The fate of small businesses across Canada, representing 42 per cent of the country’s GDP and 48 per cent of new jobs, hinges on their ability to adapt to dramatically altered consumer preferences and embrace digital technologies as the economy reopens. According to a newly released report from RBC Economics, this shift is not simply desirable but essential for survival. The report, published Wednesday, cautions that failing to capitalize on these changes could prove just as costly as the unprecedented economic collapse experienced during the COVID-19 pandemic. RBC’s analysis indicates a prolonged and uneven recovery, with some sectors, particularly those reliant on domestic demand, expected to remain 25 to 50 per cent below February 2020 levels by the end of the year.
The report underscores a significant shift in consumer behavior, accelerated by mandated lockdowns and social distancing protocols. Businesses that successfully pivoted to cater to consumers largely confined to their homes – offering products and services delivered directly to consumers’ doors – have fared considerably better than those that did not. However, as the economy reopens, many small businesses face the daunting challenge of creating an operational plan with no guarantee of full consumer returns and no definitive understanding of how long conditions of social distancing will persist. This extended uncertainty, potentially spanning nine months or even two years, presents a considerable hurdle for businesses already grappling with significant financial pressures. RBC stresses that preparedness for this evolving landscape is paramount.
Recommendations within the RBC report are multifaceted, encompassing both immediate and long-term strategies. The financial institution suggests a coordinated effort involving government agencies, business associations, and individual firms. A key element is the implementation of a program designed to assist small businesses in bolstering their online channels – a goal of achieving one million businesses deriving at least 25 per cent of their revenue from online transactions by 2025. Compounding this need is the proposal to establish virtual Main Streets and farmers’ markets to effectively connect businesses with customers, particularly in areas where broadband internet access is limited. Moreover, RBC advocates for the creation of national programs to support Canadian businesses in investing in Canadian-designed software and hardware, promoting digital transactions and services.
To further support this shift, the RBC report proposes a multi-year investment in regional tech accelerators, alongside the acceleration of the 2019 federal budget commitment to provide high-speed internet access to every Canadian and business by 2030. This initiative, coupled with tax credits available to small firms investing in these technologies, represents a significant step toward facilitating digital commerce and service delivery. In addition, the report suggests launching safety certification programs for businesses – initially targeting hard-hit sectors such as restaurants, hotels, and retail outlets – to encourage customer returns. Rocco Rossi, the chief executive of the Ontario Chamber of Commerce, highlights the critical role of small businesses in driving local demand and job creation across Canada, emphasizing that a recovery driven by these entities should be viewed as “too small to fail,” contrasting this approach with the “too big to fail” emphasis that characterized the response to the 2008-2009 financial crisis. The report’s authors underscored this point by observing that during the last recession, small businesses accounted for nearly 60 per cent of job losses – twice the share they shouldered in 2008-2009. The overall message is clear: adaptability and a strategic embrace of digital transformation are now non-negotiable factors for the survival and prosperity of Canadian small businesses.