5 Ways COVID-19 Will Affect SMBs on Shopify in 2021

Posted by Billy Gray on

5 Ways COVID-19 Will Affect SMBs on Shopify in 2021

2020 will forever be remembered as the year the earth stood still. Except, the reality was quite different. People might have been stuck at home under lockdown, but a booming eCommerce wave and the logistics infrastructure behind it were moving around more than ever before. 

There has been a lot of talk about how eCommerce trends will develop in 2021, particularly with regard to small businesses on Shopify and other platforms. 

The coronavirus pandemic had a devastating impact on the global economy, with tourism, hospitality, and brick and mortar stores taking the brunt of the downturn. Yet still, small businesses can gain from making the switch to eCommerce. 

How has COVID-19 already affected eCommerce?

COVID-19 has made consumers spend less. Research suggests that 79% of shoppers say they’ll continue to be more frugal with spending in the coming months. Still, this doesn’t mean that every industry is suffering. 

There’s been massive year-on-year growth of orders in services, hardware, entertainment, and other industries, no doubt a result of people being stuck at home on lockdown and looking for new ways to entertain themselves.

ecommerce sme growth by category 2020
Services and recreational products have massive growth in 2020. Source: Bazaarvoice

Most of the increase in sales has taken place online, with 62% of people say they now shop more online than before the pandemic. This has led to massive growth in eCommerce’s share of the global retail market, including a whopping 10 years’ growth of eCommerce penetration in just three months in the US.

us ecommerce growth 2020 covid

US eCommerce penetration saw a staggering 10-years growth in just 90 days. Source: Shopify Plus

A not-so-happy anniversary 

We’re now passing our one year anniversary with the pandemic and e-merchants are right to assess how COVID-19 will affect small businesses on Shopify in 2021. 

It’s dizzying to think about how much the world has changed in a year. We’re going to take a look at trends predicted by several major institutions and companies, such as the UN and Shopify.

Here’s what 2021 will look like for eCommerce. 

What a post-Covid-19 world will look like

The expansion of eCommerce will continue in 2021 and beyond. The acceleration of growth in digital sales channels has led to fiercer competition in the digital space and businesses are spending more energy on their online strategies as a result. 

But with the growth of eCommerce comes new opportunities. 

UNCTAD shows eCommerce boom in emerging economies

A report by UNCTAD (United Nations Conference on Trade and Development) suggests that while all countries will likely report lower spending in 2021, there will be increased opportunity for digital growth. 

In particular, emerging economies in the APAC region and elsewhere are seeing a large increase in online spending.

unctad online shopping growth emerging economies

Western developed countries saw lower increases in online spending because they already shop more frequently online. Source: UNCTAD.

Emerging economies were responsible for most of the world’s new middle class, with Asia taking on some 87% of it. China and India will together represent some 43% of the global middle class by 2030. 

Small and medium-sized businesses (SMBs) in emerging economies are switching online as internet access becomes standard in these countries and the emerging middle class there gains more spending power. 

A Danish study shows a glimpse of a post-COVID world

You may have seen your grandma on Facebook recently. A study published by Deloitte shows that older people are shopping online much more than before due to COVID-19. This is likely because they’re so much more vulnerable to the virus and thus are going outside less. 

People surveyed said that the pandemic blowback would likely cause them to socially distance to some degree for years to come. 

Importantly, convenience was shown to be more important than price as a reason for shopping online. This has led to a logistics battle in which contactless, local, and same-day delivery are of growing importance to win over consumers. 

5 ways COVID-19 will affect SMBs on Shopify in 2021

Small businesses will be looking to online sales channels to keep themselves afloat in 2021. Countries in Europe and elsewhere have already seen shops on their high streets boarded up as Amazon sucked up brick and mortar business. 

A report concluded that up to 14% of UK high street, retail park, and shopping center outlets could be left vacant due to COVID-19. This amounts to more than 18,000 empty stores across the country. 

The effects of the coronavirus pandemic on SMBs on Shopify stores are less obvious. It appears at first glance that eCommerce is booming, but the story is a little more complicated than that. 

Here are five ways that COVID-19 will affect SMBs on Shopify in 2021 and beyond. 

Businesses will look to diversify suppliers

Many small businesses - and large ones - were hit hard when the coronavirus outbreak hit China. Factories were closed and shipping was halted causing the main supply chain of many small businesses to dry up. 

This hit small businesses on Shopify particularly hard. Another outbreak in China could cause further breaks in the supply chain and this coil has devastated Shopify businesses around the world. 

As a result of this, many merchants are looking to diversify their suppliers so that future outbreaks don’t have such a hard effect. A report by Digital Commerce 360 showed that 19% of merchants were already seeking alternative suppliers, and a further 23% were aggressively monitoring shipments from the country.

diversify suppliers away from china sme ecommerce

Many small businesses are looking to move away from dependence on Chinese suppliers to avoid future problems due to coronavirus. 

US sanctions against Chinese imports also affected American companies’ attitudes towards suppliers from the country. 

But small businesses will find it difficult to quickly source alternatives to the world’s largest manufacturing hub. 

Factories relocate from China

Companies have been relocating their factories from China at an increasing rate even before the coronavirus outbreak, largely due to wage increases in the country. This includes Samsung, Nintendo, GoPro, Apple, and Hasbro. 

Emerging economies like Vietnam, Taiwan, and Mexico have been popular choices to move factories to. Vietnam and Taiwan look especially attractive right now due to their success in containing the coronavirus. 

This trend will likely make it easier for small businesses to diversify to a wider global reach and prevent future stoppages in supply. 

