How Small Businesses Can Adapt to Changing Consumer Behavior

Small businesses have faced immense challenges as they’ve been fully or partially shut down in 2020. According to U.S. Census data, nearly 80% of small businesses reported a moderate or large negative effect as recently as of mid-August. 

But after a difficult spring and early summer, during which time one in five businesses reported applying for and receiving loans from the Paycheck Protection Program (PPP), the landscape is beginning to look up. Small businesses are increasingly reopening, with 86% reporting that they are either fully (52%) or partially (34%) open. 

However, as businesses reopen, they must address changes to consumer behavior and increased concerns about health and safety.

The Consumer Behavior Shift

In 2020, people in many parts of the U.S. were sequestered at home for weeks or months, adjusting to life without their favorite restaurants, local shops, and personal and professional services like cleaning or child care. Rising unemployment also impacted consumer spending, with a nearly 30% drop in spending on food services and accommodations, and 32% on recreation by mid-spring. 

These factors have resulted in changes to consumer behavior. And as 68% of Americans continue to avoid engaging in “normal” levels of out-of-home activity, businesses that are reopening will have to contend with particular shifts.

Increased Concern About Health and Safety

“The biggest challenge right now is the continuing health crisis because it is directly impacting consumer confidence,” Sarah Crozier, spokesperson for the Main Street Alliance, told The Balance via email. “Small businesses need customers to feel safe coming into their establishments.”

More Online Ordering, Less In-Store Shopping

Spending at brick-and-mortar retail is expected to decline 14% in 2020 due to the accelerated shift to online retail. Meanwhile, contactless, click-and-collect commerce like curbside pickup has been highly favored by consumers, with an overwhelming majority saying that businesses should continue offering these options moving forward. Overall, consumers have increased their reliance on digital technology.

Changes to Purchasing Choices

Due to shortages and changes in frequency of shopping trips in 2020, some consumers may have changed their purchasing choices.

In an email interview with The Balance, Lars Perner, Assistant Professor of Clinical Marketing at the USC Marshall School of Business said, “People may have gotten out of the habit of buying certain things (such as fresh bagels), a behavior that may last after the crisis.”

Centralizing Work, School, and Shopping at Home

According to a recent study, people began to localize at home because they were unable to move around as freely during closures and stay-at-home orders. This means a decrease in venue-specific events such as, for example, banquet hall weddings and birthdays in bars, which have now changed to Zoom nuptials and car parades, respectively.

Readjusting Marketing Strategy

Shifts in consumer behavior have required small businesses to readjust their marketing strategy as they reopen. 

Cindy Solomon, co-founder of A Mom’s Village, a Massachusetts-based club that offers boutique fitness classes, children’s enrichments, and other amenities, spoke with The Balance via email.

“There have been very large shifts in the needs and behavior of our clients since reopening in early July,” she said. “Our clients have been very cautious about returning to fitness and child enrichment programs.”

Solomon said that as a result, A Mom’s Village has shifted from entirely in-person classes to a combination of indoor and outdoor fitness along with virtual fitness classes and children’s enrichment to allow members to feel safe in the environment of their choosing. The company has also created a virtual library of fitness and enrichment classes, Solomon said.

This shift to meeting the customer where they are comfortable is a common theme for small businesses as they consider how to reopen. There are several effective strategies that can be implemented to achieve this.

Build Your Online Presence 

For many small businesses, a shutdown was an opportunity to build a social media presence that kept them connected to their customers. 

Leverage Your Community

“Small businesses are part of the culture and life of our communities,” Crozier said. “The small businesses that are going to come out of this are those that have strong community support.”

Crozier recommends providing at-home experiences and other creative ways to stay connected so that customers understand that these events, places, and communities can’t be replicated, and then return when it’s safe to do so. 

Publicize Your Safety Measures 

Perner suggested that small businesses make it clear to customers what they are doing to keep both visitors and employees safe so that people feel comfortable visiting the establishment.

“Emphasizing safety will appeal to a large portion of the population,” he said.

Partner With Other Local Businesses 

Community and partnership is key to getting through any crisis. Support and raise up other local businesses by running cross-promotions or simply engaging with them on social media and sharing out their content. You’ll expand your audience of target customers while also helping build the overall business community you’re part of.

Meet Customers Where They Are

Many people want to support local businesses, but perhaps aren’t feeling confident about shopping in-store. Even as you resume normal operations, keep some of your current services, like curbside pickup or online reservations. This provides a contactless way for people to continue to patronize your business at their own comfort level.

Communicate via Email

Email marketers have seen large jumps in open and conversion rates in 2020 as people spend more time at home and shopping online. 

Tools That Can Benefit Small Businesses

Small businesses are integrating a number of new tools and strategies into their reopening plans, primarily with the goal of keeping customers and employees safe and comfortable. 

• Contactless payments: There has been an increased use of contactless payment options, like tap-and-go payments, digital wallets, or online prepaying to avoid unnecessary person-to-person contact.
• Google small business tools: As consumers shift to online shopping and reservations, even as they are patronizing local businesses, ensuring that your Google for Small Business profile is up to date is a key (and free) way to ensure you’re easily found during a search. Google also provides a suite of free and paid tools to enhance your digital presence and help customers continue to find you, even if they are shopping less in person.
• Plexiglass separators: Many small businesses have begun incorporating sneeze and cough guards into their storefronts. For example, Solomon told us that her business, A Mom’s Village, set up “pods” in the fitness room so that people can social distance with a barrier and workout inside safely.
• Employee personal protective equipment (PPE): To meet consumer concern for both their own safety and that of employees, many companies are investing in PPE for employees. For example, Claire Zeysing, CEO and founder of Las Vegas house cleaning service Make It Shine, told The Balance via email that the use of personal protective equipment is essential for their cleaners. Just as other businesses are doing, Zeysing said she plans to provide all of her employees with it, while also making foot booties mandatory.
• Thermal scanners: Some companies are investing in thermal scanners to detect if people are entering a building with a high temperature. 

The Bottom Line

As small businesses reopen, there’s no doubt that the landscape is and will be quite different. But with a combination of technology, smart marketing strategy, and improved safety protocols, businesses can continue to serve their customers effectively in a dramatically changing environment.