Nearly half of retail small and medium-sized enterprises (SMEs) (48%) are expecting to grow in the next year, but difficulty in adapting to new technologies is damaging their growth potential.
Retail SMEs who trade online report higher growth ambitions with 52% of SMEs expecting sales growth in the next year, while just four in ten businesses that do not trade online expect to see growth, according to a new report by Close Brothers Retail Finance.
The study highlighted the difficult challenges SMEs in the retail space are facing, with the constant drive for innovation to acquire customers, retain customers, and combat fierce competition from peers.
To fulfil their potential, retail SMEs need to adapt to new technologies that can help them compete, said Close Brothers Retail Finance. Additional research by the Centre for Retail Research has shown that mobile technology hesitations alone have cost retailers £6.6bn a year.
Alex Marsh, managing director, Close Brothers Retail Finance said: “It is vital that SMEs innovate by capitalising on the benefits of available technology in order to achieve their desired growth. This is where point of sale finance can be an important addition.
“Having the right partners who can provide the technology and value-add services to react to changing customer demand is essential for retailers, leaving them to focus on what they do best – sell their products. Having these relationships and tools in place will leave retailers in a strong place to focus on what they need to do to compete in today’s challenging marketplace and successfully unlock their business potential.”
In the past, retailers have not always understood how best to leverage technology innovation to their competitive advantage. Since 2000, three quarters of retail growth has come through online channels.
Despite the evidence of sales success through online channels, Close Brothers found that over a third (35%) of retail SMEs do not have a website and 36% do not sell their products online.
Giving customers more payment options and letting them spread payments over a fixed term is another way retailers can improve their prospects. With only 5% of retail SMEs offering retail finance, there is a huge opportunity.
However, 63% of retail SMEs can’t see the opportunity in offering retail finance. One in five think customers wouldn’t want to take on debt and over half think it isn’t suitable or desirable for their customers. Yet last November of the 242 million purchases made on credit cards, 58% of purchases incurred interest charges, revealed the 2015 UK Cards Association Statistics Q3.
Those SMEs who have used retail finance have reported up to a 30% increase in sales when offering finance as an option at checkout. One in seven cited an increase in sales when finance options are implemented, 13% said that it creates a demand for more expensive goods and one in six (17%) said that it benefited the customer by giving them more payment options.
Nigel Bussingham, director at JWA Electronics, added: “We are very pleased with the results we have had so far and are very excited with the opportunity point of sale finance has given us.
“We have seen a 200% increase in our average order value when it comes to customers purchasing on finance as opposed to purchasing with cash or card. Our customers say it’s easy to use and they are happy to be able to have the goods on finance to spread the cost.”