Almost half (44%) of small to medium sized enterprises (SMEs) have changed their business model to adapt to financial disruption caused by the COVID-19 pandemic, with one in five of those embracing online trading.
The results from Westpac’s SME COVID-19 Tracking Report, which is an ongoing weekly pulse check of small to medium sized businesses throughout the pandemic, shows 42 per cent of the businesses who moved online as a result of the pandemic will now make the change permanent.
SME COVID-19 Tracking Report results:
- Of the SMEs who operated both an online and a physical store during COVID-19, the survey showed 52 per cent of revenue came from their online store, while 48 per cent came from their physical store.
- In terms of sectors who moved their businesses entirely online during the pandemic, education and training (23%) led the way, followed by arts and recreation (13%) and retail trade (12%).
- Only five per cent of food and beverage businesses were able to move online completely during the pandemic, further proof the hospitality industry has been hit extremely hard by COVID-19.
- 10 per cent of SMEs who operated a physical store alone at the start of the year have moved online completely, six per cent have kept their physical store and also started trading online and 71 per cent have kept just a physical store.
- Victoria has seen the biggest proportional shift towards online stores versus physical stores of any state.
- Around eight in 10 SMEs have had a reduction in revenue as a result of COVID-19, and while one in two SMEs are still feeling financially vulnerable or worse today, they are feeling more secure than they were in March.
Westpac’s Davidson Institute Financial Education specialist Lali Wiratunga said the results from the COVID-19 Tracking Report showed how resilient Australian small and medium sized businesses could be when faced with a once in a generation challenge.
“This year has been extremely challenging for many small businesses, but many have adapted. We’ve seen more change in the way businesses operate in the last year, than we’ve seen in a very long time.
“Many businesses, particularly those in Victoria, have shifted part or all of their business model online. What’s great to see, is that three-quarters (74%) say it’s made their business easier to run, and a further 60 per cent say its reduced operating costs,” said Mr Wiratunga.
Of the SMEs who permanently moved their business online:
- 74 per cent say moving the business online has made it easier to run
- 67 per cent are marketing the business online
- 60 per cent believe going online has reduced operating costs
- 59 per cent say moving online has increased revenue
Mr Wiratunga said there are several things SMEs should take into consideration before moving their business online.
“SMEs should consider whether an online model will effectively grow their market share and earnings and weigh up whether the time and money to grow an online business will increase revenue in the months and years to come.
“This means you need a good understanding of the business’ financial picture and ensure you’ve got the cashflow to run your business, in parallel to moving it online. Start by gathering the most up-to-date financial information, including the business’ month to month revenue figures, future turnover projections, cashflow forecasts and an accurate picture of your debt.
“Going online may also require a substantial amount of extra work and staffing. SMEs should consider and plan for how to effectively resource the online component of the business, while also running their traditional business.
“It’s also worth investigating what can be done to use online tools to better serve existing customers and communities before thinking about selling to new customers. There are quick wins that could be explored, like making better use of your businesses’ social media channels to connect with customers. From here you could review and prioritise opportunities for improvement across the business, for example by using artificial intelligence, automation and machine learning, you can better understand, anticipate and respond to improve the customer experience,” said Mr Wiratunga.
Tips for moving your business online:
- Build a website by registering a domain name and picking a web hosting service. There are many platforms that offer different tiered subscription models with a range of templates to choose from.
- Be prepared to serve your existing customers online.Consider pushing out high quality content on the website and social media channels to engage and serve existing customers.
- Communicate how your online presence helps your customers. Decide and confidently communicate how your online offering increases the value you offer to your customers. Think about the frequency of communications and channels you will use – including text, social media and email.
- Start selling online and you can be open 24 hours a day, seven days a week. Even if your customers still come to you in person, a well-designed e-commerce tool will act as your virtual salesperson.
- Develop a digital and social media marketing strategy even if your main customer base is local. This will make it easier for customers to find you (online and offline) and provide a platform to share instant updates about your business. Start by asking your customers what they would like to know about your company and where they would like to ‘hang out’ digitally eg Facebook, LinkedIn or Instagram.
- Declutter your business and get organised by moving your admin online to streamline processes. Make sure you have a safe and secure digital location for business documents. For example, take your bookkeeping online and save documents to the cloud.