Small Businesses Face Big Challenges this Holiday Season

This holiday season is full of promise for small- to medium-sized businesses (SMBs), with Volusion projecting 9% growth in online sales this year. As more and more holiday purchases shift from in-store to online, smaller retailers are looking forward to making the most of this highly profitable selling period, undergoing preparations to handle the rush.

However with time and budget coming at a premium for small business owners, the holidays present a unique set of challenges to reaching success, including ensuring adequate inventory and aggressively marketing their business in an already noisy digital space.

In a recent holiday readiness report from Volusion, 800 online SMBs were asked, “What do you foresee as the biggest challenge facing your online business this holiday season?”

The top three responses were as follows:

Defining the best marketing mix to reach new and existing customers (28% deem as top challenge)

Competing against larger retailers, like Amazon (25% deem as top challenge)

Determining a pricing strategy that remains competitive but protects profit margins (15% deem as top challenge)

Other obstacles of note include, “providing shoppers a mobile-friendly site” and “meeting customer service demands.”

The primary barriers facing small businesses this holiday season are deeply connected, as SMBs have limited brand awareness compared to their larger counterparts. This introduces an additional layer of complexity, as small shops must battle mega-retailers for share of voice to even enter shoppers’ consideration sets.

Match this with the issue of having to compete with Amazon on price, and it becomes evident how these issues present considerable challenges for small retailers.

How can SMBs break down the barriers to a successful holiday season? Consider the following points:

Define the best marketing mix:

Begin by setting a definite marketing budget and appropriate those funds accordingly by balancing goals for customer retention and acquisition.

Carefully segment customers to drive repeat business, which can be effectively and affordably achieved through personalized email marketing.

Pinpoint top-performing channels and invest heavily in those, cutting lower-performing campaigns to maximize budget impact.

Compete against mega-retailers:

Personalize the customer experience to make an emotional connection with shoppers, such as sending personalized “thank you” emails or including handwritten notes in order packaging.

Launch email marketing campaigns early and send these messages often, placing an emphasis on existing customers. Starting these campaigns sooner than later reminds shoppers of a smaller brand, helping place it back into their holiday consideration set.

Determine a competitive, yet profitable pricing strategy:

Study profit margins on a per-product level to decide which prices can be cut. For example, if a certain line of products has a larger margin, it’s more financially sound to reduce prices there than on products with much smaller margins.

Reach out to inventory and/or shipping providers to see if there are any discounts or cost savings available leading up to the holidays.

Boost average order value to increase the amount customers spend on each transaction by offering free shipping at a certain dollar amount or upselling shoppers with related products to spur impulse buys.

Despite these understandably steep challenges, small business owners should remain optimistic about the holidays, taking measures to overcome these barriers. By sticking to basic business principles and focusing on the customer experience, SMBs should feel empowered to maximize this year’s growth potential and make this the most memorable, profitable season yet.

Matt Winn, Senior Marketing Communications Manager at Volusion