As the holiday season approaches, small and medium-sized businesses (SMBs) have an uphill battle to secure their piece of the sales pie. But the key for SMBs to win this year’s Q4 is not to play the same game as the major retailers but rather to play to their niche and delight their customers with an exceptional, personalized experience.
During a recent PaymentsJournal podcast, Nitin Prabhu, General Manager SMB, Developer and Payments at PayPal, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, discussed the findings of PayPal’s SMB and Consumer Survey 2023 and determined what SMBs can do to differentiate themselves from larger retailers, leverage current technology (such as PayPal PPCP) to acquire new customers, and widen their customer base as they prepare for the holiday season.
Challenges SMB Owners Face During the Holiday Rush
SMBs struggle with particular challenges related to their size and scope of operations. And with the holidays on the horizon, SMBs face stiff competition from big-box stores and their slick marketing and advertising campaigns.
Moreover, SMBs incur considerable expenses to invest in additional inventory, of hiring new and knowledgeable staff to manage the influx of customers and sales, and of course shipping costs. If any of these efforts falter, there can be negative impacts on profitability and future customer acquisition.
PayPal surveyed thousands of SMBs at the start of the year, and a few key challenges were discovered:
- 91% of SMBs cited finding new customers as a key problem.
- Attracting new customers is expensive, with some merchants spending as much as 30% of their product or sales cost to acquire new customers.
- SMBs are unable to bundle products or get the same kind of scale as their larger counterparts, making their products 37% more expensive.
- SMBs don’t have the knowledge to acquire the right logistics partner to create a seamless end-to-end experience.
“SMBs are not logistics experts, they’re not payments experts, they’re not returns experts,” Keyes said. “They are SMBs trying to make sales and get by and build their business. But they don’t come in with this level of expertise or NSA experience.
“It’s just a lot to handle, while a major retailer has whole teams for these issues. While an SMB might have one person, it’s just a lot to handle for a small business.”
Differentiation Tactics to Attract Holiday Shoppers
The key differentiation tactic that Prabhu recommends is for SMBs to not only know their limitations but also to play to their strengths. The reality is that SMBs may not have the operational sophistication and the logistical support to reach all markets throughout various geographies.
The PayPal survey discovered that 80% of consumers expressed a willingness to purchase from small businesses, provided that the product they seek is available and at a comparable price. So how can that willingness be translated into sales? Prabu said the latest trends reveal that consumers are finding their products mostly online but also in-store.
As a result, he asks SMBs to consider where they can channel their marketing dollars to reach these customers where they shop. Prabhu suggests that social media is an effective platform to reach potential customers. Additionally, he encourages businesses to ask for reviews from customers within their niche as another way to build trust and brand awareness.
Offering exceptional customer service is another winning strategy Prabhu recommends, one that creates an essential loop tapping into customers’ feedback, which can then be incorporated into product and sales strategy. SMBs can also leverage the advantage of being smaller, as larger retailers are slower to respond to customer feedback.
“If you create a very personalized experience for your consumers, you engage them, understand what the needs are, how they like the product, what do they want to see in the next holiday shopping season, or in the next quarter,” Prabhu said. “You can quickly realign your inventory, your services, and customize, and this ability and nimbleness can take you much further ahead than the large retailers.”
Finally, SMBs must leverage technology. They must be able to offload any tasks that take them away from customer acquisition, such as inventory management, logistics, accounting, sales, or search engine optimization.
Luckily, many solutions providers are now developing their offerings to cater to the specific needs of SMBs.
“There’s a lot of opportunities to take advantage of—new areas that SMBs have largely had to leave to the bigger merchants before, “ Keyes said.
“And with these new tools, there’s opportunities to increase revenue, increase retention, improve loyalty, and so much more with the addition of some solutions.”
Leveraging PayPal’s Complete Payments Solution to Enhance the Consumer Experience
A final piece of the puzzle would be a game-changer in equipping SMBs to compete for holiday market share and enhance customers’ experience: leveraging the latest solutions. PayPal Complete Payment Solution (PPCP) has just launched in the United States, with SMBs in mind and based on direct feedback from this target market.
Prabhu believes that the features included in the solution will give SMBs a competitive footing equal to that of their larger retail counterparts.
With PayPal Complete Payment Solution, consumers can safely save their payment information directly on a merchant’s e-commerce website for future purchases. This feature not only reduces friction but also promotes conversion because more consumers will choose where they shop based on whether their preferred payment method is offered.
Plus, customers enjoy tracking their online orders, and PPCP now has package tracking available with more than 5,000 merchants through UltraCart, WooCommerce, and BigCommerce.
PPCP also offers foreign exchange as a service and enables merchants to list all products in the currency where the customer lives.
“Creating a seamless experience, “ Keyes said. “I think that’s the most important thing as merchants look to sell in different geographies and accept different payment types and sell online and in-store. It’s really important that not only do they do all those things, but they make sure that the experience for the consumer is consistent, whether that is how it looks or also how easy it is to go through the process.
“You have consumers in different places or paying in different ways. There’s a lot of opportunities for things to go wrong or not being consistent or be confusing. Then you lose sales, you lose loyalty, and that’s obviously not what merchants want when they’re adding all these new capabilities. So it’s really important to make sure that everything remains cohesive. Having it all on one platform is certainly a way to do that.”