💫 The online pivot — notes from the frontline of small business

When the Covid-19 pandemic hit, small businesses around the world were pushed to increase their use of digital technologies. A new study by DAI and Ipsos provides more evidence on specific digital usage and adoption patterns.

The study goes both deep and wide — presenting case studies and drawing on more than 10,000 computer-assisted interviews from across 13 countries in Latin America, South Asia, and Southeast Asia. We discuss the most interesting insights — and why still more research is needed.

A vast and unique sample

Several studies on the pandemic’s effects on digital adoption by small businesses have recently been published, but the Facebook-funded DAI/Ipsos study stands out for its methodology and vast sample size.

Data was derived mostly from surveys administered through computer-assisted personal interviews (CAPI), augmented in some countries by telephone interviews, conducted in the second half of 2021.

The report does not specify the precise number of interviews conducted, but mentions approximately 1,000 interviews per country, across 13 countries in Latin America (5), South Asia (3), and Southeast Asia (5).

In-person interviews can be an effective method to study small businesses: they make it possible to access the broader population of small businesses including informal enterprises and others that cannot be found in business registers or listings.

To study barriers to digitalization, it is especially important to include businesses which remain offline; Additionally, administering surveys through interviews allows for flexibility to capture observations beyond the questionnaire.

At the same time, the DAI/Ipsos study is honest about the limitations of its approach. First, the data are not representative: only businesses with a public front were included, which excludes any home- and distribution-based businesses.

Second, the 13,000 interviews were spread out over an extended period of time, such that time-based survey questions (“in the past 30 days”) prompted participants to think of different timeframes.

Third, lockdowns and infection waves happened at different times across the 13 countries. All in all, the study’s sample size is its unique selling point; yet, its findings need to be interpreted with these limitations in mind. Given these complexities, it is appropriate that the study’s methods chapter has its own conclusion section!

Smartphones, smiles, social

Because country-specific survey results are not directly comparable to each other, the study authors avoid pointing out overarching patterns. Still, reading across the country specific results, the study confirms three major patterns of how small business digitalize:

1. Analog practices (face-to-face interactions, phone calls, etc.) continue to play an important role for small businesses, even those with an extensive digital footprint. Instead of replacing offline business practices, digital tools and techniques become embedded into existing ways of doing things.
2. Anywhere in the world, and especially in Southeast Asia, small businesses use smartphones rather than computers to access the internet. For example, 92 percent of small businesses surveyed in Indonesia reported connecting to the internet via phone, with only six percent saying they use a laptop or desk computer to go online.
3. Social commerce (the use of social networks for marketing and trade) is more prevalent than the use of dedicated ecommerce platforms among small businesses. For instance, in Mexico, 40 percent of online digital businesses reported using Facebook to address customers versus five percent saying using specialized digital tools.

The study’s most interesting findings highlight how small businesses use digital tools in versatile and innovative ways. Most notably, several case studies illustrate how Covid-19 pushed small businesses that mostly relied on a physical store to deepen their online presence, adopting various customer outreach and digital marketing practices.

Several businesses set up virtual storefronts and focused on direct distribution as their main or only channel of customer outreach. For instance, one small business owner refocused from direct in-store sales to distributed sales to wholesalers, thereby maintaining efficient scale during a time when customers could not visit her store.

In another example, an artisan food producer in Cambodia deepened her online presence, running digital marketing campaigns through photo sharing and using basic operations tools to expand nationally.

Another case study highlights how a business’s customers were more prepared to watch longer-form videos during lockdowns, prompting this enterprise to adjust its customer-facing content.

One case shows how online-only businesses fared better during pandemic: with heightened demand, an online food delivery service in Bangladesh was able to swiftly deepen and expand its digital marketing practices, such as visual storytelling around prices and promotions or automated short messages to existing customers.

The findings also provide more detail on why Facebook has become the dominant digital channel for many small businesses.

In contrast to more specialized digital tools like ecommerce platforms, Facebook has wide reach and can be used flexibly. For instance, 15 percent of small businesses in Colombia reported using Facebook for new hires, while only seven percent reported using other tools for this purpose.

In Cambodia, 29 percent of businesses recently used Facebook for customer research, with only eight percent using other digital tools. In Thailand, 33 percent of surveyed businesses said that they used Facebook for customer support and communication, compared to 18 percent reporting using other tools.

Finally, three case studies show the particular potential of social media for small businesses with products that customers strongly identify with. The study outlines one case of an ecotourism provider in Argentina and traders of eco-friendly products in Colombia and Peru, showcasing how these small businesses used Facebook and social media to promote their products, but also to generate a wider following and organize communities.

Relentlessly changing platforms

The DAI/Ipsos study is a treasure trove of interesting findings about how the pandemic has shifted small businesses’ use of digital technology. The attention it draws to small businesses as engines of inclusive growth and contributors to the Sustainable Development Goals is welcome.

Such detailed studies, that draw on an extensive empirical base and clearly flag limitations, are rare and represent important contributions to our overall understanding of small business digitalization.

The study leaves open two important questions. First, case studies and survey statistics often focus on Facebook and its benefits. The study provides detailed methodological information, but does not lay out its survey design.

The selection of countries also appears to focus on markets where Facebook is particularly popular. It is therefore hard to draw firm conclusions about the benefits that Facebook generates for small businesses compared to other digital technologies.

As we highlighted in a previous Spotlight, Facebook has become an essential channel for small businesses around the world, but its dominance also implies that businesses depend on — and are often forced onto — a single platform.

Second, the study explicitly highlights the potential of social commerce, but it also hints at why this potential does not apply equally to all small businesses. Specifically, the case studies illustrate the rather sophisticated digital marketing practices and strategies that successful social merchants engage in.

Not all small businesses have the capabilities to learn about digital and social media marketing. For instance, older business owners may find it hard to adopt entirely different ways of selling their goods. A revealing passage from a case study of a small business in Thailand captures the new demands that small business owners are facing:

While she [the small business owner] benefited from Facebook customer support to learn how to use the application’s marketing tools effectively, she noted the challenges in keeping up with the changing technology. “You notice that it changes season by season, I have to sit down and relearn things again. It took me a while to continue progressing.” (p.31)

While success cases of small businesses using low-barrier digital technologies like social media to grow are inspiring, supporters and future studies should focus on those who are unable, or need support to, keep up with the pressures that social media create. This would ensure that the digital revolution’s opportunities are extended to those who aren’t already well-positioned to take advantage of them.