A/NZ consumers cut back spending at small businesses amid inflation

A recent study by Constant Contact reveals that 60 per cent of consumers in Australia and New Zealand (A/NZ) are spending less at small to medium businesses (SMBs) due to inflation. This reduction is the highest among all regions polled, including the United States, United Kingdom and Canada.

Constant Contact's "Small Business Now: Holiday Crunch" report indicates that inflationary pressures have prompted 43 per cent of A/NZ SMBs to raise their prices in an attempt to counteract the financial strain. This percentage is slightly below the global average of 44 per cent. "Small businesses make up almost 98 per cent of businesses in Australia and New Zealand, and supporting them right now will genuinely help some of these businesses survive the economic storm," explained Renee Chaplin, VP Asia Pacific at Constant Contact.

The report also reveals that A/NZ SMBs are less reliant on the Christmas and New Year period to drive revenue compared to their counterparts in the U.S., Canada and the U.K. U.S. businesses, for example, are significantly more dependent on Q4 (October to December) revenue. In contrast, only 29 per cent of A/NZ SMBs feel the most pressure to generate income during Q4—the lowest among the regions surveyed. Instead, the financial pressure on A/NZ SMBs is more evenly distributed across the year.

"It's reassuring to see that the Christmas and New Year period isn't 'make or break' pressure for small business as is the case in other regions," commented Chaplin. However, she warned that A/NZ SMBs may be missing out on potential revenue during the end-of-year spending surge, commonly the busiest season. "It comes down to marketing and being prepared in areas like labour and training for staff. SMBs in Australia and New Zealand seem to be lagging behind their global counterparts."

Anne Nalder, CEO and Founder of the Small Business Association of Australia, highlighted cultural factors as a contributing issue. "The 'she'll be right' mentality in this region is a part of who we all are, but it doesn't bode well when it comes down to a small business owner assessing how their business is going, and whether they'll be able to survive some of the hardest times we've seen for businesses in this country in thirty years," said Nalder.

The report also identified that A/NZ consumers tend to plan end-of-year spending later than those in other regions. 72 per cent of A/NZ consumers start thinking about holiday spending from October onwards, with 26 per cent beginning in October, 28 per cent in November, and 18 per cent in December. This last figure is the highest among all polled regions. Correspondingly, 48 per cent of A/NZ SMBs begin their marketing preparations in Q4, which is later than SMBs in the U.S. (40 per cent), U.K. (31 per cent) and Canada (41 per cent).

"The opportunity is there for SMBs to drive revenue at a time when local customers are looking to spend," said Chaplin. "But much like their customers, A/NZ SMBs are leaving things to the last minute when it comes to marketing and promotion." Nalder pointed out that a lack of adequate customer communication post-purchase is also an issue, with previous research showing that less than half of shoppers at an SMB receive follow-up communication.

Budget constraints are cited as a primary factor limiting marketing efforts among A/NZ SMBs, with 38 per cent indicating financial limitations. "Inflation is clearly having an impact on small business owners who are looking to reduce expenses by trimming the fat where they can," noted Nalder. Despite these challenges, she stressed the importance of continued marketing efforts: "Embracing new technology to fill gaps in knowledge, or to do the work an owner doesn't have time to do, can really help companies stay top of mind and compete against the corporations with more people and bigger budgets."

The study aggregated insights from decision-makers at over 1,600 small businesses globally, including 284 from Australia and New Zealand. The survey also included data from over 3,000 consumers, with 511 respondents from A/NZ.