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SMEs express concerns over softening consumer demand

In the wake of persistent inflation and recent interest rate hikes, small businesses are facing a challenging landscape as they gear up for the peak sales season.

A recent survey conducted by Sendle, Australia’s first 100% carbon-neutral parcel delivery service, sheds light on the apprehensions of over 1300 small businesses across the country. The “2023 Small Business Survey” delves into the attitudes and expectations of these enterprises, uncovering a nuanced picture of economic confidence and strategic planning.

Sales worries and economic pressures

Two-thirds of small businesses express concern about their sales performance this peak sales season, with 30% forecasting zero growth compared to the same period last year. The impact of persistent inflation and recent rate rises is palpable, revealing a year-on-year dip in small business confidence. The survey discloses that 34% of small businesses are confident about their peak sales growth this year, a drop from 42% in 2022.

Laura Hill, Managing Director of Sendle Australia, interprets the findings, stating, “Sendle’s 2023 Small Business Survey shows that many small businesses are feeling less confident about consumer demand this peak sales season, due to the impact of recent rate rises and cost-of-living pressures. However, small businesses are more optimistic about growth in 2024, most likely as they’re taking a number of proactive steps to attract new customers.”

Performance expectations across categories

While concerns loom over economic challenges, the survey highlights specific expectations within different business categories. The impact of inflation and rate rises on household consumption is a primary concern, with over half (52%) of small businesses worried about slowing consumer spending due to cost-of-living pressures this peak sales season.

Interestingly, when forecasting business performance for the upcoming Black Friday, Cyber Monday, and Christmas sales period, 36% of small businesses anticipate significant sales growth, with 14% expecting between 50-65% growth. Small businesses in key gifting product categories such as clothing and footwear, secondhand and vintage items, and toys, hobbies, and games are most likely to forecast strong sales growth. However, within the same categories, there is variability, with some businesses forecasting zero to no sales growth, hinting at ongoing uncertainty or the influence of other factors such as the ability to offer sales discounts.

Challenges on the Horizon and Proactive Measures

Looking ahead to 2024, persistent inflation remains a concern for 62% of small businesses, expecting a mild impact on their bottom line. Customer acquisition takes center stage as the number one concern for the new year, with two-thirds (66%) expressing anxiety about bringing in new customers. This marks a substantial jump from 2022 when only 22% of small businesses considered customer acquisition their top challenge. Managing cost pressures (53%) and keeping the business competitive (38%) are also reported as significant challenges.

Despite these challenges, the majority (84%) of small businesses are forecasting online sales growth over the next 12 months, with 36% anticipating up to 25% sales growth. The survey indicates that 37% are looking overseas for growth, expecting up to a quarter of their total sales growth to come from outside Australia.

To navigate the complexities of 2024, small businesses plan to take proactive measures. Many are focusing on enhancing their social and marketing capabilities, with 61% planning to grow their social media presence and engagement. Additionally, 39% plan to invest in more marketing and brand awareness initiatives, aiming to engage new customers and convert them into sales. Other proactive steps include updating pricing strategies, expanding into new markets, and increasing shipping options for customers.

Calls for industry changes

In the face of challenges, small businesses are making strategic choices in the postal and parcel delivery industry. Over the last 12 months, Australia Post’s price hikes have prompted 60% of small businesses to move 50-100% of their shipping volumes to Sendle. Almost half (49%) are utilizing multiple shipping carriers to secure the best prices.

Concerns about the postal and parcel delivery industry in Australia are widespread among small businesses. The majority (84%) express a desire for greater competition and access to low-cost carriers/shippers. A significant portion (35%) believes that more government intervention and regulation are needed to drive down prices.

Laura Hill concludes, “Small businesses are remarkably resourceful and resilient. But their bottom line is being increasingly squeezed by inflationary pressures and parcel price hikes by Australia Post. While it’s encouraging to see more small businesses shipping around for better rates, more can be done to make Australia’s postal and parcel delivery industry open and competitive, so it delivers choice and ultimately drives down costs for small businesses. Our survey reveals this is what small businesses want to see in 2024.”

For more information about Sendle’s 2023 Small Business Survey, please visit: https://try.sendle.com/en-au/small-business-survey-october-2023

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