SME Photo 76231766 © One Photo
© One Photo

Concerns about a looming recession appear less of a headache to many small and mid-sized enterprises (SMEs) in North America than current supply chain issues, according to two new surveys of the sector.

Kabbage, a data & tech offshoot of American Express that provides access to funding to SMEs, surveyed small US businesses in April on their expectations and challenges.

Their Canadian counterparts were included in a survey of over 1.000 SMEs in nine countries by UPS and Nathan Associates.

Both surveys suggest supply chain disruption is the biggest challenge for SMEs.

Kabbage’s sixth review canvassed 550 SME leaders, with 250 representing firms with fewer than ten employees, 200 with 11-100 staff and 100 with 101-500 on their payroll. They hail from sectors, including retail, healthcare, manufacturing, technology, automotive and financial services.

More than four in five (83%) expressed concern that the US economy would slip into recession soon, but this did not blunt their outlook on their own business. As many as 80% of them voiced confidence that their company could withstand it.

The main reason for this is the experience of having come through the pandemic disruptions, which infused them with a greater sense of resilience and preparedness. Nearly half of SMEs (45%) have developed new competitive strategies since the start of the pandemic.

And the firms have carved out their own space, with 29% of the smallest players and 57% of the rest claiming they are using branding as a differentiator. Moreover, 44% of the medium-sized and larger respondents are marketing their offerings through social media and digital channels that are different from those used by their competitors.

The emphasis on digital channels and branding reflects a strong focus on online selling. This is in line with the approach of Canadian SMEs surveyed by UPS and Nathan Associates in partnership with Startup Canada. They found that growing domestic e-commerce sales is the top priority for 58% of respondents, in terms of business growth goals for the next two years.

The survey was based on input from 111 companies, ranging from one-person operations (35%) to outfits employing between 301 and 499 people (2%). According to the survey authors, Canada is the tenth-largest market for e-commerce in the world, with SMEs producing 40.6% of the nation’s exports.

The share of respondents that sell online rose from 50% before Covid to 67% two years later, and 23% have closed at least one physical store since the start of the pandemic. The lion’s share of their sales (76%) goes to the B2C sector, while 23% target B2B clients. Only 1% are selling in both channels.

For 58%, growing domestic online sales is their top priority, while 16% see an expansion of international online sales as their top objective. This appears logical in light of the key challenges to their growth ambitions respondents identified: lack of access to information on international markets; management of e-payments and taxes for international customers; and insufficient facilitation of shipping and trade logistics.

Still, almost half of the respondents are selling online to international customers – more than 70% export to other North American markets, while 38% sell to East Asia and the Pacific region and 33% to Europe and Eurasia.

For SMEs in Canada and the US, supply chain disruption is the biggest hurdle. For 69% of Canadian SMEs, this was the biggest concern this year, having ranked second last year behind worries about a decrease in cash flow.

While 29% describe dealing with supply chain disruptions as “very challenging”, they are also struggling with other aspects of the logistics arena, to challenges in storage and management of inventory and in management of after-sales service.

In the US, Kabbage found 53% of its respondents expected to be impacted by supply chain problems in the next three months, and up to a year ahead, and 24% were planning to use funding to cover costs due to supply shortages.

Comment on this article

You must be logged in to post a comment.