SMEs Gearing Up for An Uncertain Christmas

As many Auckland retailers gear up to open their doors for the first time in months tomorrow, the impact of the latest COVID-19 community outbreak and ongoing concerns about supply chain disruptions is also seeing SMEs prepare for a very different Christmas and New Year period.

More than 80% of SMEs are concerned about the impact of the COVID-19 Delta resurgence on their business over the Christmas and New Year period, with more than a third (37%) very or extremely concerned, according to MYOB’s Holiday Trading Snapshot.

The survey of more than 500 local SME business owners and decision-makers also found that more than three-quarters (77%) of SMEs were concerned about the wider disruptions of the pandemic affecting their supply chain over summer.

As a result, over half (55%) of the SMEs surveyed said they have made changes to their business this year to prepare and manage the impact of any COVID-19 disruptions over summer. Of this group, one-in-10 (10%) said they have had to completely readapt or reposition their business.

MYOB Head of Customer Services – Jo Tozer, said even though it is our second ‘COVID Christmas’, this year is looking very different for local businesses.

“While we saw similar levels of concern in the lead up to Christmas last year, at that time we were also fortunate enough to be one of the only countries in the world to be living without COVID-19 in the community, allowing us to enjoy a relatively normal summer.

“For this holiday trading period, New Zealand businesses will have to contend with the Delta variant continuing to spread, a change from the current alert levels to a new traffic light system, the potential introduction of vaccine passports, as well as some vaccine mandates for frontline staff, and a global supply chain that is looking increasingly fractured.

“With timing still uncertain around many of these factors, all of this makes for an extremely uncertain picture, as many businesses work hard to prepare for what is traditionally a vital trading time for many SMEs.”

Summer revenue predictions

The Holiday Trading Snapshot reveals that, on average, SMEs derive around 20% of their annual income from the Christmas/New Year period, with more than a third (37%) saying the summer months are very or extremely important to their business in terms of revenue.

Nearly half (49%) of the SMEs surveyed expect their revenue to be about the same as last year for Christmas and New Year, however, 28% are forecasting their revenue will be down on the 2020/21 period – including 35% of SMEs based in the Auckland region. In contrast, just 14% of New Zealand’s SMEs expect their revenue to be up on last year.

SMEs adapting to risk

In response to the concerns they’re facing, those SMEs (55%) making changes to their business are adopting a range of strategies designed to minimise disruption, reduce costs or manage risk.

What SMEs are doing differently to prepare for the Christmas/New Year period, due to COVID-19 (Respondents could select more than one option)

  • 41% of this group have ordered stock earlier than normal to avoid delays (October 2020: 32%)
  • 37% of this group have revised business plans to prepare for the movement of Alert Levels (October 2020: 32%)
  • 36% of this group have requested staff get vaccinated (N/A)
  • 21% of this group have limited the volume of products they stock to ensure most stock can be sold (October 2020: 28%)
  • 19% of this group have planned to extend their business hours (October 2020: 24%)
  • 18% of this group will be closed over the Christmas break this year (October 2020: 15%)

Tozer pointed out that this is the second Christmas where businesses have needed to plan ahead for significant disruption. In last year’s Holiday Trading Snapshot, 32% of SMEs said they were ordering stock early to avoid delays – almost 10% less than this year, with more SMEs now taking action against these concerns. The number of SMEs revising business plans to prepare for a change in Alert Levels has also increased on last year, with 32% taking this action in 2020 (compared with 37% in 2021).

“The Christmas period can be a busy and overwhelming time for a lot of business owners and having to manage constant change while being prepared to adapt swiftly to new developments can put a lot of pressure on SMEs – particularly when many are doing what they can to just try to stay afloat. For those businesses eager to get a second opinion on planning and preparation, consider talking this through with your accountant, a business advisor or even a trusted friend or family member,” Tozer continued.

Buy local for Christmas

The MYOB survey also asked business owners and operators to identify the one thing they would ask of consumers over the holiday trading period.

Just over half (51%) of SMEs said they would ask consumers to get vaccinated, a quarter (25%) said shop local and buy New Zealand made and – in line with cashflow concerns – 11% said their one ask would be to pay invoices to small businesses on time.

“This Christmas is shaping up to be a challenging one for many local businesses, however, we can all play a role in making this a better-than-expected Christmas for SMEs – the businesses that sit at the heart of our local communities,” Tozer concluded.

“From shopping for New Zealand-made products to visiting local hospitality businesses with loved ones, trying out local tourist activities, shopping at local online stores or simply by recommending their products or services to friends and family. We can make their Christmas a bright spot in another tough year if we just give them our support.”