The COVID-19 pandemic altered the way Americans shop. It also affected the way retail businesses reach customers and position their businesses for growth and prosperity. Looking forward, some of these changes are likely to stick around. Here are the trends small businesses in the retail industry can likely count on for the foreseeable future.
Online shopping was certainly not a new concept when the pandemic hit, but nationwide lockdowns forced more consumers to shop online, and accelerated the rate at which business owners opened e-commerce sites. The shift to more digital business is likely here to stay, even as the world economy begins to recover. A recent study conducted by the United Nations Conference on Trade and Development (UNCTAD) and the NetComm Suisse e-Commerce Association found that online sales have increased across the majority of product categories. This suggests that consumers are increasingly content to shop online, and retail companies with dedicated e-commerce presences will be able to thrive in a post-pandemic era.
The Effect of e-Commerce on Brick-And-Mortar Stores
Retail strategist and experiential designer, Melissa Gonzalez, believes brands and retailers will be taking a close look at the role of physical stores.
“Capital allocation will have a tiered process where flagship destinations will exist in locales where there is evidence that a physical presence is justified or critical 12 months a year,” Gonzalez said. “Flagship locations will be complemented with smaller-format, specialty locations anchored around a specific purpose or localized effort. Partnering with department stores will also continue to be reimagined as they restructure and reposition as collaborative marketplaces, and there will be a deeper dedication to pop-in-shop retail.”
The pandemic ushered in new safety requirements, changing regulations, and unpredictable staff availability. These changes are leading companies to think about tech-driven solutions that can support growing requirements and evolve with their business. Some of these tools include mobile payments, online shopping, and mobile scheduling. While the pandemic demanded the urgency of customer-driven solutions, like convenience and touchless transactions, they are proving to increase efficiencies as well as customer and employee experiences, and they are likely here to stay.
Personal Shopping Services
The role of a personal shopper, where a store employee shops for a customer, isn’t a new concept, but more retailers implemented this service to compensate for the loss of foot traffic during pandemic lockdowns. While this method is being embraced across the board, personalized experiences are especially well-suited to local and small retailers, who have an opportunity to lead the industry in this area.
A number of factors go into determining an item’s price, but more retailers are depending on automated technology to establish proper pricing. Expect to see more and more automation solutions implemented for small businesses, such as online pricing automation and inventory management systems.
Social Media’s Role
The pandemic accelerated the need for retailers to reach consumers through online and mobile-friendly methods. Social media is a major stimulator of online sales, and consumers want to interact with brands through these platforms. Experts even suggest that hashtags and memes could be just as effective as traditional advertising avenues. Small businesses should think about creative social programming to boost online shopping through avenues like shoppable TikTok and Instagram. This is especially important to reach and maintain younger consumers.
The COVID-19 pandemic has been more than a health crisis—it’s been a financial crisis as well. Business closures, job loss, reduced hours, and limited financial relief led to many savings accounts taking a major hit. As a result, more than 2 million Americans took advantage of the waived penalty for early withdrawal from a 401(k) or other qualifying account set forth in the CARES Act of 2020. This benefit may have been a financial life raft for some, but the move to tap into retirement funds isn’t without short- and long-term impact.
401(k) Early Withdrawal in 2020
Dipping into a retirement savings plan such as a 401(k) before age 59 ½ typically is not without penalty. However, in response to the ongoing COVID-19 crisis, the CARES Act of 2020 made it possible for retirement savers younger than 59 ½ to withdraw, for Covid-related reasons, up to $100,000 from qualified accounts without paying the usual 10% early-withdrawal penalty. For Americans who took a withdrawal, the money is yours and you don’t need to figure out a repayment plan. However, the flip side to this move is that retirement funds you’d planned to live on in the future are now diminished.
Taxes Upon Withdrawal Still Apply
The CARES Act temporarily eliminated the 10% early-withdrawal penalty, but the legislation didn’t pardon the taxes due. While you don’t generally pay taxes on contributions to traditional 401(k)s and IRAs, you do need to report income and pay taxes upon withdrawal. This holds true even though the CARES Act canceled the 10% early-withdrawal penalty for a short time. The temporary rules allow for the distribution to be spread across three years, but you need to account for a least one-third of the taxes due on that amount on your 2020 tax return.
Paying it Back is Recommended
Though you’re not required to pay back this type of withdrawal, experts agree that it’s generally in the saver’s best interest. Doing so allows you to avoid the taxes and to replenish your retirement account. If you pay back the full distribution amount within the three years, you can amend your tax returns and get all the money back paid in taxes.
For those who took a plan loan, you generally have five years to pay it back. You’ll need to be diligent in sticking to the plan’s repayment schedule. A loan that isn’t paid back could be counted as a distribution, therefore taxes (and possibly a penalty) will apply.
