This is Part 1 of the Retail TouchPoints SMB Report. Part 2 will be featured in the December 3 newsletter.
Smart SMB retailers are investing in IT solutions to compete head-on with larger competitors. From mobile payment apps and web site optimization to CRM and email personalization, smaller-scale yet powerful retail technologies have prepared SMB retailers for stiff competition.
“Technology spending is key to keeping SMBs successful in an increasingly competitive market,” said Raymond Boggs, VP of SMB Research at IDC, in an interview with Retail TouchPoints. “SMB IT spending in the U.S. continues to rebound from the dip we saw during the economic downturn. We expect 2013 to finish with approximately $150 billion in SMB IT investments, with growth at more than twice the rate of GDP. By the end of 2016, we expect the annual SMB IT spend to be $20 billion higher than it is today, driven in large part by expanding investments in tablets, smartphones and related applications.”
Results from the Fall 2013 American Express OPEN study of small businesses showed that smaller retailers are no longer taking a “wait and see approach” to growing their businesses, but are poised for active expansion. In fact, 32% of respondents said growth is their top priority over the next year. In addition, among the small business owners surveyed:
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- 56% have a positive outlook on business prospects;
- 54% (up from 49% last year) said capital investments are a top priority;
- 43% are confident that their revenues will increase; and
- 35% (up from 29% last year) plan to hire.
To bring greater focus, and spend, to small businesses nationwide, American Express founded Small Business Saturday in 2010. The popular annual event, celebrated each Saturday after Thanksgiving, urges consumers to “shop small” in support of neighborhood SMBs. (For more SMB-related research from American Express, see this recent article in Retail TouchPoints.)
For example, at Dunn Bros Coffee, a chain of more than 80 locally owned coffee shops, Small Business Saturday “gives our local franchisees and other small businesses a day that shines a spotlight on their contributions to their communities,” said Laura Radewald, CMO for Dunn Bros. “Being a part of a supportive community is incredibly important to the success and growth of smaller retailers.”
Dunn Bros Brews-Up Mobile Payments And Loyalty App
To help franchisees increase sales, speed checkout and save money on payment processing fees, Dunn Bros has implemented a franchise-wide roll-out of a mobile payment and loyalty app. Powered by LevelUp, the app provides customers with a fast, easy payment experience, includes a list of the closest shop locations, and rewards loyal customers: The mobile app automatically unlocks $3 of Dunn Bros credit for every $50 customers spend.
When the roll-out completes, targeted for the end of December 2013, each Dunn Bros franchisee will have access to customer purchase data and the engagement tools. For example, store owners can segment customers by purchasing pattern then provide more relevant offers designed to increase sales and shopping frequency.
“Dunn Bros understands the importance of moving quickly in order to remain relevant to customers,” Radewald stated. “While others might be content to sit on the sidelines until a clear winner emerges in the mobile payments space, we’ve adopted an ‘act and iterate’ strategy, and [are seeing] a significant lift in the average ticket for app customers.”
The app helps franchisees compete with larger retailers in the coffee segment: “Consumers who pay with the app visit Dunn Bros more frequently, seem more willing to try new things and spend more per purchase than customers who don’t pay with the app,” said Radewald. “We believe a strong loyalty program is required to compete effectively today. Our customer base is increasingly price conscious, and the next generation of coffee drinkers expects to be rewarded for their purchases and loyalty.”
Combined Loyalty And Gift Card Sizzles For Hwy 55
Some SMBs now are leveraging complex loyalty and gift card technologies, once limited to larger retail chains, to drive sales and repeat business. Hwy 55 Burgers, Shakes & Fries, a quick-service restaurant chain and franchisee, helps store owners draw more business with a loyalty program that also functions as a gift card. Powered by FiveStars, the all-in-one loyalty and gift card stores pre-loaded values while engaging Hwy 55 customers with loyalty components. The strategy is designed to encourage gift card recipients to become repeat customers even after the balance is spent.
During the initial launch of the loyalty/gift card program in Q4 2012, Hwy 55 Burgers obtained more than $50,000 in gift card revenue from more than 3,000 customers ― a result primarily generated from holiday gift-giving. Now rolled out to all Hwy 55 locations, the program is poised for an even greater impact for the during the 2013 holiday season.
Digital Marketing Brings ‘Mom And Pop’ To A Google Top Eight
Many merchants that have been in business since before the digital revolution are discovering the benefits of new technologies. Everett Vacuum Sales & Service, for one, is a single-store, family-owned business established in 1944. In the past, the company relied only on word-of-mouth and a telephone book ad to draw new customers. In 2003 the family created a web site, reported Mike Lane, Co-owner of Everett Vacuum, “but we were too busy running the business and had no knowledge about how to update the site.”
Lane then was approached by Dex Media, a provider of digital marketing programs for small businesses, which proposed a more advanced way to market: An Internet package including updated PC/laptop and mobile websites; search engine marketing and optimization; Google+ and Facebook pages, reputation monitoring, call tracking services, a QR Code and more.
“The program gives us complete access to our online ratings and reviews, and puts full interaction and control in our hands,” Lane stated. After just two months, the digital package helped place Everett Vacuum “in the top eight results on Google, and we’re getting customers from areas where we never used to do business. Our new web site is clear and up-to-date, and our Facebook page is refreshed twice a week with current, industry-related topics.”
Social Media And Mobile Search Benefit SMBs
Social media components such as those in the Dex Media offering are becoming a larger part of SMB retailers’ online marketing programs: According to the fall 2013 American Express OPEN study of SMBs, more companies are using social media this year compared to last, primarily to:
- Attract new customers (71%, up from 57%);
- Drive sales (59%, up from 46%); and
- Create a dialogue with customers (55%, up from 31%).
At the same time, small businesses with mobile web sites are tapping into the nearly 86 million U.S. consumers now seeking local business information on their mobile phones, according to comScore research. The study revealed that consumers’ Number One activity on mobile devices is search, and that in just ten months, the total number of visitors to search sites via mobile devices had jumped by more than 26%, with local searches playing “a particularly important role.”
E-Commerce Platform And Plug-Ins Deliver Scale And Personalization
Smaller retailers also are realizing the benefits of working with third-party partners, rather than investing in the development of in-house solutions. Moxie Jean, an online children’s consignment store with three full-time employees, uses third-party partners for technologies that help the reseller compete head-on with much larger retail contemporaries. “My staff has no formal technical training, while one of my competitors has more than 10 program developers permanently on staff ― which equates to about $1 million a year in tech talent,” said Sharon Schneider, Founder of Moxie Jean. “I’m only paying a few hundred dollars a month and am competing quite successfully!”
