With Stimulus Funds Delayed, Small Businesses Digitize for Survival

On paper, the nearly $3 trillion in stimulus spending the federal government has approved to date appears to center on buoying struggling businesses.

The CARES Act provided $500 billion in loans for large corporations and some $377 billion for businesses with 500 or fewer employees. The subsequent $484 billion stimulus package, signed into law just last week by President Trump, allots an additional $310 billion to the small business-focused Paycheck Protection Program. Add to this the Federal Reserve’s quick and aggressive commitment to unlimited quantitative easing, and it would seem businesses are receiving ample assistance in the early days of the worst economic crisis the US has experienced since the Great Depression.

Yet the reality, at least for small businesses, is far less optimistic. Unlike the financial crisis of 2008, the nearly nationwide economic shutdown caused by Covid-19 is not a problem fiscal policy alone can solve. People are afraid and will, for months and possibly more than a year to come, remain afraid to visit their local restaurants, gyms, and salons. Government funds for mom-and-pop businesses are, perhaps for the majority of small businesses, nowhere to be found. The lockdown-driven shift to e-commerce and delivery positions well-funded digital natives and ecommerce incumbents like Amazon to dominate even further as small-staffed brick-and-mortars vanish from the streets.

At the same time, experts at helping SMBs adapt to a tech-first commercial landscape say the pandemic has led some businesses to tap into their long-dormant potential as digital marketers and sellers, possibly setting them up for gains in the aftermath of the recession. Now that e-commerce is the only path to survival, mom-and-pop shops, aided by martech firms, agencies, and Silicon Valley giants, are capitalizing on cutting-edge marketing and retail techniques, many for the first time.

Thousands, if not millions, of Main Street businesses will close their doors for good as a result of the pandemic. Those that survive will be technologically savvier and sleeker than they were before.

Where is the money?

As of April 20, as many as 92% of small businesses that had applied for CARES funding had not received it. That is according to a survey by small business referral network Alignable, which asked via email 38,500 businesses with up to 50 employees to report whether they had applied and the status of their applications for CARES Act relief.

Of the 13,360 business owners and operators who replied to Alignable, 8% had received funding, 6% had been denied, 14% had been approved but were waiting on funding, and an overwhelming 72% were still waiting on a response. Hours after the Small Business Administration’s portal allowing fresh applications for stimulus funding opened yesterday, it crashed, sparking widespread frustration.

“The number-one concern they all have is a lack of cash,” Alignable CEO and co-founder Eric Groves said of small businesses. An earlier Alignable survey indicated that 37% of small businesses had less than a month’s cash on hand around the time the coronavirus recession began in mid-March, and an additional 30% had only one to three months of emergency funds. That means that while digital innovation makes for a good story for businesses able to implement new solutions, most lack the reserves necessary to survive long enough to adapt.

Groves said that, even more than the Great Recession, the situation in which businesses currently find themselves mirrors the aftermath of a natural disaster, when physical circumstances both drain consumers’ pocketbooks and make it physically difficult for them to patronize nearby stores. “The strange thing we’re dealing with this time is that the disaster period is undefined,” he said.

The CARES Act’s Paycheck Protection Program, administered by the Small Business Administration with the help of the Treasury Department, not only lacks the funds necessary to help all struggling small businesses cope with an unprecedented disaster but also suffers from a couple of key design flaws that have hindered its implementation.

For one, the federal government outsourced the job of processing initial PPP requests to private financial institutions. The problem with this is that, facing hundreds of thousands of applications, even major institutions with tremendous staffing resources including Bank of America, Chase, TD Bank, and Capital One have limited applications to businesses with existing relationships with them. More dramatically still, Wells Fargo stopped accepting applications just a week after the CARES Act passed because it had received so many requests. The upshot is that businesses are limited in the banks to which they can apply for help, and larger businesses eligible for the funding (businesses which may have as many as 499 employees) as well as venture capital-backed startups may have an advantage when it comes to submitting applications and pushing financial partners to fulfill them.

Secondly, as Vox’s Matt Yglesias has pointed out, the Paycheck Protection Program, as the name suggests, requires that 75% of the total amount of the loans businesses would like to be forgiven be used for payroll. But for truly small businesses with only a handful of employees to pay and potentially high rent or previous debts, this requirement, while seemingly beneficial for workers, may just prevent the money from doing what it is supposed to do — keep small businesses open through the pandemic — and cause more businesses to close, costing workers and managers their jobs.

Still, the main problem with the PPP is simple: It does not provide nearly enough money for America’s 30 million small businesses. To help fill the gaps, a number of tech companies have donated money, supplied marketing tools, and set up channels for small businesses to connect with customers and each other. Among the most prominent donations, Yelp launched a $25 million relief fund, Facebook announced a $100 million small business grant program, and Google offered $340 million in free ads.

Partnering with a slew of tech companies that also cater to SMBs, Alignable launched an initiative called #paytoday that aims to replenish small businesses’ bank accounts through means other than donations. The group urged clients of small businesses, especially big corporations and government agencies, to fulfill outstanding financial obligations to them.

