The fifth part of an ongoing series of blog posts on lessons learned from COVID 19. The pandemic created new trends and business models that changed priorities and planning for small business owners. These are the top 6 business trends that will impact your business in 2021 and beyond.
As the pandemic hit and in the months after certain terms have popped up in the news with growing frequency – Supply Chain Disruption, Worker Shortage, Inflation, Social Distancing, Remote Work, and Cyber Security to name a few. As a business owner, you’re always trying to predict trends in order to prepare for or get ahead of the market.
Understanding these six trends will help you stay ahead of the curve!
Home Based Projects and Home Sales
According to CNBC, Lowes and Home Depot have seen a 30% increase in sales year-over-year. In fact, Lowes conducted their own survey in December of 2020 to gauge what was happening in the market. The survey showed that 4 in 10 said that they turned a room in their home into a workplace/office; 1 in 3 said they turned a room into a workout space; 1 in 4 said they transformed a part of their home into a classroom; and finally 1 in 3 said they turned a space into a private retreat. In addition to the interior modifications, 51% of the respondents said that outdoor space became very important to them. Many respondents said that they had transformed at least a little outdoor space into an outdoor escape, social distancing destination, garden, or better place for the kids to play.
This new importance and focus on the home is also being reflected in home sales. The National Association of Realtors conducted a survey in August and September of 2020 asking Realtors if potential buyers were looking specifically for home features to use as work from home space. The results showed that 61% and 62% of home buyers respectively were looking for work from home space.
Home sales for 2020 were the highest in Maine’s history with home price values increasing an average of 20% from November 2019 to November 2020.
In the current economy, the trend is that the HOME is now the destination – and consumers are spending money on buying homes, making homes better, or enjoying their homes more.
The market is seeing the after effects of the extended lockdown in the form of a YOLO (You Only Live Once) economy. This stems from the lockdown period in which many felt that they were languishing — stuck somewhere between flourishing and depression.
During the mix of shutdowns and lockdowns, many consumers also went into a sort of forced savings – they could no longer go to restaurants, bars, vacations, or other venues to spend their money. This resulted in the Federal Reserve reporting one of the highest Savings Rates of the average American consumer ever this past April 2020 (almost 35% versus a “normal” 8-9% level for the past 5 years).
This has led to what some are dubbing a time of “Revenge Spending” – where consumers are tired of lockdowns and are now spending money on experiences and possessions to make up for lost time. In addition, many employees are quitting jobs to begin their own businesses, as evidenced by the US Census Bureau reporting business starts at a 13 year high.
The result of this trend is that consumers are willing to spend more – so emphasizing quality, one-of-a-kind type experiences, or ways to make life more efficient should resonate.
Corporate Social Responsibility (CSR)
As consumers increase their spending, they’re also increasing the importance they place on corporate social responsibility. A recent Neilsen survey found that 87% of Americans are more likely to buy a product from a company who cares about the same issues as they do. In addition, 55% of consumers are willing to pay extra from companies that have a Corporate Social Responsibility plan. And finally, the survey uncovered that 67% of consumers will boycott brands with opposing social values (often referred to as Cancel Culture). This survey also tracks with recent Human Resources trends showing similar concerns from job applicants.
Some businesses struggle with how to come up with a CSR Plan but according to the social impact platform submittable.com, businesses can address a variety of important issues. You can work on reducing your carbon footprint, volunteering in your community, improving labor policies, making social and environmental investments, focusing on Fairtrade projects, developing policies that positively impact the environment, or helping causes for children (education, poverty), inequality, woman’s rights, and diversity.
The main story behind this trend is that consumers are increasingly concerned about the social impact of the businesses they buy from. So ask yourself if there is more to your business story that would resonate with your customers – then incorporate it into your brand and marketing. But don’t fake it, consumers are increasingly skeptical.
While environmental impact falls under the topic of corporate social responsibility, it is worth highlighting this issue in particular.. Lendingtree.com did a recent study that found a majority (55%) of consumers are willing to spend extra money on environmentally friendly products with 28% of those consumers saying they are spending more now on environmentally friendly products than before.
When Lendingtree.com dug deeper with further survey questions, the top three reasons for the increase in spending came down to: 1) “I’m a lot more educated about the importance of helping the environment, 2) It makes me feel good about myself, and 3) I have more disposable income and can afford to do so. These reasons tend to align with the other trends we are seeing above.
Supply Chain Shortages/ Disruptions
When I presented this trend topic on Fast Forward Maine I included recent news articles listing 14 current shortages ranging from toilet paper to lumber, ketchup packages to plastics, computer chips to labor, and more.
One of the major reasons for the shortage is that businesses often use what is called a “just-in-time” inventory system where they do not keep large amounts of inventory on hand, but instead depend on a constant supply chain to deliver goods when they are needed. This system was developed in Japan in the 1970’s and adopted worldwide in the 1980s as way to keep a company lean. Until recently, this model worked very well.
But the just-in-time inventory model collapsed during the Covid pandemic because plants were shut down, major transportation routes were disrupted (think about the week the Suez Canal was blocked), and labor shortages in many industries meant less workers making or moving products. In addition, the epidemic caused unusual demands – restaurants were handing out ketchup packets, everyone was buying chlorine for their new pools, office furniture was being sold out as people converted or created home office space.
The lesson from this trend is that businesses now need to reassess their supply chains. Many businesses are building in redundancies in their systems by having back up suppliers. Other businesses have strategies in place to switch to alternatives if shortages hit. Conversely, if you are a business able to offer alternatives to a shortage, now is your time to shine.
Online Marketplace – The Rise of the Digital
One thing that became increasingly evident during the pandemic, was that everyone was shopping online. I struggle to find any other time in history when all the major generations were proficient at a similar skill set. The US Department of Commerce reported that US Ecommerce sales rose 44% from $598 Billion in 2019 to $861 Billion in 2020. Many restaurants were forced to adopt online ordering and pickup models. Retail stores followed suit with their own curbside pickup and online options. Soon package deliveries became a normal occurrence through the postal system.
Hand in hand with this development came the rise in different digital payment methods and a reduction in the use of physical cash. In fact, the pandemic has jump started research and development by many countries into their own centralized cryptocurrency (not to be confused with decentralized cryptocurrency like Bitcoin). While a digital dollar might be farther off in the future, the fact is that online payment methods have grown over the past few years.
If this trend taught businesses anything, it’s that your business must have some sort of digital presence, and should consider offering different payment methods to make the shopping experience as easy as possible. Cash only stores are now few and far between.
Understanding these trends, spotting new ones, and developing a plan to take action can be tricky. If you need help along the way, the Maine SBDC is here to help. You can request advising online and an advisor will reach out to set up an appointment.