Amid increasing economic pressures, small business owners in the restaurant, beauty, and retail sectors are gearing up for a transformative year ahead. According to Square’s forthcoming annual Future of Commerce report, a significant majority are planning to invest in customer retention strategies, including loyalty programs and automation technologies, to not only survive but thrive in 2025.
Square’s report highlights a critical trend: businesses are not just grappling with high inflation and shrinking consumer wallets but are actively seeking innovative solutions to enhance customer relationships and operational efficiency. The report reveals that over 70% of restaurant leaders intend to increase investments in loyalty programs within the next year, aiming to keep customers engaged during a challenging economic climate.
As small business owners know, maintaining customer loyalty is crucial, especially when competition is fierce. Alex Donley, co-owner of Gioia’s Deli in St. Louis, MO, shared his insights, stating, “Now, instead of having a meeting about our gross sales, we’re getting more granular with these reports. We know that last February we sold this amount of hot salami, and this February we sold this amount. What’s the difference? What did we do wrong? Or what did we do right? It makes us a more efficient business, which ultimately makes the customer experience better.” This focus on data-driven decision-making can empower small businesses to refine their offerings and improve customer satisfaction.
With 71% of restaurant operators planning to enhance their loyalty or rewards programs, it’s evident that these initiatives are seen as paying dividends. The report notes that 83% of restaurant leaders believe their loyalty programs effectively increase order sizes, while 82% report more repeat visits among participants. Considering that 63% of consumers have cut back on spending, loyalty programs could be the lifeline businesses need to retain their customer base.
However, the pressure to raise menu prices is palpable, as 71% of restaurants plan to increase their prices this year. In light of these challenges, it remains vital for small business owners to strike a balance between sustaining operational costs and delivering excellent customer service. Optimistically, 78% of restaurant leaders express confidence in their business outlook compared to a year earlier, indicating a resilient spirit within the sector.
In addition to customer retention, the utilization of technology is at the forefront of many businesses’ strategies. The report indicates that 85% of restaurant leaders plan to invest in AI and automation tools to streamline operations. This investment is crucial, particularly as many are spending more time on operational aspects due to rising costs. Popular applications of technology include marketing and promotions (77%), inventory management (77%), and payment processing (76%).
Ming-Tai Huh, Head of Food & Beverage at Square, emphasizes this technological shift: “In 2025, restaurants are walking the fine line between automation and hospitality. As businesses continue to face economic pressures, we’re seeing them invest in growth and experimentation as they find new, streamlined ways to work and deliver exceptional customer service – particularly through using time-saving and experience-enhancing technology.”
The report’s insights extend to the beauty and retail sectors, where businesses are also leveraging technology for enhanced customer engagement. In beauty, data shows that 55% of consumers are likely to purchase products recommended by their beauty specialists, indicating that personalized experiences are key to driving additional revenues. Retailers, on the other hand, are focusing on linking physical and digital experiences, with 78% believing in-store experiences like product demonstrations are vital for growth.
As we look ahead, the Square report underscores the critical role of technology and customer-centric strategies in combating economic challenges and enhancing operational effectiveness. The full analysis, including valuable real-life business applications, will be available in Square’s in-depth report on February 4, 2025. For more insights, visit the original post at https://squareup.com/us/en/press/future-of-commerce-us.
For small business owners assessing these trends, embracing loyalty programs and technological innovations not only addresses today’s challenges but potentially paves the way for sustained growth in an ever-evolving marketplace.
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