Marketing for Survival

While checks from the government and Big Tech benefactors may help, they will not make the difference between outlasting or succumbing to the pandemic in most cases, Groves said. “The recovery period is driven by grassroots initiatives that are community-centric,” he said. “Those are people who are going to help you get through the initial stage of recovery.”

In other words, it is connecting with existing customers and community partners despite physical distancing that will separate successful businesses from those unable to endure. That means digital marketing and e-commerce, long touted as essential adaptations for brick-and-mortar businesses, are now more indispensable than ever.

Digital marketing “could be the difference between survival and failure,” said Greg Sterling, vice president of market insights at location marketing firm Uberall.

Google, whose Knowledge Panel and Search Engine Results Pages are the main ways small businesses connect with customers online, surpassing even the utility of their own websites, is the basis of any brick-and-mortar shop’s online marketing efforts.

Sterling mostly praised Google for its adaptations to the crisis. Google shut down reviews when lockdowns began to provide businesses time to adapt to the rapidly changing status quo, a sign of its (sometimes elusive) sensitivity to the scale of its impact on small businesses. The company also added display features allowing restaurants to communicate whether they are open for dining in, takeout, and delivery.

Sterling split up Google’s response to the pandemic into two categories: mechanics and best practices. In addition to facilitating communication between businesses and customers via the mechanical changes pictured above, Google also provides broader advice and mostly free courses on digital basics for small businesses. “They feel the urgency of trying to help these customers,” Sterling said. “If all these businesses collapse, that’s going to diminish the product.”

Nevertheless, the sheer number of businesses currently facing unusually urgent demands for digital adaptation has created roadblocks. Some local search gurus described the Google My Business help process as “broken,” as the firm seemingly struggled to adapt to a surge in requests, Sterling said.

A more significant challenge is that businesses struggling to keep the lights on do not necessarily have the time to set up the infrastructure for online marketing and payments. That is where marketing tech firms and digital agencies come in. As stores close and budgets shrink, the bar rises for those hoping to secure a share of SMB marketing spend.

“Businesses are going to be more trained on, ‘How fast am I generating real value'” from digital marketing tools and services, said Greg Goldfarb, vice president of products at GoDaddy.

An early success story in Covid-19-era marketing appears to be email, which marketers are successfully deploying to connect with consumers spending more time at home in front of their phones and computers. Email marketers have seen a 5% increase in engagement, with hard news and health-focused campaign click rates soaring.

To help businesses address the demands of the present time, GoDaddy is releasing free tools centered on four key objectives: helping businesses communicate with customers via Google, their own websites, social media, and email; adapt to transacting online; raise funding and create revenue streams via gift cards and other pandemic-optimized innovations; and easily access all those technical tools. GoDaddy maintains staff on call to help small business owners and operators navigate technical tools.

This need for direct communication with small businesses about the options available and how to capitalize on them also happens to be the area in which Google could improve its current practices, Sterling said. He suggested Google invest in TV or streaming ads, a sort of “public service campaign” through which the search giant could “communicate directly to the small business customer.”

Necessity is the Mother of Invention

Even with reasonably quick action from Google and help from industry tech players, the fact remains that storefronts have been closed in many states for more than a month, Google My Business impressions are down 59% across verticals, and consumers are staying home and even avoiding takeout for fear of contracting the coronavirus. The challenge, then, for small businesses is to make every impression count; connect with and even finds way to transact with consumers who cannot leave their homes; and lay the groundwork for operating in a commercial environment that may not fully return to normal for a year or 18 months, if ever.

Some digital adaptations that appeared to be flashy add-ons just months ago have become table stakes. Buying online and picking up in store, known as BOPIS, has flourished, as has curbside pick-up. Google has even begun featuring whether businesses allow curbside pickup and no-contact delivery on SERPs and in Maps. Retailers and bars are offering gift card purchases online so that regular customers can support their preferred businesses now and show up in person when social distancing restrictions are rolled back.

More creative innovations include at-home workout videos and fitnesses classes for gyms as well as cooking classes for restaurants. Arts and craft stores and companies like breweries, which sell a product but survive on the strength of in-store atmosphere and customer experience, might consider offering classes and videos to keep their customers engaged as well, experts said.

“To be really effective as a small business, you need to sell some kind of experience,” Groves said, noting that products alone are insufficient in a market where Amazon can typically deliver cheaper options in two days’ time. “The businesses that are finding ways to generate revenue are the ones recognizing the experiences they were providing and finding a way to put them online.”

This is where tech vendors and agencies have a role to play in helping SMBs best the pandemic. Groves underscored vendors’ ability to explore creative solutions while small businesses focus on staying afloat. Tech firms also supply the tools and know-how SMBs need to implement digital solutions.

The most basic digital innovations, such as BOPIS, will soon become commonplace as businesses realize not offering them is no longer a tenable way of doing business.

“In the aftermath of this,” Sterling said, “everybody’s going to have to build a hybrid omnichannel business.”

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Joe Zappa is the Managing Editor of Street Fight. He joined Street Fight as a contributing writer in 2015, has compiled the daily newsletter since 2016, and has spearheaded the newsroom's editorial operations since 2018. Shoot him an email at jzappa@streetfightmag.com.