SMEs struggle to maintain business due to the rise in living costs – as many are forced to shop with big brands
Eight in 10 Brits claim the rising cost of living is forcing them to shop with big brands and national firms to get the cheapest possible price – but for many, they’d prefer to shop local.
A study of 2,000 adults found 21 per cent like to support smaller businesses when they can, due to better customer service, more unique products and wanting to put money into the local community.
But despite their best intentions, 42 per cent have already started looking for the cheapest option for lots of products due to the cost-of-living pressures.
These shopping habits are already starting to hit local shops and small businesses, as a separate survey of 750 SME (small and medium sized business) owners found three-quarters are questioning the long-term viability of their business.
While 80 per cent are struggling to compete with the lower prices offered by larger firms, leaving 72 per cent of these losing customers.
Almost three-quarters (73 per cent) believe the current economic climate is making it harder than ever to compete, leaving 69 per cent with no option but to increase their prices.
SMEs under pressure in challenging times
The research was commissioned by Santander UK to mark the launch of its new SME Support toolkit, which offers practical support for those trying to manage the uncertainty, rising costs and adaptations needed to continue.
John Baldwin, the bank’s head of commercial banking, said: “It’s clear businesses of all sizes are facing into a tough winter, however our conversations with SMEs find them increasingly resilient and resourceful.
“They proved during the pandemic with the right support and adaptations to their business models, they could survive and, in some cases, even prosper.
“Many have already adapted their business models, enhanced their products, explored and exploited new markets, developed new skills and reviewed their costs and pricing to counter the spiralling cost of supplies, energy and labour.
“We are acutely aware many SMEs face very challenging times, but we are here to help and support them in whichever way we can.”
Supporting local businesses
The study also found the trend to shop with whoever provides the cheapest products and services is a new direction for shoppers.
As 55 per cent of the consumers polled claimed to have tried harder than ever before to support their local businesses when the pandemic began.
And between March 2020 and 2022, 67 per cent of small businesses experienced an influx of new customers.
During this phase of the pandemic, when shoppers were focused on supporting local businesses, 49 per cent were impressed by the variety of goods on offer from nearby stores, and 47 per cent liked the friendliness of local proprietors.
More than four in 10 (43 per cent) have been able, so far, to retain their focus on shopping with local companies, with 28 per cent believing it is ‘very important’ local businesses in their community are successful.
But a quarter have recently scaled back this support, going out less for food and drink locally to save money.
While 23 per cent are no longer making purchases from local clothing stores, and 11 per cent are cutting back on attending nearby gigs or supporting their local music scene.
Quality over quantity
It also emerged the average shopper estimates they currently spend around £70 per person at small businesses in their local area, according to the OnePoll.com figures.
While many small businesses recognise the difficulty in matching their larger competitors in terms of price, 67 per cent believe they are better placed to offer customers a more personalised service.
And 42 per cent believe they have more flexibility to reach niche markets, while 40 per cent think the quality of their products is better than that of large companies.
But despite increasing their prices by nearly nine per cent due to the cost-of-living crisis, many SMEs have been making strides to ensure they stay as low as possible for their customers.
A third have been searching for cheaper suppliers, 31 per cent have been monitoring and minimising their energy use and 21 per cent have shelved plans to grow their staff.
But thankfully, 76 per cent said some of their customer base has been understanding or supportive following their price increases.
John Baldwin added: “SMEs are the lifeblood of the UK economy and loved by consumers – where they can, people want to shop local and support local businesses which is encouraging.
“That’s why we’re doing everything we can to offer support to these SMEs through our toolkit and I’d urge everyone who can, to do the same.”