue is much earlier than it has traditionally been. Brands that recognize this and adopt their approach have an opportunity to drive earlier revenue potentially at a higher price versus waiting until later in the season and competing more heavily through the use of the promotion.”
Drabicky also said SMBs should not count on customer loyalty to drive sales this year. “Ever since the pandemic hit, customer loyalty has been waning, with InMobi reporting more than 80 percent of customers tried new brands in the back half of 2021,” Drabicky said. “With much of the world fully breaking out of COVID-19 lockdowns, consumers are excited to try new brands, new looks and new experiences.”
As a result, Drabicky described the market as being “ripe for brands willing to spend into new customer acquisition.” He also noted that consumers are holding the cards this year as inflation coupled with extra inventory is going to drive promotions. “Outside of the luxury space, inflation has caused consumers to be more price conscious than typical,” Drabicky said. “Combine this with brands that have excess inventory, and the market is ripe for a big promotional season. Knowing much of the market will be on promo, getting the timing, the messaging and the incentive just right is more important than ever.”
Flexible Options
Another road to driving conversions this holiday season is in offering flexibility with payment options. Natalie McGrath, vice president of marketing at Afterpay and an industry veteran with positions held at Boohoo, Net-a-porter, Coach and Alexander Wang, said for SMB merchants in the higher-price point space, it’s important to know that Millennials and Generation Z are averse to using credit cards. They also want transparent payment options when shopping for luxury goods.
“The more payment options you offer, the higher the likelihood that you’re servicing this younger consumer who prefers a flexible and affordable way to shop online and in-store,” McGrath told WWD. McGrath also said brands and merchants should diversify their channels “and go beyond only selling in-store and online to cut through the noise during the holiday season.”
“Consider how your brand appears on social platforms, shopping apps and new marketplaces to offer your customers more omnichannel experiences to shop from,” McGrath said. “Find strategic and multifunctional partners to work with, and that can support cost efficiencies. Your partners should be both a solution for your business that understands your customer and brand, increases customer conversion, helps drive revenue and serves as marketing support to deliver qualified new customers to your business.”
Focus on Personalization
Laura Goldberg, chief marketing officer at Constant Contact, said SMBs should consider text messaging for engagement and driving conversions. “We’re living in a smartphone world, and small businesses need to get creative to stand out and connect with their mobile-first customers,” Goldberg said. “Our research shows that over half of consumers would consider buying if they received a text message from a small business — that’s something retail businesses can capitalize on to reach and engage more customers this holiday season.”
Goldberg said text messages are quick and easy to send, “and customers open them almost immediately. They also feel more personal than an ad, so shoppers are more likely to read and click through if there is a relevant call to action. Text marketing can really help small businesses engage their customers and drive more holiday sales in the process.”
Matthew Schwartz, chief revenue officer at Aetrex, the foot scanning technology company, said for the in-store experience, SMBs should focus on service. “One challenge during the holiday season is being able to consistently provide a high level of customer service,” Schwartz said. “Training your staff to deliver a consistent experience despite the rush, especially when there’s not enough time to spend with each customer, is key.” Schwartz said tools such as Aetrex’s Albert 3D foot scanner could help footwear customers “find the right fitting shoes for their unique feet on the first try. It ensures a high level of customer service and a personalized, memorable experience.”
Leveraging Technology
On the backend, the supply chain is still a mess with some materials and product categories. And big retailers are sitting on a lot of excess inventory, which means this fall will be heavily promotional — making it challenging for SMBs to compete. JP Chauvet, CEO of Lightspeed, said SMBs need to prepare their inventory.
“While global supply chain issues may not be as severe as in previous years, it remains critical for merchants to plan ahead to effectively manage their inventory throughout the busy holiday season,” Chauvet told WWD. “First, they should prepare a holiday budget, making sure to consider their sales trends from previous holiday seasons, recent sales trends from the past quarter, and popular inventory items. Once the budget is set, business owners should look to accumulate enough inventory to last not only through the holiday season but into the new year as well. A particular focus can be paid to their top-selling items as well as products that can be effectively sold year-round. This puts retailers in the best position possible to avoid being stuck with inventory that won’t sell until the next holiday season — or, even worse, that needs to be sold at a loss.”
Chauvet also suggested leveraging technology. “In addition to potential inventory challenges, staffing continues to pose a challenge for small businesses, with the demand of the holiday season further complicating this,” Chauvet explained. “By leveraging the full powers of their retail technology partners, business owners can streamline every aspect of their operation and reduce the strain on their employees. Whether it’s seamlessly managing inventory over multiple locations and platforms, integrating payments to ensure an efficient checkout experience or even leveraging data to provide insightful analytics on day-to-day performance, retail technology platforms can empower merchants and their employees so they can better serve their customers.”
