ANALYTICS

How Small Businesses Can

Increase Their Digital Capabilities
by John Beatty
JULY 25, 2017

Paying for a cup of coffee on an iPad is mainstream in big cities, but the majority of small businesses
— the backbone of our local economies — have not yet fully come online. And as e-commerce outfits
increasingly follow Amazon’s lead in adopting a purely data-driven model to provide greater value in
the face of squeezed margins, retailers and service providers that don’t embrace technology will be
at a major disadvantage. Small businesses like restaurants, which have an 80% failure rate in the first
five years, are some of the most challenged in curbing inefficiency and meeting the rising
expectations of tech-empowered customers.
While the business case for embracing technology is widely documented, retailers have historically
shied away, given the high cost and operational complexity. But the rise of cloud computing and
open APIs has changed the game for the industry, allowing small businesses to take advantage of
data in entirely new ways.

INSIGHT CENTER I categorize local businesses into four generations

of technological maturity. At either end of the
Crossing the Digital Divide
SPONSORED BY DXC TECHNOLOGY spectrum are the minorities — mom-and-pop

How the best companies get up to speed. shops on one end, with old-school cash registers
and no bar codes, and the most tech-savvy
businesses on the other end, who are using data
to optimize everything from staffing to inventory.
The majority are somewhere in the middle — they’ve embraced basic or cloud-based technology but
aren’t taking advantage of their data that’s now easily API-accessible in the cloud. And they’re
leaving money on the table as a result.

No matter where your business is on this spectrum, here are some best practices I’ve absorbed
working alongside small businesses successfully crossing the digital divide.

Bringing Your Operations Online

Bringing efficiency to operations is table stakes for retailers. Choosing a low-cost, cloud-based point-
of-sale platform that facilitates smart decision making for everything from inventory to staffing is
the first step. There are many to choose from, so consider the following benefits when evaluating
one for your business:

Vet feature richness. Historically, point-of-sale (POS) systems were vertical-specific, but today it’s
more common to find open platforms that work across many verticals that support rich integrations
and add-on solutions. That said, you want to make sure the POS system you choose has the features
that are core to operating in your vertical. For example, if you’re a clothing boutique, you need
accounting integration, employee management, and sales tax automation. Cafés should look for
platforms with turnkey loyalty programs and staffing solutions. Consider integration, too. Many
systems can function with the software you’re already using, and integrate with third-party sites like
Yelp and Google, so information such as hours of operation and menus can be updated online in real
time.

Put analytics to work. The cloud and APIs are providing access to data on every aspect of the
business, allowing retailers to make smarter, and sometimes unforeseen, business decisions. The
Cafe Grind*, a busy NYC coffee shop, uses its POS system to track customer visits, how long it takes
to serve each customer, and which items are selling, saving the store five to 10 hours per week in
managing logistics. Palo Alto–based Tin Pot Creamery* used demographic analytics to prove that
opening a store in the neighboring town of Los Altos would not cannibalize sales in its current
location, overcoming a strict real estate rule banning locations within five miles of each other.

Optimize staffing. Staffing typically accounts for 30%–35% of operating costs for a restaurant. Small
businesses are embracing a new crop of apps like Homebase to manage hourly employees — from
forecasting labor costs to scheduling and payroll. Businesses report saving an average five to 10
hours per week on scheduling, freeing up time and resources for other priorities.

Double Down on Your Customers

Amazon and Starbucks have made reaching customers a science. They’re not simply acquiring
customers — they’re enlisting subscribers who shop so frequently that joining a service like Amazon
Prime is a no-brainer. You don’t have to be Amazon or Starbucks to do this. Omaha-based Scooter’s
Coffee* has enlisted a loyal customer base rivaling that of Starbucks through its mobile app, where
7% of transactions occur. Here are a few examples of how small businesses are delivering the most
convenient, personalized experiences for customers, and how other small business can follow suit:

Go mobile. Incorporating mobile devices — tablets or POS devices — is crucial, considering that 68%
of diners say server handheld tablets improve their guest experience. You still need at least one
mobile device that can print physical receipts, but many customers (42%) now prefer email receipts.
Spend time handling the devices, and take yourself through the customer’s experience before you
buy. While mobile payments are still nascent, about 33% of U.S. smartphone users are expected to
use them by 2020, and U.S. Apple Pay transaction volume is up 450% over the past year alone. To
stay ahead of the curve, look for a POS system that accepts as many forms of payment as possible,
including EMV (Europay, MasterCard, and Visa), and Alipay.
Bring ordering online. Online ordering is a huge opportunity for restaurants. Morgan Stanley
projects that the U.S. delivery market will skyrocket from $11 billion annually to as much as $210
billion over the long term. A recent study found that restaurants offering online ordering have seen
their takeout revenue grow by an average of 30%, while one in five saw revenue double. Partner
with established delivery services such as UberEATS, GrubHub, and Seamless to take advantage.

Launch a digital loyalty program. It literally pays to double down on your most valuable customers
with loyalty programs, which are proven to increase purchases by 20% or more. Launching a mobile
loyalty program can be tricky, though. LaFleur’s Seafood Restaurant* ditched traditional punch
cards and enlisted 1,800 rewards members in less than a year. It gave staff extensive training in
offering, encouraging, and setting up the rewards program for customers, motivating employees by
posting a sign that read, “If your server doesn’t tell you about our rewards program, we’ll give you
$10 off your meal.” Offer a significant discount or a gift in exchange for joining to jumpstart your
program. Advanced marketers are taking this a step further, integrating CRM with loyalty systems to
identify when a customer hasn’t been in for 90 days, then automatically putting an offer in their
mobile wallet. Or, if Wednesdays are typically slow days, businesses can automatically send a
discount push notification to customers with deals and incentives for Wednesdays.

While tech is the secret sauce of the eBays of the world, it’s also leveling the playing field for small
businesses. I believe there will always be a place for small businesses, but the ones that will thrive
are leveraging these tools to connect with customers and run more efficiently.

*Disclosure: The Cafe Grind, Tin Pot Creamery, Scooter’s Coffee, and LaFleur’s Seafood Restaurant are
businesses that use or have used Clover products.

John Beatty is cofounder and CEO of Clover, a subsidiary of First Data, focused on payments innovation for
companies including Apple, Google, and Samsung.

This article is about ANALYTICS

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