The pressures of inflation, of external shocks from geopolitics and supply chains will be too much for Main Street small and medium-sized businesses (SMBs) to bear.
But then again, it ain’t necessarily so.
It’s no secret that the smaller firms — the mom and pop shops that line the neighborhoods and avenues of every small town and big city in the United States — are the ones that keep the economy humming.
And they may be poised to outperform the broader US economy, along several units of measure.
As has been relayed in recent PYMNTS research, Main Street firms have rebounded sharply from the nadir of the pandemic. Growth is now above the second quarter of 2020, at least as has been measured in the first quarter of 2022.
That reading, of course, was taken just as inflation truly took root. There are data points that show that there are competing pushes and pulls in the mix: Most firms expect top line growth, at nearly two-thirds of companies, but also say things are uncertain. More than half say that inflation is putting their sales forecasts at risk.
Read also: Half of Main Street SMBs Say Economic Uncertainty Threatens Business Performance
But even through the past several quarters, Main Street firms have outperformed the larger, broader landscape of US businesses, as measured across 10 verticals. That outperformance is depicted in the chart below, which shows the quarterly progression, and illustrates that even during the decline seen a year ago, there was relative outperformance.
There are a number of reasons for that outperformance: by and large, these smaller companies have been able to innovate, to move nimbly, to respond to and anticipate shifts in consumer demand.
Shifting With the Times
Maybe because they have a street level view to it all. Investing in the great digital shift — and specifically, in connectivity that helps improve back-end processes and consumer facing transactions — lies at the heart of it all.
As we found earlier this year, Main Street Health Survey, a Melio and PYMNTS collaboration, found that success for SMBs is defined by digital efforts. It’s a continuing strategy, this investing in tech. As many as three-quarters (74%) of online sellers planning digital software investments in the coming three months, and 47% of that group also eying equipment upgrades. Those companies that are largely brick-and-mortar are doing the same: of physical retail, 57% said they will spend on digital connectivity in that timeframe, with 32% focused on equipment. The tech investment has some positive impact on day-to-day cash flow management, which in turn gives the visibility necessary to execute on strategy.
The conventional wisdom says that the recession looms, and will drag everyone down alongside, and as part of the downturn. But things may look a bit different for Main Street SMBs.
Read more: Main Street SMBs’ Outlook Improves Amid Broader Digital Transformation