10 Small Business Trends To Watch (New Research)

The past few years have seen unprecedented changes to how entrepreneurs start and run small businesses. If you’re feeling a little lost or unsure of what to expect next, you’re hardly alone.

As a small-business owner, the best tool you have is information, both about how other businesses are keeping the lights on and about how customers want to shop in this time of change.

Thankfully, we have data that can help you with both.

In our annual Future of Commerce report, we asked both business decision-makers and consumers what matters to them in this new era of commerce. With that information, we identified seven key small business trends to pay attention to in the new year, including what customers are looking for, how to gain an edge in how you ship, and how businesses plan to invest in themselves.

These insights will help you future-proof your small business and remain resilient.

1. Rising customer acquisition costs for paid ads are driving business owners to prioritize customer lifetime value and promote brand loyalty

It’s never been easier to start an online business. And while that’s exciting for entrepreneurs, it also means there’s more competition—and paid advertising and customer acquisition costs are trending upward as a result.

As more businesses are online, it’s harder and harder to be found by new customers. —Mel Ho, Senior Product Marketing Lead, Shopify

“As more businesses are online, it’s harder and harder to be found by new customers,” says Mel Ho, Senior Product Marketing Lead at Shopify. “Because it’s so easy to start online now, there are definitely rising costs of customer acquisition. Paid ads are getting really expensive, not to mention the Apple iOS 14 release, which has made it more difficult to track results in ad spend.”

More brands are vying for customers’ attention. In fact, global spend on social media ads in the third quarter of 2021 was 26% more than the same period in 2020. More ads means more competition.

As a result, marketers are shifting to focus on cultivating brand loyalty—a move away from acquisition toward customer retention. Customer loyalty programs, personalization, and retargeting are just a few marketing strategies brands can use to achieve these goals.

2. Businesses turn to first-party data for personalization

Speaking of personalization, data privacy concerns remain prevalent. And regulations are making it more difficult for brands to collect and use customer data—the European Union’s General Data Protection Regulation (GDPR), California’s Consumer Privacy Act, China’s Personal Information Protection Law, Brazil’s General Data Protection Law, and more likely to come. More than a quarter of “technology decision makers” expect these changes to hinder 2022 business growth.

As a result, merchants have to pay ever-increasing compliance costs and even have to hire legal professionals to advise. Many marketers have considered abandoning their personalization efforts altogether because of the challenges that come with this marketing strategy.

Still, as many as one-quarter of consumers would opt into mobile app tracking for a brand they know and trust—especially if there’s some added value for them.

This is where first-party data comes into play. Rather than relying on a host of third-party data collection sources, merchants can take data and personalization into their own hands—and consumers are more willing to trust this approach.

According to our survey, 42% of brands plan to use tools like quizzes, custom mobile apps, and first- or third-party behavioral data to provide personalized product recommendations. Another 44% plan to increase their transparency regarding how they use customer data.

Using a tool like Shopify Audiences, ecommerce brands can manage all the data directly from their Shopify admin. Plus, the tool also lets merchants optimize ad spend and performance and decrease conversion costs and find high-intent buyers.

Shopify Audiences web page with quote from Chase Waters, Direct of Digital Marketing, Trove Brands - BlenderBottle

Shopify merchant BlenderBottle gets a 600% return on ad spend performance with Shopify Audiences.

3. Brick-and-mortar businesses that went online during the pandemic are reopening their doors

The COVID-19 pandemic changed commerce forever. As physical retailers were forced to close their doors and explore online selling channels to stay afloat, the world’s return to normalcy is also inspiring a resurgence in brick-and-mortar.

Consumer behavior continues to evolve. People want to be able to blend the lines between digital and physical retail—their experience with your brand should be the same, regardless of the channel they’re using to engage with you. In fact, more than half of consumers say that over the next year they’ll likely look at a product online and later purchase it in a physical store—and more than half also say the reverse.

It’s still important for brands to maintain a physical local presence. Nearly half of consumers consider this an important factor in their purchase decisions.

Physical retail can also curb some of those rising customer acquisition costs.

Our stores operate like billboards. —Michelle Cordeiro Grant, founder, LIVELY

Shopify merchant LIVELY got its start selling women’s undergarments online but soon ran into the issue of the high cost of securing new customers. So the brand decided to open its first physical location. It not only lowered acquisition costs but also boosted average order value (AOV) by 80%. As founder Michelle Cordeiro Grant says, “Our stores operate like billboards.”

LIVELY website showing images of retail store locations in Soho and Austin
LIVELY now operates five stores across four states.

4. Mobile shopping is increasingly social

Mobile commerce has been on retailers’ radars for a while. And it’s important for merchants to understand how consumers use mobile to make purchases online. In many cases, this means going social.

Social commerce sales are forecasted to almost triple in volume by 2025, and approximately 30% of US consumers already make purchases via social channels.