Omnichannel services will become essential

Small businesses on Shopify will increasingly have to take advantage of new sales, delivery, and marketing channels to expand their reach and boost revenue. 

Social media marketing will take on more significance as these platforms increasingly become absorbed into the traditional SEO space. Search engines don’t cut it alone anymore. It’s necessary for small businesses to be discoverable on social media search as well as Google and Bing. 

More companies are moving online and this means traditional digital marketing methods will become more competitive. Merchants will have to turn to alternative social media and search platforms to get discovered. These include: 

  • TikTok
  • Pinterest 
  • Instagram influencer marketing 
  • Bing
  • Reddit 
  • Quora 
  • Advertising on other Shopify stores
  • Affiliate marketing 
  • YouTube 
  • Twitter 

Simply listing products on Google and sharing posts on Facebook will not be enough. Merchants will have to take advantage of several channels to ensure discoverability. 

For example, the number of US households that own a smart TV is expected to reach 84% by 2024. This is expected to lead to a boom in connected-TV ads. Small businesses would do well to take advantage of this platform before the cost of advertising here rises. 

Local and curbside pickup 

Customers are increasingly choosing curbside and local pickup options over traditional shipping methods. 64% of shoppers say they’re choosing curbside pick up more than they did before the pandemic

curbside local pickup shopify consumer

Curbside and local pickup is becoming more popular around the world. Source: Shopify Future of Commerce 2021

On top of that, shoppers who choose local pickup on Shopify from May to August 2020 spent 23% more and had a 25% bigger cart size.

Small businesses on Shopify should offer local delivery and curbside pickup to meet with current consumer trends during and after the pandemic.  

Rising acquisition costs will make retention more important 

CPC advertising on Facebook and Google is getting more expensive, upping customer acquisition costs for small businesses. This will make customer retention more important going into the future. 

Paid search costs increased 17% towards the end of 2020, rebounding after a pandemic-induced decline, and paid social advertising went up an eye-watering 23%. This will cause small businesses with lower marketing budgets to look to save money while still maintaining a steady flow of customers. 

The best way to do this will be to retarget existing customers. Research shows that a 5% increase in customer retention can increase profits by 25% to 95%. On average, repeat customers spend up to 300% more than new customers. 

Building loyalty with existing customers will take on new significance as independent brands try their best to keep costs down and keep shoppers coming back for more.

Ways to retain customers include:

  1. Using analytics to identify your best customers and their conversion paths. 
  2. Making a loyalty program - customers on them are 47% more likely to make a second purchase.
  3. Building a subscription-based product into your catalog 
  4. Offering ‘subscribe and save’ 
  5. Focusing on retargeting ads 

Social commerce will expand exponentially 

Social commerce is already booming, but it’s about to explode on an atomic scale. The new Facebook Shops and Instagram Shops, as well as Shopify’s partnership with Google Shopping, will allow merchants to list products for free on social media and reach potentially millions of people. 

Facebook Shops and Instagram Shops, in particular, will lead the charge in the new social commerce invasion. These mobile-first shopfronts will allow anyone to quickly set up an eCommerce store without having to spend a penny.

sales on social media shopify 2020

Young shoppers in the UK, Spain, and France are most likely to shop on social media. Source: Shopify Future of Commerce 2021.

Already, 30% of shoppers say they would buy directly within Facebook, Instagram, Twitter, Pinterest, or Snapchat. A further 70% say they research products on social media before buying them. 

Social media platforms have become search engines in and of themselves and their power to become engines of brand and product discoverability is being unleashed. 

Examples of this power are already being seen. Nike partnered with Snapchat to promote the new Air Jordan III “Tinker” and the sneakers sold out in just 23 minutes. 

The need for new sales and marketing channels, as well as the realization of social media companies that they could easily dominate eCommerce, will ensure social commerce explodes. Small businesses should jump on this train while it’s still got seats available. 

People are going to choose independent businesses

This is good news for small businesses on Shopify. Consumers are increasingly willing to support independent businesses. Some of the most common reasons are to improve the local economy, reduce their environmental impact when shopping, and increase local employment. 

A recent Shopify report found that 50% of consumers look for independently-owned businesses to support, while a further 65% say they support small businesses.

ecommerce shopify sme statistics

Consumers in Spain, New Zealand, and the US are the most likely to support small businesses. Source: Shopify Future of Commerce 2021.

Small businesses on Shopify can take advantage of this growing trend by localizing their business. This includes offering local shipping, curbside pickup, and reaching out to the local community through targeted ads, localized marketing campaigns, and partnerships with local organizations and businesses. 

Conversational commerce

Conversational commerce is when merchants chat directly to consumers through messenger, phone calls, or other channels. This helps to build a genuine connection between the brand and the customer and drives up conversions. 

Sales on Shopify attributed to chat channels rose 185% between March 16th and July 1st. Merchants should take advantage of new channels like Shopify Ping and integration with Facebook Messenger to harness conversational commerce. 

Final thoughts

The coronavirus pandemic has fundamentally changed retail. But small businesses shouldn’t feel like this is a death sentence. New channels for online and social commerce, plus increased consumer support for local and independent businesses will help SMBs weather the storm in 2021. 

Take advantage of localization, curbside pickup, and conversational commerce to meet the needs of consumers and increase conversions. 

Diversify your suppliers if you can so you’re not relying too much on one source. 

Most of all, stay resilient. Small businesses like yours are the backbone of the global economy and represent the very best of freedom and independence. SMBs are worth fighting for - Shopify knows this, you know this, and now the consumer knows it too. 

Good luck in 2021.