Payments and the Cost-of-living Pinch - How Can SMEs Capture a Share of Reduced Consumer Spend?

  • Nick Horne, Sales and Commercial Director at Suresite Group

  • 13.09.2022 01:30 pm
  • #payments

Whatever the causes of the current cost-of-living crisis in the UK – variously attributed to Brexit, Covid-19, and the war in Ukraine – the upshot for SMEs was spelt out in June by online payments firm PayPal’s annual ‘Business of Change’ report.

Polling a thousand SMEs, PayPal’s data showed that over three-quarters of them consider this crisis the biggest threat to their business. Forty-seven per cent think the next twelve months could be even worse.

Significant changes to consumer habits, driven by inflation, including an over 9 per cent rise in fuel costs, mean an estimated cut of £12 billion in spending on essential products and services by consumers.

Under this pressure, how can SMEs capture and maintain a share of the reduced consumer spending now available, and ease pressure on their own finances?

Challenges and opportunities for SMEs

Many challenges currently encountered by customer-facing SMEs can also be the source of new opportunities. A great example of this is in the fuel market - where, although the average transaction value is staying the same, the number of transactions at the petrol forecourt is increasing. Consumers are filling their vehicles to the same monetary value as they once did prior to the cost of living crisis – but due to the increased fuel price, are needing to fill up more regularly.

The opportunity here is that forecourts - and their associated convenience stores – are seeing their customers more often. So what could they and other small and independent retailers do to get them to spend more in the store, or boost loyalty during that extra visit?

Enhance your payment options

One of the best ways to boost customer confidence and an SME’s share of spend is through enhanced payment options and innovative technologies. SMEs should be offering as many payment options and catering to as many customers as they possibly can - from the 18-year-old who has cryptocurrency to spend, to people who use standard methods of plastic and cash, to one of the new breeds of ‘buy now – pay later’ cards like Klarna for instance.

Offering ‘Buy now – Pay later’ services actually removes the barrier to sales for retailers and can do a lot to lower spend and cart abandonment rates. But it comes with a moral dilemma since mismanagement of the services by consumers could put them into financial trouble in relation to the cost of living, which is a reputational risk for retailers.

Self-checkouts: are they right for SMEs?

Another way to boost customer satisfaction through to the point of payment - and capture that all important spend - is to ensure the process is fast, efficient and smooth. Self-checkouts are often deployed in larger businesses to speed up queues and reduce labour costs. However, there are downsides to consider, particularly among SMEs. Firstly, smaller businesses may struggle to recoup the cost of the terminals with much smaller cost savings. Secondly, drawing on the fact businesses need to make every penny count in the current cost of living crisis, self-checkouts must factor in additional security measures to prevent self-service theft. In the same breath, card skimmers - devices that thieves install on card readers to collect card numbers to make fraudulent purchases - although traditionally used on ATMs and at fuel pumps, have now become a risk at self-checkouts too.

It’s also key to note that although one staff member is able to oversee eight self-checkouts, hence reducing costs, not all generations are comfortable with the technology. Granted, over 91 percent of people aged 35 or younger have used it, but many will feel the lack of human contact negatively impacts the customer experience.

Cast your net wider by offering home delivery

Another innovation perhaps better suited to the SME market is home delivery. Employed through an online service, it can be a great way to increase a business’ reach and customer engagement outside of their shop front door.

A service such as this can be enabled through third-party relationships such as with Appy Shop, for example. Additional services should be chosen carefully, however. Ease of use, range, speed of checkout and cost of deliveries are the parameters you should be looking at.

For your customers, they’ll be looking for an eye-catching web interface that’s easy to use and offers fast payments at the web interface; does it look good, is it easy to use and is payment really fast?

Takeaways for customer-facing SMEs across all sectors

Upping your market share of customer spend in an increasingly challenging marketplace is linked to the reach of your business and the ease of payment, which all tie into the customer experience.

Loyalty in retail also has to touch everything you do. It needs to provide actual instant value when customers are financially struggling without bothering them too much, whether that’s through a free coffee, a five pounds discount or a voucher scheme.

So, offer as many different payment options as possible and examine the benefits of ‘buy now – pay later’ options. Maybe think about whether self-checkouts are right for your business, or whether deploying a third-party delivery service may work well.

Perhaps the major point is how to analyse your transaction data to drive loyalty and to examine the impact of say, putting self-checkouts in, and offering those advanced payment options. Such data could be a game-changer for SMEs battling extreme financial pressures.

So, the next time a cost-of-living crisis lands - and it’s when, not if -  your innovative marketplace strategy means you’ll never have to turn away a customer.

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