Unexpected Effects of COVID-19 on Business & Payments
The COVID-19 outbreak has been responsible for a huge shift in consumer behaviour, with 60% of global consumers reportedly changing their shopping habits during the pandemic.
Research by McKinsey makes it clear that national lockdowns resulted in the biggest changes for consumers. While in China and the US 75% of consumers reported trying a new shopping method during the outbreak, in Japan, which had no lockdown, the figure was only 33%. This demonstrates that, worldwide, consumer habits have been changed by necessity – rather than by choice.
However, the pandemic may bring about lasting changes in behaviour. As lockdown restrictions ease, hygiene concerns continue to make consumers cautious about traditional, in-store shopping, meaning that new shopping habits developed during the pandemic look set to continue for the moment.
In this article, we investigate some of the most notable effects of the COVID-19 pandemic on businesses – and how SMEs are adapting to survive and thrive in these new conditions.
A Boost for eCommerce
As COVID-19 took hold, many countries imposed lockdowns that confined people to their homes and closed the doors of all but “essential” businesses. As shopping in brick-and-mortar stores became more difficult and concerns about the risk of infection rose among consumers, eCommerce sales skyrocketed.
Online sales grew 25% in a two-week period of March 2020. To put this into perspective, over the last four years online sales have grown steadily at a rate of 14% compound annual growth rate (CAGR).
Although consumers have been focused on purchasing essentials like food, medicines, and cleaning products during the pandemic, eCommerce sales in clothing and beauty products have also seen more than 10% growth in their online consumer base.
A survey of US consumers pinpointed some of the key reasons for this eCommerce growth. The study found that 80% of consumers were currently less likely to shop in brick-and-mortar stores because of the virus; similarly, 76% of people said that they preferred to shop online in order to avoid the risk of infection in stores.
To adapt to these new shopping habits, more SMEs have embraced an omnichannel approach to business. According to one survey, a fifth of micro businesses say they have gone online for the first time during lockdown. Other businesses have strengthened their existing online shop by increasing their range of available products or offering new delivery options.
Cash in Decline
The pandemic has also impacted the way consumers pay for goods. Cash use has declined substantially: nearly half of surveyed consumers in Asia Pacific said they were using cash less often, and two thirds of consumers in Latin America said they were using cash less often or not at all.
This decline in cash is not simply the result of the rise of eCommerce, but because of the increasing popularity of electronic payment methods in-store.
When consumers go to a brick-and-mortar store in the present climate, they want their visit to be as quick and hygienic as possible, to limit any exposure to the virus. That’s where contactless payments come in. Payment via a contactless card or mobile device reduces contact with surfaces and allows the customer to pay and leave the store more quickly.
With 64% of consumers in Europe now saying that they prefer to use contactless payments in-store, it’s important that SMEs are set up with a facility to accept these payments. This not only demonstrates a concern for customer convenience but also for their safety, and the safety of staff members.
Click and Collect on the Up
Another change during the pandemic has been the increasing popularity of collection services for goods – whether to reduce crowding in stores or for restaurants to offer takeaway options instead of eat-in.
The BOPIS model (buy online pick up in-store), in particular, has experienced 34% growth over six weeks of the pandemic, according to McKinsey. This system allows consumers to avoid long queues at socially distanced stores and avoid prolonged contact with other shoppers once inside.
Interestingly, 59% of consumers intend to continue using BOPIS services in the long term, even once the risk of the virus is reduced.
Kerb-side pick-up or BOPIS can be useful options for SMEs to consider, as they encourage customers to continue patronising their businesses even if they don’t want to enter the store itself. It can also be a cost-effective solution compared to offering delivery, particularly if the business has a strong local client base who are happy to come and collect.
Supporting Local Businesses
The COVID-19 outbreak has prompted more consumers to shop locally. Travel restrictions during lockdowns made this a matter of practicality, but it seems that consumers are also understandably keen to support local businesses when they’ve been hit hard by the pandemic.
In the US, 62% of consumers surveyed said that the outbreak had made them more aware of local or independent brands they can buy from, while 69% said that it had made them more likely to support local or independent retailers. In the UK, small independent stores had 69% more sales in the three months leading up to 20th June.
Global research by Accenture found that, in the wake of the pandemic, consumers not only want to shop locally but they also want to buy locally-produced goods. This might mean buying food from a nearby farm shop, or beer from a local micro-brewery.
So although the pandemic has brought financial difficulties for many small businesses, if they can weather the storm then they may benefit in the long run from this shift towards buying local. And we’ve seen a “together stronger” mentality help in this regard when we spoke to ARCAD – a community in a Swiss Alps village that has grouped together to boost commercial activity and support local merchants.
Summary: The Effects of COVID-19 on SME Commerce & Payments
COVID-19 has caused consumers across the world to adopt new shopping habits, whether because of practicality during lockdown or extra safety concerns related to the virus.
eCommerce has grown as house-bound consumers sought new ways to buy essential goods, while contactless payments have gained popularity as a safer alternative to cash. Consumers are also ordering online and collecting from stores or the kerb-side as a way to avoid crowds.
However, this move towards online shopping and electronic payments has not stopped consumers from supporting local, independent businesses. Despite being able to order goods from anywhere in the world, consumers are still choosing to shop local.
This suggests that SMEs adopting a flexible, omnichannel approach, with a combination of an online shop and a strong local presence, have the potential to thrive in spite of the challenges that have been brought by COVID-19 in 2020 and beyond.