What Does The Future Hold For Small Businesses in the UK?
Chancellor Rishi Sunak may be talking about a severe recession, but not all financial experts share his pessimistic outlook. Bank of England Governor, Andrew Bailey, has said his belief is that Britain's economy will bounce back strongly after the end of lockdown.
Certainly, now that the lockdown measures are starting to be relaxed, the world seems keen to get back to work.
Of course, business everywhere may be slow initially as people deal with the financial shock of lockdown and try to get their finances back in order. Most business owners are currently looking at their immediate survival rather than the future. However, the future is coming and it is time to start looking at how your business will survive then.
So what about your business? It looks as though there will be a difficult few months - but will it be business as usual afterwards?
What the future holds for you may depend on what kind of business you are in.
If you are a retailer, things may have changed dramatically
Head of Marks and Spencer, Steve Rowe, has suggested that customers "may never shop the same way again" after the coronavirus crisis.
When the boss of Britain’s best-known retailer believes that the industry will be changing, it makes sense to take notice. The pandemic has driven some major changes and, while some customers and some customer habits will return to normal, others will have been changed forever by the experience of lockdown and the virus.
Some of those changes will affect you and your shop – even if your retail empire is not on the same scale as M&S. Because Marks and Spencer offer everything from food to clothes and from furniture to gifts, their view could be important for the lookout for your own retail business, whatever sector you work in.
So what are the changes he is looking at?
Customers are going online
The move to online shopping has been accelerating in recent years. Most people have been tentatively trying buying online for the past few years – hence the unstoppable growth of Amazon.
But with most bricks and mortar shops under lockdown, online shopping has become mainstream. Books were the gateway for the Amazon habit. Now it is possible to buy almost anything from the retail giant that it has become.
Of course, it is not just books, music and household goods and not just Amazon. Online fashion house Farfetch is changing the rules for fashion, with designer names alongside the high street brands – and all available for online purchase.
What is even more significant is that everyday shopping is now being threatened by online. All the major supermarket chains, including Marks and Spencer, are now looking at delivery services. With social distancing taking shopping in person back into the 1950s, with queues and at times rationing - not to mention masks and surgical gloves - it is hardly surprising that thousands of people are swapping a trip to their local supermarket every few days for a weekly delivery.
It is becoming hard to imagine that, now customers have realised that it is the perfect answer to the challenges of lockdown - and established a repeat order - that they will have any reason to go back to old-style physical shopping.
“I used to shop three or four times a week. I could not carry on doing that with all the restrictions on shopping. So getting the family shop delivered instead made sense. It saves time, and all the hassles of parking and carrying bags. I’m going to do all my shopping online in future.”
Interestingly, many people are going back to their laptop for their shopping - rather than using their smartphone. This reflects the simple fact they are at home, with room to use a larger device, rather than trying to cram in shopping on the go on their phone as part of their commute. Desktop visits were up 38% in comparison with the same period last year.
The M&S experts observed that online shoppers are now browsing earlier in the day, between 15:00 and 17:00 - which would have been desk time when work was office-based but may now come as personal time when the day's tasks have been finished for home workers.
Buying online and getting everything delivered has affected what people buy as well as how they buy it.
The retailer has also found that, as shoppers are visiting the shops less, they are planning what to eat further in advance.
The Marks and Spencer experience is that customers are buying bigger product packs and more frozen items. These are up by 75% on the year in the UK. It also looks as though with more time to spend at home, more people are cooking from scratch rather than buying ready meals. Sales of flour and other basics seem to be increasing.
With online shopping replacing physical shopping in bricks and mortar stores, delivery is becoming key to profitability. Marks and Spencer has recognised that it has lagged behind the other chains in not having a delivery service of its own and it is now working to catch up with its rivals. The firm said last year that it had bought a 50% share of online supermarket Ocado's retail business for £750m. Ocado is, of course, one of the success stories of recent years, and had built up its reputation as a delivery service working with Waitrose.
Marks and Spencer will start working with Ocado from September this year and have said that more than 1,000 non-food items would also be available for delivery through its tie-up with Ocado. Customers will soon be able to buy such things as cushions or their underwear alongside their eggs, bread and ready meals.
The lockdown seems to have accelerated the trend to delivery, rather than traditional shopping. Busy schedules - and busy roads and car parks - were already making traditional shopping difficult. It looks likely that the delivery habit is here to stay.
What about other small businesses?
Some businesses may seem to be largely unaffected by the shutdown - and have simply kept working.
However, many office businesses have been forced to adopt working from home.
The coronavirus crisis has forced many firms that were initially reluctant to allow home working to adopt the practice. It has also forced them to ask if the office is necessary for modern businesses to function. It may have made sense at a time when offices depended on typing pools and paper documents on in-trays to function, but office technology has moved on. Many businesses are seeing that it makes little sense for their staff to travel into city centres and take up costly space to work alone, two metres away from each other, at desks or in cubicles, every single day of the working week.
The surprising fact that many businesses are finding working from home actually increases productivity will accelerate the process.
So what should you do to secure your future?
There are several steps you may need to take now to ensure that your business really has a future.
The first is to deal with the next few months - when income may be slow coming in, and the debts built up during lockdown will need to be paid. At Rangewell we can help, with short-term Cashflow Loans.
The second is to look at the changes that have been triggered by the crisis, and realise that the world and your business will not be going back to the way things were before.
So if you are a retailer, you need to recognise that people may be less keen on physical shopping and much more enthusiastic about deliveries.
Being able to offer an online service and delivery may be essential.
Creating an online shop is now well within the reach of any retailer. There are off-the-shelf packages that you can use, and simply slot in your own products and pricing - but you may want to use a web design business to create a customised site that reflects your business and the goodwill it has built up in the real world.
You can easily use a delivery service to take care of getting goods to your customers - although you may find, if your business is local, that you can provide the service you need with a driver and a van.
But whatever route you go down, you will need to invest to deal with the new retail realities. A basic e-commerce website can easily cost upwards of £5,000, and will require additional support with social media to bring customers in.
If you are looking at adopting remote working, you will also need to invest in your network and IT.
At Rangewell we can help find the most cost-effective ways to bring in the equipment and services you need.
Of course, money may be in short supply in your business, but the consequences of not investing could be catastrophic. We can help find solutions, with a variety of lending products.
A business loan could be very cost-effective in the current financial climate, with low rates and longer terms, and it may be possible to obtain government-backed funding schemes to reduce costs still further.
We may also be able to provide other less conventional solutions. A Merchant Cash Advance is a cash advance secured on the takings your retail business enjoys from customers who pay with a card. A percentage of each payment is automatically diverted to the lender - ensuring that your repayments keep pace with the amount of business you do, and avoiding any need to budget for payments yourself.
As business funding experts we can work with you to find the most appropriate solution to your funding needs and the most appropriate lender to provide them.
As the worst of the crisis starts to recede, the new economic realities may be harsh. Getting our support to ensure you have the finances to deal with them could be essential.
Call us today.