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Why do we buy from small shops and businesses? Corona Research Part I

The Corona crisis has dramatically changed our life, both as consumers and business owners. Many problems it which it has created, however, were existing problems which until recently remained under the surface. The demanding world of business often forces us to become reactive and responsive rather than proactive.

The exhausting day to day operation and the ever increasing customer demands made working strategically with a long term orientation quite challenging. Instead, shop owners and other traditional business owners focus mostly on the daily activities with little to no planning. This makes them less prepared for handling risks and less flexible to adjust to new realities. In the current crisis we see a real collapse which must lead to a fundamental change in the practice and work of these small businesses.

Over the last month, my team and I gathered a large amount of data from businesses in Vienna to support them during the crisis through sharing their story. We managed to gather quite a lot of information and generate important insights that can be vital for their survival. But before i share these key findings and conclusions, there are two important questions which should be considered and asked. My answers to these questions are of course subjective yet also data backed and they lay the ground to the re-thinking of the current model of traditional businesses.

The first question which should be asked is- why do we buy from small shops and businesses at all?

Here we must first make a distinction between product and service based businesses. While most of us waited anxiously for the hairdresser to open up and give us a much needed haircut, i doubt customers waited as eagerly for small shops to open their doors as well. Since much of what they offer can be bought online, they must begin by understanding why do customers buy from them at all.

Several factors are relevant for a thorough answer- location, urgency, exclusivity, recommendations or personal relationships.

Location is perhaps the most obvious factor as we would rarely drive across town merely for visiting and buying from a small shop. Convenience is key and so location can be a great benefit or a serious drawback, depends on where it is. Another important factor is urgency and time sensitivity. Sometimes we just can’t wait the 1 week shipping period and will choose to get the product immediately. Stores which offer hand-made, limited edition or exclusive products will also attract more customers and in many cases will attract them even from far away. Often communities of customers can be formed around such niche stores. A community of loyal customers who write good reviews and share their positive purchasing experience is perhaps the best tool for converting new customers and help them overcome any perceived risk. To build such a community of ambassadors, it is important to have a personal approach and establish a relationship with each customer. The benefits of knowing the customer’s name, previous purchases and possible needs is possibly one of the biggest advantages small businesses have.

The second question we must ask is the opposite- why don’t people buy from small shops and businesses? Aside from simply mentioning the opposites of the factors mentioned above such as bad location, generic products or negative reviews, i would like to focus on what could be the most important factor- risk. Risk is one of any customer’s main driver which directly influences our decision making process. Especially during times of crisis, risk aversion and fear of loss determine how people consume. The truth is, shopping becomes riskier when we invest our time and money without knowing exactly what we are going to get. This is a challenge which every business owner cannot and must not ignore.

If you go outside and walk down a shopping street, how many stores do you find inviting? How many of them let us know exactly what we can find inside? Moreover, try visiting the stores’ website (if they have one at all)- how many of them offer clear information and a risk free shopping experience? The answer is very few.

Most stores are rather confusing, usually crambed with a large variety of products in a very small space. The windows aren’t always inviting or even clear as to what is being sold. Cafes and restaurants often have novels as menus with too many options to select from. Those who do have a website don’t at all utilize it to tell the business’s story and instead settle for generic and uninspired content with very limited functionality. This simply has to change and now they finally have a much needed break to implement those changes.

There are of course those who do it right and try their best to eliminate risks. They are called brands. perhaps it’s time for small businesses to think more like brands and adjust to the needs of the modern customer.

 in the next article, i will share with you the key insights and initial conclusions of my analysis of over 2,500 small businesses in Vienna.

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