Digital safety net helps Kentucky small businesses survive during COVID-19, report shows

The Connected Commerce Council (3C) has released a report detailing the existence and importance of the small business “Digital Safety Net” to businesses in all 50 states. The report confirms that small businesses using more digital tools, technologies and online marketplaces are doing better during the COVID-19 pandemic.

Those who embrace digital tools early and integrate them more are doing even better. 3C defines the Digital Safety Net as the free and low-cost small business services that include communications and workflow tools, digital marketing and advertising, websites and social media, back-office tools, and e-commerce and online payment tools.

Digitally Driven shows that nationally small businesses that embraced digital tools the earliest — “Digital Drivers” — expect 4x better revenue for 2020 compared to “Digital Maintainers,” those who are generally skeptical of digital tools’ value and typically use only a few basic tools such as email and perhaps a website. In Kentucky, 20 percent of small businesses are digital drivers compared to 35 percent nationally with a predicted 18.71 percent in revenue reduction compared to an expected 16 percent reduction in revenue nationally.

“In times like these, when in-person commerce is limited, if not impossible, and working from home is the norm, digital tools literally are a safety net preventing deeper small business calamity,” said 3C President Jake Ward. “The Digital Safety Net is real. However, the net could — and must — be bigger, more robust, and more inclusive. Small businesses must invest time in selecting the right digital tools for their business; technology companies must help small businesses access the right tools; and policymakers must invest more money in public-private partnerships that create and support small business resource networks.”

Other key findings in the report include:

In addition to the 20 percent that were digital drivers:

• 36 percent of Kentucky small businesses are “Digital Adopters.” They recognize the value of digital tools and are using some, but are not fully committed to digital, compared to 33 percent nationally.

• 32 percent of Kentucky small businesses are “Digital Maintainers.” They are generally skeptical of digital tools’ value or are tech-nervous, and typically only use a few basic tools such as email and perhaps a website, compared to 33 percent nationally.

Comparing the 50 states, those with a higher incidence of Digital Drivers show stronger small businesses resiliency than those states with more Adopters and Maintainers.

The states with the most Drivers and best-expected revenue are:

• Nevada (63 percent Drivers, 5.26 percent revenue growth)
• Alabama (51 percent Drivers, 6.61 percent revenue reduction)
• Arizona (49 percent Drivers, 9.75 percent revenue reduction)
• Georgia (40 percent Drivers, 10.75 percent revenue reduction)
• Colorado (47 percent Drivers, 12.45 percent revenue reduction).

A total 78 percent of Kentucky small businesses increased their use of digital tools during the pandemic, compared to 72 percent nationally.

Pre-COVID-19, 57 percent of Kentucky small businesses found digital tools either “essential” or “important” to their business, compared to 68 percent nationally.

Kentucky small businesses cited three key challenges to adopting and expanding their use of digital tools:

• 27 percent cite being unsure about return on investment, 48 percent cite cost, and 57 percent cite information and skills gaps.

The report also recommends that small businesses maximize their digital tool use and become better prepared for the next crisis, and provides a playbook for tech platforms, governments, and NGOs to support small businesses today and into the future.

For small businesses, it is critical to identify their goals, gaps, and precise needs to ensure they are investing in the right digital tools – not the most popular or least expensive options. For technology companies, helping small businesses discover which digital tools they need and providing confidence-building skills training and user-friendly support materials will help with the knowledge gap that prevents many companies from taking the digital plunge. And for policymakers, the need is to increase funding of small business resources and create public-private partnerships to address access and education barriers that small businesses experience during tough economic times.

Digitally Driven, commissioned by 3C in conjunction with Google and Greenberg, is based on findings from a nationwide survey of 7,021 small businesses that were still in business, including a representative sample from every state in the country. Data are weighted by gender, ethnicity, region, business size, and vertical, to ensure an accurate national representation. The survey was fielded online and by phone between May 28 and July 3, 2020.