As the holiday season approaches, small and medium-sized businesses (SMBs) have an uphill battle to secure their piece of the sales pie. But the key for SMBs to win this year’s Q4 is not to play the same game as the major retailers but rather to play to their niche and delight their customers with an exceptional, personalized experience.

During a recent PaymentsJournal podcast, Nitin Prabhu, General Manager SMB, Developer and Payments at PayPal, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, discussed the findings of PayPal’s SMB and Consumer Survey 2023 and determined what SMBs can do to differentiate themselves from larger retailers, leverage current technology (such as PayPal PPCP) to acquire new customers, and widen their customer base as they prepare for the holiday season.

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Challenges SMB Owners Face During the Holiday Rush

SMBs struggle with particular challenges related to their size and scope of operations. And with the holidays on the horizon, SMBs face stiff competition from big-box stores and their slick marketing and advertising campaigns.

Moreover, SMBs incur considerable expenses to invest in additional inventory, of hiring new and knowledgeable staff to manage the influx of customers and sales, and of course shipping costs. If any of these efforts falter, there can be negative impacts on profitability and future customer acquisition.

PayPal surveyed thousands of SMBs at the start of the year, and a few key challenges were discovered:

* 91% of SMBs cited finding new customers as a key problem.

* Attracting new customers is expensive, with some merchants spending as much as 30% of their product or sales cost to acquire new customers.

* SMBs are unable to bundle products or get the same kind of scale as their larger counterparts, making their products 37% more expensive.

* SMBs don’t have the knowledge to acquire the right logistics partner to create a seamless end-to-end experience.

“SMBs are not logistics experts, they’re not payments experts, they’re not returns experts,” Keyes said. “They are SMBs trying to make sales and get by and build their business. But they don’t come in with this level of expertise or NSA experience.