Savers who took a coronavirus-related distribution have more leeway in developing repayment strategies that best serve their personal situations. Those who took a plan loan have less flexibility, but some repayment strategies could be advantageous, including:
- A mortgage refinance. Given the current low interest rates, refinancing might save a few hundred dollars a month. That savings could then be redirected to repay the 401(k) funds.
- A home equity line of credit. Take advantage of low interest rates, with the ability to pay back the line of credit over at least 10 years.
- Student loans. For savers with college-age children, don’t count out the possibility of relying on federal student loans to help fund college costs while using the freed-up out-of-pocket cash to help pay back funds taken from a 401(k), perhaps in a lump sum. A federal undergraduate loan interest rate of 2.75% through June 30, 2021 combined with conventional thinking that you can borrow to pay for college make a potentially attractive avenue. Just be aware to not overborrow and dig yourself deeper into debt.
Some people may need to apply more than one strategy to return the money to their 401(k), relying on different options that will get them through the next few years. Work with a financial advisor to help determine the best path forward to getting back on track.
According to a recent study, smaller nonprofits are largely missing opportunities to share their message online. While budgeting is certainly an issue, the benefits of online marketing and an online presence for nonprofits can’t be overstated. Below is a quick guide to various means of digital marketing and why they’re vital for nonprofit organizations.
Email Marketing for Nonprofits
Looking to increase newsletter subscribers, launch a fundraising campaign, keep supporters and volunteers in the know, or share recent developments? Email is one of the most effective, direct, and inexpensive ways to accomplish all this and more. The key is to capture your reader with engaging content, both in words and images, and always end your emails with a call to action, inviting the reader to reach out to your organization. Consider someone on staff who has the writing chops to accomplish this task, or think about hiring a freelance writer. Aim for sending two-four emails a month.
In addition to having a website that is straightforward and easy to navigate, you want it to function as a tool that maximizes lead generation and gift revenue in ways that email can’t. For instance, adding pop-ups to your site can help gain newsletter subscriptions as well as collect contact information for potential donors.
Establishing a presence on social media and engaging with your audience on individual platforms are no-brainer ways to share your organization’s purpose, campaign materials, involvement in the community, etc. A social media manager on staff could prove to be invaluable. Be sure to add social sharing buttons to your website and emails in order to grow an organic following. Greater outreach equals donations.
The key with donation pages is simplicity, so cut the lengthy information and instructions. You want to encourage two main actions with your donation page:
- Give donors a clear path to give to your organization
- Make sharing the page with friends, family members, and social media networks easy
You will also want to include a recurring donation option for those who prefer to contribute smaller amounts on a monthly basis. This donation approach can be beneficial to both the donor and your organization because:
- Donors aren’t likely to notice or take issue with a recurring $5 or $10 out of their monthly budget for a cause they’re drawn to, but your organization will appreciate these monthly contributions as every dollar adds up.
- Recurring donations create long-term connections between supporters and your organization.
If your organization can establish a position of having a finger on the pulse of current news, knowledge, and facts surrounding its particular cause, donors who share an interest with your cause are going to want to support you, and feel confident doing so. In order to achieve this, you will want to create regular and quality content in the form of informative articles, fact sheets, and other applicable digital resources, all of which convey not just that your organization is a top source of information about your particular cause, but how it’s impacting and changing your community and even beyond.
Gratitude for Supporters
Organizations that recognize the patronage and loyalty of their supporters are more likely to receive follow-up donations and social media mentions than those that fail to acknowledge their supporters, or do so intermittently. This fix can be as simple as creating an automated but personal email response to each donor, professing thanks and gratitude on behalf of the organization.
Generating more organic traffic and engagement on your website and across social media platforms will set your organization on a path for long-term growth and success.
Last year construction contractors saw projects suspended indefinitely (or scrapped altogether) and escalated competition in the bidding process, both of which effectively stifled profit margins. It’s safe to say that the construction industry was not spared the upheaval of 2020. After such a tumultuous year, tax planning for 2021 might seem like a daunting challenge, but it’s a critical step for construction contractors in preparation of the year ahead.
Essential Tax Provisions for 2021 Preparation
With the uncertainty of the Covid-19 pandemic and a transfer of administrations in the White House this year, new legislation affecting tax provisions is a possibility, but there are several provisions under the current tax law, including those put in place under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, that you want to be sure not to pass over.
Are you eligible to use the bonus depreciation this year? Changes have been made to qualifying property under both the Tax Cuts and Jobs Act (TCJA) and the CARES Act as follows:
- TCJA: expanded the bonus depreciation deduction to 100% for specified property obtained and placed in service after Sept. 27, 2017, and before Jan. 1, 2023.
- CARES Act: authorized the qualified improvement property (QIP)—typically interior improvements to nonresidential property—to be depreciable over 15 years and eligible for 100% bonus depreciation.
