For Main Street retailers, much is riding on the success of Small Business Saturday on Nov. 25. They expect the day to see their businesses through the end of the year and into 2024.
This “official” shopping holiday celebrating small businesses was introduced by American ExpressAXP +1.8% in 2010, and since its launch, American Express estimates it has contributed $184 billion to small businesses in total.
Last year, the day accounted for $18 billion in revenues for small, independently-owned retailers and restaurants. By comparison, AmazonAMZN +0.6% alone took in $13 billion in this past July’s two-day Prime Day event, according to Digital Commerce 306.
Small Business Saturday’s takings amount to mere crumbs when spread across the thousands upon thousands of small businesses, but from such small seeds, great things can grow.
Shopping Small Means Doing Good
Small Business Saturday is distinctive from other made-up shopping holidays, like Prime Day, Black Friday, or Cyber Monday. Small Business Saturday is sold on the idea of supporting people’s neighbors and their local communities rather than saving a ton of money.
“Small businesses keep our communities vibrant,” Jessica Ling, senior vice president of global brand advertising at American Express, shared in a statement. “They are the lifeblood of our communities that help create jobs, boost the economy and enrich our neighborhoods.”
American Express provides support for that statement. Its 2022 Small Business Economic Impact Study finds that for every $1 spent with a local business, over two-thirds ($0.68) stays in the local community to support local families, local causes, and other local businesses.
It’s called the multiplier effect. By contrast, for every $1 spent with a national retailer, only about 30% to 40% stays local, or $0.30 to $0.40.
Shoppers seem to be getting the give-back, do-good message about shopping locally. In a YouGov survey conducted for Bankrate among some 2,000 holiday shoppers, more shoppers (61%) said they would participate in Small Business Saturday than Black Friday (56%).
And they are inclined to keep up their local business support through the rest of the year, with 72% saying they plan to shop small over the season, up from 65% last year.
Shoppers are drawn to small businesses primarily because that’s where they can find unique gift ideas (56%) and better customer service (54%). In addition, 44% of those surveyed said shopping small fosters a sense of community.
An American Express survey conducted by Teneo among 1,000 adults finds much the same. Nearly 80% of those polled agree that small businesses are essential to their communities and that when they shop at a local small business, they are supporting their communities.
Further, half of consumers (51%) said they prefer to seek out small businesses rather than big retailers for holiday purchases. Small businesses are counting on them to keep their word.
Small Businesses Need Support
Going into the holiday season, the National Federation of Independent Business reported that the Optimism Index dropped from September in its October Small Business Economic Trends survey. This continued a 22-month run where its Optimism Index was below the 50-year average. The NFIB survey covers a wide range of small businesses, including retail, finance, construction, transportation, and wholesale.
“The October data shows that small businesses are still recovering, and owners are not optimistic about better business conditions,” reported NFIB chief economist Bill Dunkelberg.
Multiple dark clouds hang over small business owners, cutting their profits, including ongoing inflation, rising labor costs, weaker sales and staff shortages. Under these conditions, it’s hard for retailers to keep smiling through the season, which they must do to make their customers happy.
Yet, retailers are by nature an optimistic bunch, and a companion American Express survey conducted with 500 small business owners found over 80% have a positive outlook for holiday sales this season, with nearly two-thirds believing they will do better this year than last.
However, when they remove their rose-colored glasses, they know they’re up against strong headwinds. A majority of small business owners (56%) said it is even more difficult this year to remain competitive against larger companies.
Being forced to raise prices (72%) hasn’t helped any. Nearly six-in-ten (57%) said raising their prices has made it challenging to retain existing customers and reach new ones during the past year.
Some 58% attribute many of their problems to the weakened economy, so an overwhelming 88% report that “now more than ever, small businesses need the support of customers in their community, given the current economic environment.”
Hope Springs Eternal
The National Retail Federation predicts 65.6 million shoppers will turn out on Small Business Saturday to shop, making it the third most important shopping day over the five-day Thanksgiving weekend after Black Friday (131 million) and Cyber Monday (71 million).
If shoppers meet NRF’s expectation that sales will grow 3% to 4% this year, it might give Main Street retailers what they need to squeak by into the new year, but much is riding on how well their shoppers perform.
A survey by Constant Contact among 500 small businesses found across all businesses, the fourth quarter holiday season is vital for generating about one-fourth of their year’s revenues, but retailers are twice as likely to rely on the holiday period for at least 50% of their annual revenues.
Reaching as much as 50% of a retailer’s year in only three months is quite a feat. And sadly, Small Business Saturday is just one day. But a good turnout on that day will surely help.
“The holiday period is a crucial time of year for small businesses as they work overtime to attract new customers, hit revenue goals and plan for the year ahead,” said Constant Contact’s chief marketing officer Laura Goldberg in a statement.
Not unexpectedly, the Constant Contact report leans into marketing strategies small businesses can use to engage new customers they meet over the holiday period and keep them returning in the new year, e.g. to collect contact information and use it for personalized emails, texts and social media posts.
But these days, with consumers inclined to shop their values, the message that could provide the biggest bump for small businesses is just how vital small businesses are to the local community.
American Express’ Ling sums it up: “Nearly nine in ten small owners say –now more than ever – they need the support of customers in their community. ”
The message of how shopping small businesses puts customers’ money to good use by helping their neighbors and their communities could really break through and give independent retailers the lift needed to compete with the big retailers that primarily rely upon cheap prices to draw in the customers.