One way to take advantage of this trend is to harness the power of live chat and livestream shopping. According to our data, more than 80% of companies have plans to increase or maintain their budget for livestream selling.

If you can’t do video-based livestreams for whatever reason, consider live chat. Our data found that 58% of consumers say it’s important for them to be able to easily reach customer service via their preferred channel. Another 43% said they’re likely to use live chat in the next year. As a result, 45% of brands have plans to implement the technology in the near future.

statistics about live chat

Brands can make themselves available for real-time interactions via social media or live chat apps on their ecommerce site. You can also use a tool like Shopify Inbox to manage all your live chat interactions from a single dashboard. As many as 70% of Shopify Inbox conversations end with a purchase.

5. Online business creation is up as more people embrace entrepreneurship

While small-business entrepreneurship soared in 2022, many entrepreneurs look to take advantage of selling online. Technology has made it easier than ever before to launch an online business, and the ecommerce market is forecasted to grow by nearly $11 trillion through 2025 as a result.

bar graph showing stats about retail ecommerce sales from 2014-2024

The recent pandemic forced business and consumers to interact online, and many have become comfortable interfacing with these digital channels now. There are between 12 million and 24 million ecommerce sites in the world—more competition than we’ve ever seen before. In fact, that competition is the biggest challenge merchants face, according to our survey.

To stand out in the crowded environment, brands have to focus on quality across the board. Quality products, customer service, branding—everything should invoke a positive feeling and experience for your audience.

6. The most popular small-business ideas are environmentally conscious

According to one survey by Accenture, more than half of global consumers are more likely to buy from a company that shares their values. These values are increasingly environment-centric.

Our survey found that more than three-quarters of consumers have concerns about the impact on the planet the products they buy have. And searches for “sustainable goods” have steadily risen by as much as 71% since 2016.

Both businesses and customers are increasingly aware and concerned about the impact commerce has on our planet.

Over the next 12 months, 46% of businesses plan to invest in enabling customers to easily recycle products, 39% want to improve the efficiency of their manufacturing process, and 39% plan to invest in using natural, renewable, or recycled materials.

graphic showing 39 percent businsses plan to invest in sustainable materials.jpg

Plus, nearly half of merchants plan to make it easier for customers to recycle used items. Others plan to improve operations, focusing on manufacturing efficiency (39%) and even revisiting business relationships with partners that don’t share these values (36%).

graphic showing line graph of top sustainability initiatives for brands

Building sustainable business practices is a worthwhile process, and it can start with small steps, like educating customers, offsetting carbon emissions, using social media to promote messages about sustainability, and finding sustainable shipping partners.

Activewear brand Girlfriend Collective, for example, takes steps to ensure it’s minimizing its impact as much as possible. It’s fully transparent about its manufacturing and labor processes. Plus, its ReGirlfriend program serves as a place for customers to sell and purchase previously used products—a major issue in the fashion industry.

screenshot of Girlfriend Collective website outlining its sustainability practices

7. Brands invest in transparency around shipping to boost brand loyalty

Shoppers expect more than just fast shipping. They also want it for free. And they want the option to choose different types of shipping methods, expedite orders when needed, and then be able to track and manage those shipments on their own.

According to our data, free shipping influences as many as three-quarters of purchases, while 60% of online shoppers are influenced by fast shipping times and another 53% by flexible shipping options.

graphic showing influence of shipping speed cost on conversions

Merchants who don’t accommodate these consumer preferences stand to miss out on sales. Nearly one-third of consumers will abandon their cart if the shipping time is too long, and nearly a quarter will do the same if they can’t get a guaranteed delivery date from the merchant prior to purchasing.

Ensure shipping rates and estimated delivery windows are accurate. Almost three-quarters of consumers find “upfront shipping costs” to be the most valuable information when making a purchase decision—more important than any other factor.

graph showing what consumers find most valuable when shopping online, most want upfront costs

When incorporating order tracking and updates into your shipping strategy, it’s equally important to provide useful, accurate information. Many merchants fall victim to using tools that aren’t all that user-friendly, which only creates an even more negative experience.

Personal care brand by Humankind sends shipping updates via email, including a link to live tracking, the order number, and the order contents.

screenshot of shipping update email from by Humankind with tracking information

8. Labor shortages in the US retail and service sectors force merchants to get creative

More than 80% of retailers are investing in recruiting and hiring, but it’s been difficult to find staff. Workers in retail and service know they have the upper hand, and they’re looking for more than higher wages. And this threatens business scalability—as many as seven in 10 surveyed executives believe labor shortages will slow retail growth.

Labor shortages are both directly and indirectly impacting merchants looking to build or maintain a team. Lack of workers means slow supply chains, as there are fewer people to receive and deliver goods.

