This year, we have been reminded of just how important local businesses are to our communities, especially when it comes to bringing people together and supporting regional economies.
In part this reminder has come as a result of some local enterprises having to shut their doors for many months and the ensuing reports of the devastating impact that the pandemic has had on small businesses. Yet personally, I have found that COVID-19 has only highlighted the importance of these businesses as I have found myself exploring new local shops far more as I spend an increasing amount of time in my local area.
Looking at the spending habits of our own customers over the last year suggests that I’m not alone - with the pandemic pushing spending 1km closer to home. Similarly the British Independent Retail Association found that between March and June 2020 sales in small, independent local stores rose by 69%. I believe that while the pandemic has tested the resilience of small retail businesses across the UK, it has also uncovered a big opportunity in the “relocalisation” of shopping.
The pandemic has pushed spending
closer to home
Refamiliarising ourselves with local shopping
While many of us struggled with the travel limitations we have experienced during the pandemic, I am finding that one of the little joys that is coming out of this is the opportunity to refamiliarise myself with all the small independent businesses in my local area of Horsham, West Sussex. As I continue to work from home and local businesses are opening back up, I’m realising just how many great retailers I have on my doorstep. The unforeseen and unprecedented situation has given local businesses across the UK the opportunity to deliver for their local communities and show off all they have to offer to a newly-engaged audience.
This “relocalisation” is a trend which is set to continue. As businesses are increasingly adapting their working policies to enable greater flexibility for employees, the home office is set to remain a prominent feature throughout 2021 and beyond. We expect this trend will continue to boost sales for local retailers as they continue to attract home workers during the week.
There are potentially wide-ranging benefits of “relocalisation”. From our research with the CBI we know that closing the productivity gap for the eight largest cities outside London could deliver a £47 billion boost to the nation’s wealth. This process requires investment, and part of this investment is now coming as a result of consumers increasingly spending within their local and regional economy.
As well as COVID-19 bringing consumers back to their local areas, we have become increasingly aware of the challenges that many local businesses have faced over the past year and may continue to experience as they reopen their doors. A London School of Economics study found that 900,000 UK small businesses were “at risk of failing” at the beginning of this year.
As a result of this awareness, consumers have become more intentional in their shopping, deliberately buying from independent stores, cafés and pubs to make sure they stay afloat. A survey carried out by Visa for BIRA found that three in five consumers are worried independent businesses will not survive, and four in five said they are shopping local as much as, or more than, before the pandemic – showcasing the desire to support local businesses.
We have been speaking with local businesses throughout the pandemic and they have told us how their local customers have shown up for them and made sure that they are financially supported. It’s clear from this intentional buying, that many local business have built strong brand loyalty in their communities and we expect that as consumers increasingly spend their time in their local area, that brand loyalty and familiarity will grow. This will ultimately increase the revenue and longevity of these businesses.
Innovation and digitalisation
Small businesses have also taken matters into their own hands. One of the things I have always admired about SMEs in the UK is their ability to be agile, adapting to new circumstances and innovating their offers - and that is exactly what they have done. From pubs and restaurants offering takeaways to gyms hosting outdoor workouts, and cocktail bars hosting cocktail mixing masterclasses over Zoom, we have seen a tremendous amount of innovation and adaptation from local businesses.
A report by Yell Business found that an incredible 76% of SMEs have introduced new services. Of those, more than half said the new service was crucial for them to survive the pandemic, and 88% said they planned to continue the service as the impact of COVID-19 lessens. This adaptability and agility has not only helped many small local businesses to survive the pandemic, it has also meant that many of them are emerging from the pandemic with a stronger offering which will ensure their continued success for years to come.
Technology and digitalisation have played a key role in local businesses’ adaptation and survival, as Yell Business also discovered that 34% of the companies have moved to online video consultations or viewings, 32% enabled online bookings, and 25% have used contactless payments for the first time. Similarly, for consumers, technology is helping to connect them to the businesses in their area which has been apparent from the explosion in platforms like Nextdoor and Google’s finding that searches for “available near me” grew globally by over 100% in 2020.
Helping Britain Recover
While the months ahead may continue to be challenging for local businesses as we move towards the recovery phase, I believe that the shift towards a “relocalisation” of shopping and retail consumption has the potential to spark a revitalisation of local economies around the UK.
For our part, I’m proud to say that Lloyds Banking Group has been consistently by the side of small businesses throughout the pandemic, providing more than £31 billion in financial support in 2020, either through reducing outgoings with capital repayment holidays on existing loans, extending overdraft facilities or through the various government support schemes. We are also continuing to work closely with industry and government to help drive recovery across local and regional areas in the UK.