By Jeff Fortney
Signature Payments
To open a business—be it a retail store or an eatery—the first step is to build a business plan. It's what enables business owners to live their dreams. They all understand the importance of planning for the first few years, primarily projecting costs and revenue. Sound planning will demonstrate potential for success and show when revenue will exceed costs and the business will turn a profit.
A competent business plan considers the history of the targeted marketplace, the current product opportunity found therein, and its highs and the lows, including recession periods. Additionally, the plan addresses the projected profit timeline against all the variables. The results provide a clear picture of the financial need prior to breaking a profit.
One recent variable no one could have projected was the impact of a pandemic and subsequent forced business closures. Merchants of all types have shared this variable's impact on their business plans with me while discussing the pandemic's ramifications. It was not something they planned for or even considered. They planned for potential fires, floods and other such disasters that could be addressed with insurance options and other protections. These were finite, sudden and short lived in nature, and business owners could predictably recover and move forward afterward.
The lockdown in response to the COVID-19 pandemic was completely different. Business owners had no idea when they would be able to open their doors again. They had no physical damage or failures on their part to address. They saw closed signs everywhere, and they were scared.
Looking back, I doubt many of us in the payments world would admit it, but we were scared, too. Our success was predicated on our merchants' success and, with businesses shut down, we were in an emotional and financial situation similar to theirs. How our merchants responded to the pandemic would have an immediate, direct impact on our revenue.
Merchant responses to the lockdown varied greatly. Restaurants and others with perishable items had to react immediately. They converted to online or phone ordering coupled with delivery and pickup to get items into customers' hands. Some used third-party ordering systems (although they were costly). Many local restaurants chose to provide the services directly, converting waitstaff into delivery people.
To accomplish this, they needed two key components: an online presence and a way to reach their customers. Those I spoke with had a sense of urgency. The day after the lockdown they were already making plans to address these two options. Most already took phone orders and had at least a rudimentary presence online with a menu and contact information. The most important step for their survival was letting their customers know they were still taking orders and able to serve them, often in new ways.
Those with loyalty programs reached out to customers within days. Most of those interactions were brief but did let customers know they were still very much in business and taking orders. Depending on what items had the shortest shelf life, merchants may have included offers for specific family-sized meals. Some also offered "cook it yourself meals" with recipes, requisite ingredients for full courses, and tips to prevent spoilage.
Many merchants also upgraded their online presence. They revised menus to eliminate items that had a short shelf-life unless they were in high demand. They also checked their prices to insure there were no loss leaders and determine whether there was room to raise a few prices.
At the beginning, merchants relied on phone orders, but as the lockdown continued, they realized the need to add an online ordering system. When they were able to reopen with restrictions, numerous restaurants dispensed with printed menus (for sanitary reasons) and started using QR codes instead. They put QR codes on signage directing people to their online menus and email headers.
With all these efforts, most found they were able to reach only 60 percent of their previous average volumes.
Specialty restaurants whose menus changed daily or weekly, or who provided a unique dining experience, faced distinct challenges. Others had no way to contact their consumers. And many restaurants that were struggling before the lockdown chose to close entirely. In these cases, even a PPP loan did not help. The majority didn’t survive.
Retail merchants faced different, and ultimately more serious issues, than restaurateurs. Unlike larger merchants, small retailers likely did not have a customer database. They may have had an online presence, but it likely didn’t include their inventory or provide shoppers a way to buy from them.
When they closed and locked their doors in March 2020, these business owners had no idea what was coming next. They hoped the lockdown would be short. For several (like my friend who owned a kickboxing gym) the lockdown provided an opportunity to review their personal exit strategy. As a result, they chose to close now rather than wait it out or rely on the support they were offered.
Others, with the help of PPP loans and an eviction moratorium, held out hope. Some had a basic web page and spent time updating their web presence. And they sought new ways to reach out to customers.
Many retailers saw an increase in business during the lockdown. People stuck at home decided to spend time on improving their homes. For example, the nursery industry saw increased demand for their products. I know of several that saw a spike in their spring 2020 volumes above what they sold prior to the lockdown. They did, however, need to change how these purchases were made. Instead of entering the nursery, consumers called ahead to place an order. The nursery would deliver merchandise to the car. For those who drove in without ordering beforehand, orders were taken from the car. Customers would park while nursery staff pulled the items desired, and the merchant took payment using a phone app or other mobile payment device.
Home improvement stores and hardware stores found similar demand. They may not have seen as big a spike as nurseries, but they did experience unanticipated business gains. They also had to operate in a similar fashion, with curbside or phone-in orders.
Grocery stores were early adopters of curbside pickup. Big-box stores may have driven this process, but all stores followed suit. All you needed was to submit your shopping list, set a time for pickup, drive to the store at the designated time, and your purchases were loaded into your car.
All types of businesses knew they had to compete with the fast growth of home delivery and the growth in Amazon usage. They also knew their world would be different when the lockdown ended, and if they survived, they had to change to continue to survive.
Today, as the lockdown continues to ease where it is safe to do so, we need to be at the forefront of providing what is needed to help merchants address their new normal. We can implement some changes now; others are coming soon. Merchants are opening under restrictions that vary from community to community, and they are opening to a new type of consumer. They recognize this and will be accepting more electronic payments and less cash.
Looking at consumers' and merchants' responses to restrictions imposed to contain the spread of COVID is critical to our success going forward. In my next article, I'll look at our situation, as payment professionals, through the various stages of lockdown and opening up, examining what we learned, what we need to offer now and what we can expect in the new normal.
Jeff Fortney is vice president ISO relations for Signature Payments. A long-time payments industry executive and mentor, Jeff is focused on strengthening and developing partnerships and evaluating new business opportunities. He can be reached at 214-458-1379.
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