Although Omicron is still throwing up a messy combination of supply chain bottlenecks, staff shortages and vacillating consumer demand, it’s heartening to see optimism among small to medium sized business owners rebounding.
After the previously unimaginable hurdles they’ve faced during the past two years of pandemic lockdowns, that light at the end of the tunnel seems to be getting much brighter.
But, among those I speak to, they’re also under no illusions that they’re out of the woods just yet.
For some, the most pressing concern is simply to survive the next few months of Omicron disruptions.
There are many others who are thriving, but the challenge for them is preparing for whatever their post-pandemic “new normal” might be, recognising many of the shifts in consumer behaviour sparked by lockdowns may be here to stay.
What’s become most apparent as I work with our Westpac business customers is the dichotomy that’s emerged between those in survival mode versus those that are flourishing.
I’ve never seen such a multi-speed small business operating environment.
The divergence isn’t just sectoral. It’s within sectors, creating more micro segments than ever before.
Take tourism, for example. Prior to COVID, you could look across tourism operators and the vast majority would either be enjoying (or bearing) similar general conditions. Since we’ve emerged from lockdowns, it’s a very different story, as we’ve seen an almost even split develop between those operating at all-time highs, and those yet to get back on track.
For businesses in CBDs across our major cities, it’s a similar story. Most retailers and hospitality venues at the heart of those locations are struggling without consumer foot traffic, as working-from-home arrangements keep CBD-based employees away and shoppers remain wary of returning. Yet we’re also seeing those who successfully tilted their businesses online at the beginning of the outbreak now doing better than before. Those in regional centres are also experiencing a renaissance, as people relocate out of metro areas in record numbers.
Even within the construction sector, which has fared well generally, a divergence has emerged. While many mid-tier property developers are having record years as the housing market booms, many others are struggling with cashflow as materials are getting stuck in global supply chain bottlenecks. As one customer explained to me, they’ve had to become more of a logistics and supply chain manager than a builder.
Regardless of which end of the dichotomy small businesses are on, the mental fatigue of navigating the pandemic – now entering its third year – is taking a growing toll. Even among those doing well, I’m floored by how much they’ve had to push themselves to get through.
On a positive note, their optimism is being bolstered on a few different fronts. We’re seeing expectations firm that the current COVID wave is likely to peak very soon thus leading to improved trading conditions. Unemployment looks likely to dip below 4 per cent this year (the lowest since the 1970s) and GDP growth should reach 6 per cent, according to Westpac’s forecasts.
All this is translating to far fewer businesses requiring hardship assistance than in the first COVID waves. And among those seeking financial relief, they’re only after short-term support to bridge them over, rather than the longer-term help needed in the first waves.
Among those Westpac customers who have taken out loans through the government-backed SME Recovery Loan Scheme since October, just 10 per cent have deferred their repayments, while 25 per cent are actually ahead on their repayments.
The narrative is no longer about the end of the pandemic, but about how we live with it. There is no doubt that the businesses that thrive will be those who don’t presume things will return to what they were pre-pandemic.
Despite a collective national longing to get back to some form of normalcy, the fact is that many consumers’ behaviours have irreversibly changed. The massive shift to digital interactions will only accelerate, and altered foot traffic patterns look set to last for the long haul as big employers move to hybrid work arrangements.
Just as businesses have always needed to evolve to meet changing customer preferences and expectations, these “new normal” patterns must be factored into operating models.
But one pattern I’m sure every business owner is hoping will change sooner rather than later, is for Australians to start spending again!
Households and businesses have squirrelled away around $424 billion in savings during the pandemic according to APRA and 70 per cent of Westpac customers are ahead on their mortgage repayments.
While this is forming a great buffer for households and businesses against further economic shocks, many small and medium sized businesses won’t get the kickstart they really need until those savings begin to recirculate back through the economy by way of spending on goods and services.
I’ve no doubt many will agree that is key to hoisting businesses from surviving to thriving again – a good outcome for the whole economy.