Federation of Small Businesses: the digital trade revolution needs state assistance

Lockdown has highlighted how valuable e-commerce can be for small companies. But government support is required if they’re to continue to flourish in the digital world

COVID-19 has spurred some of the largest changes to the economy since the dotcom boom of the mid-1990s. Back then, small businesses often sold no further than their hometown, but the shifting landscape of e-commerce means they’re now one click away from customers from across the globe.

In today’s age, websites such as eBay, Amazon and Facebook are central to advertising, sales and exporting aims. In fact, around 20 per cent of small business exporters and importers use online platforms to trade internationally. This year alone saw 83,000 more e-commerce websites created.

Businesses: the shift The pandemic put a large number of traditional brick and mortar businesses on hold, so many retailers turned to the internet. Customers have changed their shopping habits too, becoming more dependant than ever on online shopping.

When the lockdown hit, 16 per cent of small businesses reported developing a new or increasing their old online presence. For businesses that expected to remain open, that figure rises to 20 per cent.

The lockdown has highlighted just how powerful and valuable the digital landscape can be for small businesses. They’re now embracing the digital trade revolution as a means to fight the effects of lockdown. Adapting quickly has allowed them to stay ahead of the curve.

Some of these changes are likely to be of a long-term nature, even when the world returns to normal. Buying behaviours have seen significant change this year alone. Customers have become more dependant than ever on online shopping and have begun to realise just how easy it is to purchase goods online, while those who started to engage with e-commerce in order to respect social distancing guidelines might stick to this as part of their newly acquired routines.

Why the internet?

The internet is an easy way for a brand to be seen by unbounded numbers of users with no geographical limitations. E-commerce stores will also have lower operation costs than a brick and mortar outlet, cutting out the cost of rent and business rates.

Marketing is also simple through the use of social media such as Facebook, Instagram and Twitter, allowing businesses to promote a product without any advertising costs. Some brands have successfully launched with social media alone by simply getting the word out there.

Fast and reliable broadband

It’s clear that digital connectivity has been a lifeline. But all this means nothing without access to fast and reliable broadband. Decent speeds should not be a luxury. Sluggish broadband is debilitating and results in lost business and employment opportunities.

That’s why the need for universal gigabit-capable broadband has never been more pressing. It allows firms to connect with customers nationally and internationally and leads to improvements in productivity.

Last year, it was announced that anyone who receives an internet download speed of less than 10 Mbps or an upload speed of less than one Mbps has the legal right to request decent, affordable broadband from BT under the government’s universal service obligation.

In August, FSB joined a taskforce with Which? and the government to advise on a strategic, evidence-based approach to stimulate the demand for gigabit broadband connections.

Fake reviews

Reviews are one of the easiest and most important ways to boost online sales and develop a reputation. But FSB research found that 20 per cent of small firms have suffered malicious or fake reviews and increased online trading has intensified the problem.

Last year, the Competition & Markets Authority launched an investigation into whether websites are taking sufficient measures to protect consumers from fake reviews. Online trading platforms such as Facebook, Instagram and eBay have committed to tackle the issue and ensure that robust systems are in place.

FSB is also urging the government to monitor these trends to rectify this barrier to the survival of many small firms. As the e-commerce market continues to expand, this should be made a top priority.

Increasing digitisation

Larger businesses have the means and resources to switch between their online and offline offering, but smaller firms need extra support to get there. The government should support small businesses with increased digitisation by introducing digital vouchers for small businesses.

There are currently a number of initiatives available for existing businesses, such as research and development tax credits and grants, but the government should widen the definition of the word ‘development’.

There’s also very little financial support available for new-to-firm innovation. The government’s Business Basics Fund, which supports projects that test methods of encouraging small and medium-sized enterprises to boost their productivity through technology, is a step in the right direction, but the current crisis requires an intervention of a different order of magnitude.

The government must also support small businesses through the National Skills Fund and allow the workforce to quickly acquire new skills, including digital ones. This could be delivered through a digital platform linked to digital accounts with allocated funding for small businesses.

The government should target the sectors that have struggled the most during the crisis and those who have been made redundant across such sectors.

Cybercrime and digital vouchers

The widespread use of digital networked technologies has increased the vulnerability of many small firms to criminals who are exploiting the weaknesses in common technologies.

FSB research shows that around one in five smaller firms across England and Wales say they were victims of cybercrime at least once in the last two years, a figure expected to worsen as the coronavirus crisis continues.

Of the smaller businesses that experienced cybercrime, the most frequently reported types are phishing, malware and processing fraudulent payments online. That’s why we’re calling on the government to create digital vouchers to help small businesses tackle cybercrime.

The future

Small businesses are going to be part of the frontline efforts to keep the back generator of the British economy running in 2021 and beyond. However, high streets cannot survive on e-commerce alone. Businesses will need to head back into the offline market to recruit staff and stimulate job creation.

In order for the economy to fully recover and prosper, businesses will need to adopt a mix of online and in-person trading

In this brave new world, it’s not just about surviving - it’s about thriving. The more government support provided now, the more benefits the economy will reap in the long term.

Get to know Mike Cherry

Best part of your job?

Meeting members, whether that’s face to face or now, in a COVID-19 world, virtually. This can be in their own businesses, at roundtable events or in other ways. I enjoy hearing about the issues they’re facing and putting plans into action in order to improve the situation.

Biggest achievement in 2020?

2020 was a challenging year, with COVID-19 leaving the economy on its knees struggling to survive. FSB has worked tirelessly to help get a strong package of support for the small business and self-employed community and it’s something I’m immensely proud of.

Greatest challenge in 2021?

Undoubtedly, it’s seeing as many businesses as possible get through this pandemic, ensuring we’ve got the right approach to enable recovery and economic growth.

Best piece of advice you’ve ever been given?

Being told at a young age ‘my word is my bond.’.

What advice would you give a younger you?

Spend more time with the family, as well as focusing on business.

The author

Mike Cherry is national chair at the Federation of Small Businesses.