With limited staff and resources, small businesses often struggle to expand their customer base, especially in the government procurement process where they’re up against additional barriers like incumbent suppliers. But online stores can connect small commercial product suppliers with new audiences outside their regions that can ultimately help them grow revenue.
In a report by Censeo Consulting Group that surveyed 455 small businesses on the challenges they face in selling to government customers, the vast majority of small businesses—93%—reported significant incumbent and process barriers when trying to reach government customers. But online stores can help alleviate those barriers: Respondents who use online stores reported they provide a larger share of revenue than any other channel.
Previous articles in this series focused on the unique barriers small businesses face in government procurement—such as the incumbent supplier advantage and complex, as well as inefficient processes. Part Three will examine the role online stores play in expanding customer bases and increasing revenue for small businesses.
Reaching new audiences without increased selling cost
Large suppliers often have access to dedicated public sector staff or consultants to handle government outreach and secure procurement opportunities. Small suppliers have far fewer resources at hand in comparison, making it all the more challenging to win government contracts from incumbents with existing government relationships and insight into the complex procurement process.
As a result, many small suppliers must resort to time-intensive sales tactics, like driving around the state to meet with potential government customers in person. Not only are these tactics inefficient and costly, they’re significantly limited under pandemic-related restrictions. And now that many organizations have shifted operations and adopted digital solutions, it’s unlikely that business will ever fully revert to the way it was pre-COVID-19.
Yet even before the pandemic, small businesses were already seeing success with online stores. Digital storefronts provide product sellers with access to a wider customer base, enabling them to expand into new market segments and regions. Of the small product suppliers that reported using online stores, 74% said the channel gave them access to more customers and 66% said it helped them expand into new market segments.
Even more, 72% of respondents reported that the cost of sales is the same or lower when using an online store compared to other channels. With online stores, small suppliers can dramatically reduce their investments in marketing materials, and spend less time and resources on outdated selling methods, like door-to-door sales.
Increasing revenue with an omnichannel approach
Most businesses, regardless of size, leverage cross-channel marketing strategies to reach their customers across more points of contact. This strategy is not only correlated with increased customer satisfaction and retention, but also enables businesses to sell higher volumes of products and increase their revenue each year.
Digital channels like online stores can account for a large chunk of annual revenue. Small businesses surveyed reported that 42% of their annual revenue came from online stores, the largest share of revenue compared to all other channels.
When it comes to government procurement, online stores can help connect small businesses with buyers outside their home markets. These contracts create further opportunity for maximizing revenue, especially when small suppliers win contracts with larger government entities.
But currently, small businesses may rely too heavily on traditional channels such as their company website, in-person sales and phone outreach. Just 29% of small suppliers surveyed said they even use online stores as a sales channel. That means 71% are missing a critical opportunity to increase their revenue.
Consumers have long enjoyed the ease and efficiency provided by online stores. Now businesses are looking for the same purchasing convenience. Online stores can connect small commercial product suppliers with new business customers, including government procurement buyers, and help increase their annual revenue—without increasing business operational costs.
Anne Rung is Director of Public Sector for Amazon Business. Prior to joining Amazon in 2016, Rung was the U.S. Chief Acquisition Officer in the White House Office of Management and Budget. Also, she has held senior management positions in procurement at the U.S. General Services Administration, the U.S. Department of Commerce and the Pennsylvania Department of General Services.