Can digital transformation save dying Main St. America?

We talk a lot in this class about big companies (we know, we know, FAANG are cool), but what about the little guys?

When people think of quintessential America, they picture walking up a tree-lined Main Street, peeking into the little independently owned shops, and seeing good hard-working folks making an honest living. These businesses are community centers: a place to go and chat with neighbors and support your local economy through buying and selling locally.

Well, that vision has been fleeting for some time now – starting with large department stores like Walmart coming in and pushing small business owners out with lower prices, convenient service, and better quality. Next came Amazon, allowing customers access to any product they could ask for, right at their fingertips, available for delivery to their door within 2 days. They too pushed small American business owners out with lower prices, even taking it to the next level by copying successful products, manufacturing them abroad, and undercutting the original sellers, promoting them in searches above the independent products themselves.

And if you thought that was bad, in strolled COVID-19, wreaking havoc on any business relying on in-person shoppers, and favoring the explosion of other large e-commerce retailers – making the rich richer, and making the environment even harder for a small business to thrive.

These small & medium businesses (SMBs) are vital – According to AirCall, small businesses contributed 48% ($17 trillion U.S. currency) to the GDP of the U.K., the U.S., Germany, France, and Canada. Moreover, research says small businesses that digitize processes could increase GDP growth by an additional 5.6% ($2.3 trillion U.S. currency) by 2024. We need them to make our economy go.

So where do local small business owners turn? How can they still make a living in America?

Let’s follow a hypothetical small business that will demonstrate the steps, technologies, and culture changes needed to digitally transform, quickly, to support the new age of consumers.

Julie owns a small jewelry shop based in Ashville, North Carolina. She relies on a healthy mix of tourists and locals coming into the shop for their jewelry needs. When COVID came in the spring of 2020, her business was forced to close. Quickly, it became evident that Julie wouldn’t be able to re-open her shop for a long time, and that when she did, it wasn’t likely that many tourists would be around to buy. How can she reach her customers? She doesn’t know a thing about online selling.

  • First, she has to move from in-person retail, to an e-commerce model. The #1 company I found in my research to help SMBs do this is Shopify. Shopify consolidates sales, shipping, payment processing, and more, all onto one centralized platform, making it easy for Julie to create and manage her ecommerce site. When she is able to reopen her shop in due time, she can continue with Shopify as the POS technology too, integrating everything seamlessly. Shopify can even help Julie create, execute and analyze digital marketing campaigns. BigCommerce and Adobe’s Magento are competitors here, and others like Salesforce do one piece of the pie very well, but Shopify seems to be the Tom Brady of the category. The best part is, they provide support for less tech-savvy owners, like Julie.
  • Julie also asks around to customers she knows well, and finds that because she offers Shop Pay, folks are way more likely to go onto her site and actually follow through with completing their order, because it’s so easy (as a side-note, I personally was online shopping this past weekend, and with Shop Pay it’s literally one click and your credit card, address, delivery preference, etc. are autopopulated, so it allowed me to shop much faster). Google pay and others also do this, but having all the business systems with Shopify will help her integrate all of the information and keep track more easily, plus probably save her a few bucks for using more of their services.
  • Pickup and Delivery service is another beast, and although she can track via Shopify, she may need to make an agreement with a carrier on her own. FedEx and UPS are fighting over SMB share right now, and have both recently increased prices a lucrative 5.9%. Luckily, companies like Reveel will help you negotiate against the big guys for lower rates.
  • Next, she must begin to market on digital channels. Two Boston based tech companies are helping SMBs tackle this relatively new and urgent frontier: Hubspot and Klaviyo. Klaviyo helps small businesses with targeted, personalized email and SMS campaigns. It also integrates with Shopify seamlessly. Hubspot offers a wide suite of products, but it’s their Marketing Hub that is the bread & butter, helping small businesses grow traffic, convert visitors, and scale campaigns. Loyalty marketing is all the rage right now. Setting up subscription services or rewards programs is the best way to build a following and get repeat buyers, not to mention manage more predictable recurring income – and these companies can help. Perhaps the most effective digital marketing tool is simply social media marketing. Facebook, Instagram, and more can be cheap and effective places to reach targeted consumers, and with built-in shopping platforms now, users can buy right from the site. Instagram influencer partnerships, for example, are often the catalyst for small online businesses to skyrocket sales in a short period of time.
  • Lastly, once Julie establishes her online presence, she can scale using these same cloud tools. By having her data and operations in Shopify, Google drive (for documentation), Quickbooks (for accounting), and others, SMBs can pay only for what they use, and gain serious value from accessing info when and where they need it.
the e-commerce lifecycle

Now, this is all much easier said than done. According to a study from Cisco, only 24% of SMBs are in the most advanced stages of digital transformation, and only 4% are born in the digital world (digitally native). Thus, when mom-and-pop shops try to pivot to e-commerce, there are many opportunities for failure. Harvard Business Review says that the most important needs are bringing business analytics expertise onto your leadership team, and changing how your organization makes decisions. In my opinion, it’s not possible to just upend your “leadership team” if your leadership team is simply yourself. I’d recommend instead that SMBs utilize platforms that offer strong consultative services as part of the package, to get access to people who understand this stuff well.

