Small Businesses at the Holiday Season: Facing Challenges and Grasping Opportunities

Female small business owner talks to a customer on the phone while standing in a dimly-lit office

Heading into the second major holiday shopping season of the pandemic, small businesses face many challenges: difficulty finding quality employees, increased prices and supply chain shortages, and fewer dollars circulating in the market. Despite the challenges, Small Business Saturday presents ripe opportunities for small businesses to invest in digital and omnichannel strategies to attract more customers and have a successful holiday sales season.

With 31.7 million small businesses operating in the United States as of November 2020, these types of organizations make up 99% of business in the country — and they were among the hardest hit by the pandemic. Those still in operation are looking for opportunities to grow their operations and expand their bottom lines.

American Express® founded Small Business Saturday (SBS) in 2010 in an effort to motivate consumers to spend more with small business retailers on the Saturday immediately following Thanksgiving. Last year, the 11th annual Small Business Saturday sales reached an all-time high of $19.8 billion. But despite record high sales on the most recent SBS, a majority of small business retailers report that their businesses have suffered amid the COVID-19 pandemic — and the challenges they've faced continue to present obstacles. Fortunately, there may be valuable opportunities on the horizon.ADPRU

Current challenges facing small businesses

According to data from the ADP Research Institute® (ADPRI), a top challenge for small businesses continues to be finding quality employees, especially as their teams grow. Nearly one-quarter of ADP small business clients increased the number of employees in the past six months, and more than one-third are planning an increase in the next six months.

Many small businesses have also found the need to raise prices since the pandemic began. ADPRI reports that while less than half of clients have raised the prices they charge their clients, two-thirds of those who have done so indicated that those increases are permanent.

Other key challenges for small businesses are market-wide trends. In a recent webcast, Nela Richardson, Chief Economist of ADP, noted that "there's been less government spending, fewer direct payments to households and fewer government dollars going into circulation, creating that demand that's had an effect on economic growth, slowing the economy marginally. That's translating into a harder environment for many of our small firms."

Coupled with supply chain shortages that have prompted small businesses to raise prices or, in some cases, drop certain offerings altogether, it's a particularly tough time for small business retailers.

Opportunities for Small Business Saturday

For small businesses to compete effectively in a crowded marketplace, visibility is key. Offering online promotions — such as digital advertising, online ordering, contactless payments and curbside pickup — is an essential component of an effective small business marketing strategy.

"One of the silver linings I've seen [from the pandemic] is how innovative businesses have become, even our small businesses," said Richardson. "If you think of contactless payments for the restaurant industry, moving to delivery and how many people are moving their sales from in-person to online. Just changing the nature of business in sales. That's been a huge innovation. I think that's going to stay with this. We're also seeing customers much more willing to engage in ecommerce."

The rapid shift toward embracing digital technology was born out of necessity, and now many businesses are looking ahead to understand how these innovations can continue benefiting them in the future.

In a recent episode of HR{preneur}, a podcast by ADP, host Jim Duffy talked with Kristen Fox, Strategic Partner Manager at Google Customer Solutions, about how small businesses can attract new customers during the holiday shopping season. Fox urged brands to ramp up digital and omnichannel strategies, citing an expected 25.5% increase in U.S. digital ad spending in 2021 (the fastest growth since 2018). "Given this increase, it will be critical for brands to cut through the noise to stay top of mind," said Fox. "To reach and influence consideration, brands need to rely on digital advertising methods that resonate with their customers."

Shop Small® Saturday to support small businesses

Small businesses have faced myriad challenges since the beginning of the pandemic, and heading into the second major holiday shopping season of the pandemic has many retailers nervous about what lies ahead. Thankfully, there are many ways to take advantage and maximize the opportunity.

Leaning into online promotion to gain more visibility can help small businesses compete for buyers' attention, make more sales and gain customer loyalty. The willingness to evolve, combined with the readiness to leverage technology solutions, will determine which small businesses thrive this holiday shopping season.

To learn more, launch the HR{preneur} podcast and listen to the full conversation about how small businesses can compete this year.