Jul 29, 2017

How the Internet Can Help Small Businesses Survive Through the Current Brazilian Economic Crisis


Brazil’s economy is in “freefall”. According to the “The Economist”, the country “is suffering its worst recession since the 1930s” (“The Darkest Hour”). With a decrease of the consumer's trust level, the Brazilian companies have been many affected by the current recession. Overall, business in Brazil has to face a tricky equation: high costs of operation plus few consumers. Moreover, companies cannot have financial support from banks owing to the current credit crisis that also happens in Brazil.

     Consequently, with difficulty in generating revenue, a crescent debt and the impossibility of credit, a lot of business, mostly the small ones, are closing. According to recent research, the country had more than 55,000 company’s bankruptcy filings in 2015, the most since 2008 (“Brazil's 5,500 Bankruptcies”). Thus, business needs to find a way to reduce operating expenses and, at the same time, increase their sales. In this context, the Internet is shown to be a powerful and worthwhile tool to help Brazilian companies cut spending, expand their market and come through the crisis (Quin et al. 287).

     In fact, the World Wide Web facilities can support business in several ways. In this context, there are two online strategies that are especially helpful for companies in a recession period: Electronic Commerce and Online Advertising. These solutions are greatly useful in a crisis moment owing to their effectiveness in giving a quick return on investment. Both are easy and inexpensive of adoption and businesses can keep their offline strategies, just incorporating a new channel of branding and sales.

     Firstly, electronic commerce can be a good solution for two main reasons: selling online helps businesses increase their visibility among the consumers and also reduce their operational costs. Visibility means to expand the brand range in the market and is one big advantage of e-commerce strategies adoption in Brazil nowadays. Indeed, with an online presence, companies can reach geographically distant specific markets. Thus, a small and local business can become worldwide stores.

     Furthermore, e-commerce brings the benefit of no time barriers, since the website is open 24/7, just waiting for consumers purchases. On the other hand, traditional stores have the time of operation limited per day, which ends up also limiting their revenue at the end of the month. This way, companies have more sales opportunities and consequently an increase in the profit.

    Simultaneously with the increase of visibility, e-commerce provides a new sales channel with lower spending. Traditional stores can open an e-commerce website easily and without the number of expenses that offline shops usually requires. Likewise, to maintain an online marketplace companies don't need to spend a lot of money with operation costs. Therefore, the Internet allows business to have high transaction efficiency since it's easy and fast to buy or sell online, and lower costs.

     For example, companies don't need to spend their budget with rental, a lot of seller's wages, utilities, and furniture. Moreover, they can work as a link between the consumer and the supplier. This way, it's not necessary to have a stock of products that may never be sold, generating a budget loss. Therefore, e-commerce enables new distribution technologies that can reduce costs along the supply chain and improve service (Lieber and Syvverson 13). Furthermore, apart from benefits associated with reaching new consumers and sales revenue, e-commerce benefited companies internally by improving the quality of communication and information inside the business (MacGregor and Vrazalic).

    The second proposed solution is based on the use of the Internet’s environment as a mass media for advertising. Effective advertising and marketing campaigns can be expensive and require marketing experts with an understanding of the industry involved. For small businesses access to such expertise is demanding of resources (Poon and Swatman 3). Nevertheless, on the Web businesses can promote their brands and products for the global market in a cheap and effective way. This online marketing approach relies on a variety of techniques to match an advertising message to a selected audience. In this way, the Internet allows business to reach a wider audience and also reduce marketing costs (“Business Use of”). Overall, there are two mains types of online Ads that companies can apply: the Paid Search and the Paid Social (“Online Advertising”).

     The paid search, which is also known as Pay-per-click (PPC) advertising, is one of the most common options for promotion online. It consists of ads displayed in the search tools results page that varies with the specific search queries. Thus, companies can make sponsored banners to be shown on the research results page when someone searches for a keyword that is related to the business. For example, the search engine indexes web results that are relevant to a consumer who types in the phrase “saltwater fishing rod” and with this information, the search engine can sell ads to sellers of saltwater fishing rods (Evans 4). So, the keywords must be highly relevant to the business in order to be displayed effectively. The most popular tool for paid search nowadays is the Google Adwords.

     On the other hand, the paid social approach relies on the social media popularity to reach a vast qualified audience. With a growing number of users, the social networks have become an ideal environment for directed advertising. The paid social strategy works similarly to paid search, with the exception that advertisers, not users, take the initiative. In other words, advertisers must “search” for users, rather than the other way around (“Online Advertising”).

     One of the greatest pros of paid social is the specificity with which advertisers can target the right target of customers. Advertisers can specify users with hundreds of parameters like demographic data, such as age, gender, income, the level of education, and preferences and social behavior (“Online Advertising”).

     The main advantage of this strategy is that businesses can reach a relevant and qualified group of consumers with a very low budget if compared with mass media expenses. Moreover, companies can see an instant feedback of the campaign and then optimize it in order to increase their Return on Investment (ROI). With an online advertising strategy brands can experience a return of almost three dollars in incremental sales for every dollar spent (“CGP Study”).

     It has been said that the Internet can be a useful tool to help Brazilian businesses come through the current economic crisis. The World Wide Web features give great opportunities to reduce costs and maximize profits. E-commerce and Online Ads benefits companies in different ways. However, brands could combine them in order to a most powerful and effective key for the problem. That is, businesses could sell online and, simultaneously, make banners to attract more qualified consumers to their websites.

     Perhaps, applying these strategies, Brazilian companies could even grow in the recession period. For this, companies should look at the crisis from a new perspective; instead of seeing the current moment in a pessimist view, businesses should try to see it is a moment of opportunities. In Japanese, the ideogram for the word ‘crisis’ is the same for the word ‘opportunity’. So, although this idea seems distant and opposite, they are concepts really close in practice. Brazilian companies should look at this tricky moment like an opportunity to make business in an innovative and lucrative way.



Works Cited

"Brazil's 5,500 Bankruptcies in 2015 Signal Deeper Credit Crisis."Bloomberg.com. Bloomberg. 14 February 2016. Web. 01 June 2016.

“Business Use of the Internet in New Zealand: An Exploratory Study”. Walter Abell and Leon Lim. Web. 01 June 2016.

"CPG Study: Online Ad Campaigns Using Purchaser Data Nearly Triples ROI." Nielsen Catalina. N.p., n.d. Web. 08 June 2016.

David S. Evans. "The Internet for Small Businesses: An Enabling Infrastructure for Competitiveness." Journal of Economic Perspectives (2009): 1-41. Web. 1 June 2016.

Lieber, Ethan, and Chad Syverson. "Online vs. Offline Competition." (2010). July 2010.Web. 8 June 2016.

MacGregor, Robert C., and Lejla Vrazalic. E-commerce in Regional Small to Medium Enterprises. Hershey, PA: IGI Pub., 2007.

"Online Advertising: How to Create Effective Online Advertising." Online Advertising: Learn About Advertising Online. N.p, n.d. Web. 02 June 2016.

Qin, Zheng, Yang Chang, Shundong Li, and Fengxiang Li. E-Commerce Strategy. Berlin, Heidelberg: Springer Berlin Heidelberg, 2014. Print.

Simpson Poon, and Paula M.C. Swatman. "The Internet for Small Businesses: An Enabling Infrastructure for Competitiveness." Proc. INET ‘95 (1995): 1-11. Web. 1 June 2016.

"The Darkest Hour." The Economist. The Economist Newspaper, 2016. 23 April 2016. Web. 31 May 2016.

0 comments:

Post a Comment

Thanks for your comment! :)