I hope this was a successful exercise in putting yourselves in the shoes of a small business owner, to understand the uphill battle they face, yet the opportunity that awaits if they can move to a digital model. I missed lots of stuff, feel free to chime in in the comments on things like cybersecurity, AI, and automation. I hope as you do your holiday shopping this year, that you keep local businesses in mind!

P.S. if you haven’t started, I recommend you get going on your holiday shopping (in case you live under a rock, the supply chain is a train wreck).

Further Reading

10 comments

  1. I enjoyed the narrative perspective, taking us through the SMB owner’s journey to online platforms. One question I was left wondering about was how does Shopify adjust rates based on the size and sales of the companies they transform? Since these businesses already struggled given the pandemic, I wonder if the cost of digitally transforming turned some of the SMBs away.

    Also, last note: SMBs should strongly consider subscription services. This business model continues to roll in the revenue (even if consumers aren’t constantly interacting with the platform) and offers a strong starting point for businesses looking to grow. A couple of years ago, my dad signed up for Wen conditioner (a subscription based service for hair products) and numerous amounts of products continued to show up at our door – until he finally remembered to cancel. Unfortunately, we still have Wen conditioner from 5 years ago stored at our house.

  2. Seriously one of the better blog posts of the semester!! I thought you presented this information in such a clear and concise way that it made me want to open a SMB and get going on shopify. Seriously though, I wonder how you frame this with SMB’s that are service based rather than good based. I know its probably an entirely different approach, but just my thought!

  3. Great walkthrough of an example small business. @shannonreardon22 makes an interesting point about subscription models for SMBs. I wonder if there is a significant demographic shift for small business owners due to covid. I also wonder if expanded broadband in the new infrastructure deal will bring in more rural small businesses to this shift towards digital. (definitely thinking more long term). Are there any small businesses you have encountered that have surprised you in their adoption of digital platforms?

  4. Great post! I applaud the strategy of following the persona of Julie through all the steps, as for me it made the entire process chain more tangible and accessible. The power of story!

  5. I was in Dallas 2 weeks ago and was blown away by how empty and depressing downtown was. It seemed like 70% of storefronts were closed. Seeing the same sort of thing on a smaller scale around downtown crossing where whole buildings are being advertised as vacant has me hoping maybe these spaces will be rethought. With connectivity capabilities that digital technologies bring, it would be neat to see a way where the spaces could be shared by small businesses. Maybe with rents where they are it doesn’t make sense for a single tenant to use the space anymore? VR could bring a lot to the table here if consumers could experience multiple brands offerings from one site.

  6. Well-written blog! A few weeks ago I learned that my sister-in-law also uses Shopify. I asked her why not Etsy (a shop I’m more familiar with)? She explained that she has had to jump between several e-commerce shops because as soon as they get really popular, the shops typically push more costs to the small business or consumer. It seems counterintuitive to me because more business + same fixed costs = more revenue. She said several of her small-business acquaintances have had to find new sources of e-commerce that are known enough to actually get sales, but not so popular that the rates they charge on the small business and customers become an issue. It’s an interesting dilemma that most consumers don’t think about.

  7. Great post! I believe we even spoke in class about how the recent digital transformations are finally giving small businesses the power and ability to punch above their own class, which is exciting! Though the convenience of Amazon is great, it’s small businesses where you can get great quality and value for just a bit more cost. Even when you order food from local restaurants, most of these places have their own website in which you can order pickup or delivery at the same cost as it would be for Uber Eats. Just in this case Uber Eats doesn’t charge the business for the use. Before the pandemic, I don’t think that would even be an option without these small businesses finally digitalizing with the new cloud tools.

  8. I want to shop at SMBs, but it often feels like I’m doing charity – I prefer seeing all my options online and getting the best bang for my buck (not to mention, the waste of billable hours when I’m out shopping in real life!). Shannon’s subscription model is interesting. Even more interesting would be what something like Etsy is doing, but a backend tool that helps these SMBs collaborate on the back-end to gain scale. Besides convenience, higher costs is the obvious deterrent of consumers. I’d be curious to hear what potential issues that has. Seems like such Teaming agreements would be helpful (although, not sure of the anti-trust implications in this sort of separate company model). I see it sort of like insurance pooling.

  9. Nice blog Jake. I think something also very relevant to consider is if Julie has employees. Particularly right now with all the labor shortage and folks hoping around to different jobs. Much like the big employers enjoy the perks you called out above, they also have the ability to pay people more than your typical small business. I think SMBs decisions regarding their digital technologies can you really make a difference regarding what they ultimately can pay and provide their employees. I agree with many of the call outs above that it’s been depressing to see downtowns and shopping areas not as lively as they used to be. Hopefully digital transformation can help bring some life back to Main Street!

  10. Great blog post! I will echo some of the comments made earlier – when the social distancing and mask regulations loosened over the summer I made my first trip back to my local mall. I was so shocked and surprised to see that most of the stores had shut down, I’m not just talking about small businesses but stores such as Banana Republic and J Crew. For small businesses, establishing an online presence is essential for their existence as consumer preferences have shifted!

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