Tax Credits and Deductions
These tax credits and deductions could aid in reducing tax liability for contractors:
- Research and development credits: contractors who test new techniques or processes on construction jobs could be eligible.
- Deduction for energy-efficient government buildings: contractors may be eligible for a deduction of up to $1.80 per square foot for building energy-efficient commercial buildings intended for federal, state or local governments.
- Credit for energy-efficient residential properties: Contractors can take advantage of tax credits for certain energy-efficient residential properties.
Note that the deduction and credit for energy-efficient buildings expire at the end of 2021.
Qualified Business Income Deduction
The TCJA replaced the 9% “domestic production activities deduction” under IRC Section 199 with a 20% Qualified Business Income deduction under IRC Section 199A. It also increased eligibility to encompass more businesses. Contractors might want to start the conversation with their tax advisor on how to maximize this deduction as well as receive guidance on how to maneuver through the calculation’s somewhat complicated rules and limits.
Flexibility with Accounting Methods
Smaller construction firms (meaning those with average gross receipts of less than $26 million from the prior three years) generally enjoy more flexibility with tax accounting methods. Such firms could be eligible to use cash, accrual, completed contract or “accrual less retainage” accounting methods, all of which usually aid in managing the timing of revenue recognition. This allows companies to stimulate revenue to counterbalance current losses and recognize revenue now in expectation of higher future tax rates.
Additional Tax Planning Considerations Amid the Pandemic
To help minimize the risks of ongoing economic uncertainty, contractors should consider keeping apprised of tax changes. Given the seemingly ever-changing legislation amid the pandemic, construction firms should keep in regular contact with their tax advisors in order to avoid any tax reform surprises. However, contractors should also aim to operate without presumption of further legislation. While the economic effects of the pandemic are ongoing, don’t assume further stimulus legislation like the Paycheck Protection Program will be passed by Congress.
In light of a turbulent 2020, the construction industry has experienced a return to the business practices that have proven successful in the past: more attention to jobsite monitoring, legal contracts, and insurance costs. Contractors can contact an MKR advisor to incorporate 2021 tax planning into this process.
A group of centrist lawmakers recently revealed an economic relief bill totaling approximately $908 billion. The plan has gained some traction among both congressional Democrats and Senate Republicans, getting talks moving again after Democrats and Republicans have been unable to reach a compromise on a second relief package for months. Here’s a summary of what’s included in the proposal.
The largest chunk of the $908 billion bipartisan bill—$288 billion—is reserved for U.S. businesses, with a focus on primarily assisting small firms, most likely as another round of funding for the Paycheck Protection Program (PPP). This would allow businesses that have since depleted their PPP funding to apply for another round of payments. This time, however, businesses will most likely be required to prove considerable downturns in revenue in order to qualify for assistance. Part of the $288 billion would also likely include another round of Economic Injury Disaster Loans (EIDL), which provide smaller loan amounts than PPP.
The next largest chunk of funding consists of $180 billion, which is dedicated to unemployment benefits for jobless Americans. The bipartisan plan proposes $300 per week to each American on unemployment on top of existing state unemployment benefits at least through March. This is half of the $600 per week that Congress approved in March (that expired in July), but in line with the $300 per week unemployment bonus that was approved in August (most of the funds allocated for that bonus expired in October). One question that has not been addressed is whether the unemployment benefits will be made retroactive to compensate for prior months without jobless benefits.
State and Local Funding
The relief bill offers $160 billion to state and local governments to assist them through the next several months without additional cuts to personnel or services. This has been one of the biggest sticking points in getting an additional relief bill passed as Congressional Republicans contest that that such aid is wasteful “bailouts”. As a condition for their support of the broader package, some Republican lawmakers are considering a compromise by looking to establish new boundaries on state and local funds.
Temporary Protection from Liability Lawsuits
The other big sticking point comes from Democratic opposition for the “liability shield” sought by the GOP. Senate Republicans have tried for months to give business entities immunity from coronavirus-related lawsuits. This bipartisan plan offers a temporary moratorium on COVID liability lawsuits, which would allow time for individual states to draft their own laws.
What’s Not Included?
The bipartisan plan markedly excludes a second round of $1,200 stimulus checks, a measure that has long been supported by congressional Democrats and President Trump. Congressional Republicans have been forthcoming on their resistance to spending more than $1 trillion on another stimulus package, and once unemployment assistance, aid to state and local governments, and small business relief is added up, it’s unfeasible to both include direct checks and keep the overall price-tag below $1 trillion. (Republican Senator Josh Hawley and Sen. Bernie Sanders have since teamed up to propose an amendment to this plan that would include direct stimulus checks to Americans.)
The plan also leaves out Republican-backed tax cuts, including Trump’s call for a payroll tax cut for firms, and Democrats’ push for bonuses to essential workers and health-care professionals. Also missing from the plan is a renewal of the federal moratorium on evictions that is set to expire at the end of the year.