So what can merchants do when facing a shortage of retail workers? For starters, more automation can free up your existing team’s time and make your business less dependent upon manual labor.

Focus on areas you’re likely to be hit. Warehouse positions in particular are forecasted to be difficult to fill—more than half of surveyed retail executives “expect shortfalls in hourly supply chain, distribution, and logistics positions”—so prioritize automating fulfillment operations as much as you can.

9. Artificial Intelligence (AI) helps retailers address supply chain issues

AI and machine learning help businesses automate tasks so they can be more efficient and accurate in their operations, while also being able to dedicate human-powered resources to more important areas of the business. One key area to leverage this technology is supply chain management.

The past few years have shown how kinks in the supply chain can impact even small businesses.

Our data from 2021 showed that nearly 70% of consumers had order delays due to global supply chain challenges. The top concerns were additional shipping delays and costs, followed by manufacturing delays.

graphic showing most businesses would be impacted by supply chain delays

But rather than cutting costs to deal with these issues, small businesses invested in solving them. Forty-five percent planned to invest in manufacturing capacity, 44% in improving collaboration with supply chain partners, and 44% in increasing the speed of their supply chain.

And merchants are still paying close attention to the supply chain, as issues and delays linger—and perhaps even worsened due to talks of a coming recession. Forward-thinking merchants are investing in ways to future-proof their businesses from such challenges.

Cloud-based solutions with automation help brands track inventory, manage orders, and otherwise maintain control over their operations. Cloud-based supply chain management software makes it possible to identify problems, make decisions, and communicate with partners every step of the way and in real time.

According to research, early adopters of AI supply chain technology can improve logistics costs by 15%, inventory levels by 35%, and service levels by 65%, compared with slower moving competitors. AI can optimize your packaging too, automatically determining the best packaging type and size to reduce costs and emissions.

10. Video steals the show

As many as 70% of retail executives plan to make moderate or major investments in digital marketing in 2022. One key area of focus is going to be an investment in video. According to our research, 46% of shoppers want to watch a product video prior to purchasing.

Video marketing has emerged as a high-performing content type across all mediums. And while it may have gotten its “start” on YouTube, brands can use video to connect with customers and drive sales on social media, in emails, and on product pages themselves.

And as video plays particularly well with a social audience, the rise in social commerce has made it even more important for brands to consider adding the format to their content mix. Engagement and product videos can earn you more views and visibility on social platforms, which ideally lead to sales.

Your videos could feature behind-the-scenes, livestreams, product unboxings, video consultations, or personalized product recommendations.

Remember to make your videos shoppable. Feature just one or two products per video and show them in action, filming with interactivity in mind—note where you may want to incorporate calls to action.

Sustainable clothing brand Boody uses video to promote social sales. In the unboxing video below, posted to Instagram, the brand also tags the featured products so its audience can easily make a purchase.

screenshot of Boody Instagram posting a product video

Learn more: Grow your business with Facebook and Instagram—from one place—with Shopify social commerce tools.

Take advantage of these resources to help you learn how to use videos to drive sales:

Stay tuned for more small business trends

You know better than anyone that staying in business means constantly adapting, reevaluating, and fine-tuning. These small business trends can help you determine where to focus and invest for the upcoming year.

Take this data, go forth, and make 2022 your best year ever.

Small business trends FAQ

What is trending in small business?

There are several trends in small business. One is the trend toward more online businesses. This is because it is easier to start and operate an online business than a traditional brick-and-mortar business. Additionally, more people are shopping online, so there is more opportunity for online businesses to succeed. Another trend in small business is the trend toward more niche businesses.

What are the top 5 business trends today?

  1. Cloud computing
  2. Big data
  3. Mobile commerce
  4. Social media
  5. Internet of Things

    What are the top 5 small businesses to start?

    1. A business that provides affordable online marketing and SEO services to small businesses.
    2. A luxury home cleaning and organization company.
    3. A wellness retreat center that offers yoga and meditation classes, as well as health and wellness retreats.
    4. A meal delivery service that specializes in healthy, organic, and locally sourced food.
    5. An online retailer that specializes in selling eco-friendly and sustainable home goods.

      What are the biggest trends in small business?

      1. Rising customer acquisition costs from paid ads are driving businesses elsewhere.
      2. Businesses turn to first-party data for personalization.
      3. Brick-and-mortar businesses are reopening their doors after shuttering for COVID-19.
      4. Mobile shopping is increasingly social.
      5. Online business creation is up.
      6. Businesses and consumers are increasingly environmentally conscious
      7. Brands invest in transparency around shipping to boost brand loyalty.
      8. Labor shortages force retailers to get creative.
      9. AI helps retailers address supply chain challenges.
      10. Video steals the show.

      What do small businesses need in 2022?

      • Updated technology
      • New marketing strategies
      • More efficient operations
      • Better customer service
      • More innovative products or services