Small businesses across the U.S. are still reeling from the economic impact of the coronavirus pandemic. For many, embracing e-commerce has played a major role in keeping their business afloat. And yet, one in four small business owners have yet to board the e-commerce bandwagon.
QuickBooks surveyed 890 small business owners and decision-makers in the U.S.1 to find out how e-commerce has changed the playing field for their business and what role they expect digital technology to play in 2021. The survey confirmed that moving your business online, in some capacity, might just be the key to business success.
Online businesses performed better in 2020
One in four survey respondents said they still operate primarily from brick-and-mortar locations. On the flip side, 36% said they operate primarily online, either through their own website or through an e-commerce platform like Amazon or Etsy. The remaining 35% use a mixture of both. Overall, 72% of respondents said their business operates online in some capacity.
One thing is true for many of these businesses: they lost sales in 2020 because of shelter-in-place protocols. Across all businesses, 59% said they experienced a temporary or sustained decline in sales because of the coronavirus pandemic. In addition, 26% say their sales have yet to recover.
But brick-and-mortar businesses were hit harder: 64% of brick-and-mortar businesses said they have experienced a decline in sales compared to just 57% of businesses that operate primarily online.
In addition, primarily online businesses bounced back faster. One in four online businesses said they experienced an increase in sales this year, compared to just 14% of businesses without online sales channels.
Despite these results, both online and brick-and-mortar businesses hoped for a successful holiday shopping season in 2020 to make up for lost sales. Nearly three in four respondents (73%) said holiday sales were either important or critical to their business. And that number jumped to 83% for product-based businesses.
Profits are up for online businesses
Despite the impact of COVID-19, 44% of small businesses across the board said profits exceeded expectations in 2020. Only 28% said profits didn’t hit the mark.
Unsurprisingly, businesses with some kind of online sales strategy were more likely to experience higher-than-expected profits. Just under half (46%) of primarily online businesses said profits exceeded expectations, compared to only 35% of primarily brick-and-mortar businesses.
On the flip side, only 24% of primarily online businesses said profits were down in 2020 compared to 35% of primarily brick-and-mortar businesses.
Small businesses remain optimistic for 2021
Despite obvious setbacks, 74% of small businesses still feel optimistic about the potential for their company’s financial performance in 2021. Just 8% feel pessimistic about what lies ahead.
Businesses that operate primarily online feel more confident about the year ahead than those that operate primarily from brick-and-mortar locations. But omnichannel businesses, those with a foot in both worlds, are the most optimistic of all. Omnichannel businesses have a seamless connection between online and offline sales. Customers shopping at these businesses can buy products online and pick them up at their local store, for example. Whereas 81% of these businesses feel good about their prospects in the year ahead, only 4% feel iffy.
Why are these businesses feeling so good? Two words: digital technology. More than half (60%) of small businesses said they were more reliant on digital technology in 2020. One in three businesses that increased their investment in digital technology said that investment directly contributed to higher profits. More than one in four (28%) said it made them feel more confident about the future.
Digital technology spells success for small businesses
Compared to a year ago, 50% of small businesses said they are now doing more business online. Of them, half said they’re doing significantly more business online.
Service-based businesses have been understandably slower to embrace e-commerce. Just 36% of these businesses are doing more business online compared to 64% of product-based businesses. Likewise, 65% of product-based businesses say they have been more reliant on digital technology compared to just 53% of service businesses.
As e-commerce continues to grow in popularity, so does digital technology in the workplace. As many as 60% of small businesses across the board said they were more reliant on digital technology in 2020. And they place more value on digital skills in the workplace now than they did 12 months ago. As a result, almost three in four small business owners said they value digital experience when hiring new workers. Only 21% of businesses said this isn’t something they look for in job candidates.
Nearly half of all small businesses (49%) are spending more on digital technology now than they were 12 months ago. These businesses are most likely to invest in digital sales, marketing, and customer service.
The average investment for these businesses is relatively low, at just $3,000. Looking ahead, 40% of businesses plan to increase their digital investments in 2021, but only by an average of $500. Despite this, 36% of business owners say they’re worried about the cost of digital technology.
Fortunately, when it comes to digital technology in the workplace, the return on investment is high. Small businesses that invested in digital technology this year say the top three benefits are saved time, increased efficiency, and better access to customers.
Remarkably, one in three businesses say they experienced these benefits immediately. A total of 77% said these investments paid off within the first three months.
Lack of digital knowledge is a top concern for 2021
Of course, every rose has its thorn, and digital technology is no exception. While the benefits are clear, business owners do have some concerns about adopting digital technology in the workplace. One in three (37%) are worried about cybersecurity. A similar proportion (36%) are concerned about cost. Another 32% are wary about their lack of knowledge or expertise in the digital playing field.
Just one in two business owners believe their digital marketing is where it needs to be (either “good” or “excellent”). The other half think their digital marketing strategy could use some work, especially when it comes to bidding for and targeting ads on Google and social media. The majority of business owners know search engine marketing is effective, but only 63% say they feel their company is able to compete effectively in Google search rankings.
That being said, nearly one in two small business owners say they need to increase their online sales volume in 2021—and mastering digital marketing is a critical way to reach new customers.
1Methodology: Small Business E-Commerce Survey, December 2020
QuickBooks used an online questionnaire with 27 questions to survey a representative sample of 890 small business owners and decision-makers from U.S. companies with <100 employees. The data was collected in November 2020, using quotas for business size and industry that mirror the latest data from the U.S. Census Bureau’s Statistics of U.S. Businesses. The census data shows that in 2017 there were 5,907,070 U.S. businesses with zero to 100 employees. This gives the data a 99% confidence level at a 4% confidence interval. To allow for comparisons to be made between different types of businesses—for example, whether they sold products or services, and whether their primary source of revenue was from online or in-person sales—respondents were asked both what they sold and how they sold it. The industry breakdown is as follows:
This content is for information purposes only and should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. does not warrant that the material contained herein will continue to be accurate nor that it is completely free of errors when published. Readers should verify statements before relying on them.
We provide third-party links as a convenience and for informational purposes only. Intuit does not endorse or approve these products and services, or the opinions of these corporations or organizations or individuals. Intuit accepts no responsibility for the accuracy, legality, or content on these sites.