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While economic and technological shocks will always be a constant feature of our world, experts say small businesses must continue to adapt and innovate to stay competitive and satisfy consumer preferences.

“The adoption of technology should be the priority for small businesses and the adoption of AI where it can help bolster their business should also be a priority,” says Cambridge Chamber of Commerce President & CEO Greg Durocher, noting 98% of Canadian businesses qualify as small businesses.

In its recent report entitled, A Portrait of Small Business in Canada: Adaption, Agility, All At Once, the Canadian Chamber of Commerce touches on this issue as it explores the integral role small businesses  in play in Canada’s economy and sheds light on how these businesses can thrive despite major economic forces working against them — including the rising cost of doing business, the highest borrowing costs in over two decades and increased pandemic debt loads.

The report, which defines ‘micro businesses’ as having 1-4 employees, ‘scale businesses’ as 5-19 employees, and ‘mature businesses’ as 19-99 employees, shows how small businesses of all sizes, ages and industries are already investing in technology to better access data and applications from their computers, tablets, or mobile phones — whether in the office or on the road — to connect better with their customers and employees. However, as the report indicates, a business’s size is important to its ability to not only adopt technology, but also take advantage of a variety of technology tools. The report finds that even more change is essential.

Greg agrees and says the need for smaller businesses to adopt artificial intelligence (AI) is especially imperative.

“In all probability, smaller businesses are less likely to adopt AI technology because they may be fearful of it,” he says. “But the fact of the matter is it may be the only tool that can bring them up and allow them to compete.”

AI and digital technologies

According to the report, across all industries, a higher proportion of small businesses planned to invest in AI and digital technologies. While 62% of micro firms (compared with an average of 55% for all small firms) expressed plans for the latter, 30% of mature firms were keen on investing in AI compared with the all-industry average of 24% for all small businesses. Scale and mature businesses were more likely to adopt multiple technology tools, especially those in finance and insurance, professional services, and wholesale trade.

“If they (small businesses) don’t get knee deep in AI from a business perspective, they may be missing the boat that was inevitably sent to save them,” says Greg.

The report also highlights trends to help small businesses adapt to how Canadian shoppers have evolved. While online shopping accelerated as a result of the pandemic, roughly 75% of Canadian shoppers still visit physical stores for key items like groceries, clothing, automotive, electronics, home and garden, and health products. To meet consumer preferences, businesses need to implement on and offline sales strategies to reach customers.

In the report, the critical importance of having an enticing online commercial presence is highlighted, with 83% of Canadian retail shoppers reporting they conduct online research before they visit a store. Having physical stores near customers also supports online sales, with nearly one in 10 Canadians making purchases online from retailers located nearby.

“There is still an opportunity for small businesses to capitalize on local business by advertising and marketing themselves locally,” says Greg. “But that doesn’t mean you shouldn’t have a strong online presence and look for every opportunity in which AI can help advance your cause.”

Canadian Chamber President & CEO Perrin Beatty says the findings in this report provides yet another signal that more focus is needed to support growth, especially among small businesses.

“We can start by reducing red tape, investing in infrastructure, and enabling an innovation economy,” he said in a press release. “These fundamentals of growth will increase Canadian businesses’ ability to compete and attract investment that will benefit Canadians, their families, and our communities.”

Click here to read the report.

Highlights of the report:

• In June 2023, there were 1.35 million businesses in Canada with paid employees. The over- whelming majority (98% of the total) were conventionally classified as “small” businesses, which collectively employed over 11 million people.
• In the “small business” category, micro firms are by far the most common businesses type in Canada. In fact, if all businesses in Canada were sorted by employment size, the median firm would have fewer than five employees, which underscores the importance of improving our understanding of the business realities of all small firms, but especially micro firms.
• Nearly half of all small businesses are in the following four industries: professional, scientific, and technical services; construction; retail trade; and health care and social assistance.
• Immigrants to Canada own a disproportionate share of private sector businesses (263,850 businesses, or 25.5% of all private sector businesses) compared with their share of population (23%). One strong factor is immigrants’ high share of micro businesses (30%), in contrasts with their underrepresentation in both scale and mature enterprises.
• The past few years have offered women more flexible work arrangements, encouraging them to find more in-demand and higher-paying jobs, while government efforts to increase the availability of affordable childcare have helped women’s labour force participation to rebound. With the transition back to the office, barriers that perpetuate gender-based differences in labour force participation threaten this progress.
• An underrepresented group in terms of business ownership (2.2%) compared with their share of the population (22%) is persons with a disability. Given the prevalence of disability, this gap signals tremendous untapped potential for entrepreneurship, but also one with significant potential effects on socio-economic outcomes, including labour market participation.
• The LGBTQ2+ population (4% of Canada’s total population according to the 2021 Census) is also somewhat underrepresented as business owners (3.3%), lagging most as owners of mature businesses (0.6%).
• Although they are 5% of the country’s population, Indigenous people’s share of businesses owned remains less than half of that (2.2%), although they appear to be doing better on ownership of mature businesses, the largest type of small business.
• The most recent data (June 2023) show that, compared with pre-pandemic conditions in December 2019, the number of businesses increased by 7.3% for large firms, 5.0% for medium firms and only 2.9% for small firms.
• Retail sales data show that e-commerce enjoyed a massive spike early in the pandemic but have since moderated as Canadians go back to in-person shopping. The share of total retail sales from e-commerce increased rapidly from 3.7% in January 2020 to peak of 10.7% just four months later in April 2020. With the lifting of pandemic related restrictions and stores have reopened for in-person shoppers, this figure has since moderated to 5.7%.
• In addition to age, variation by industry showed a strong trend in technology adoption. Overall, average adoption shares across all industries and all technology tools were lowest for micro firms (12%), followed by scale (16%) and then mature firms (22%). Small businesses — particularly scale and mature — in finance and insurance, information and culture, professional services and wholesale trade were consistently among those reporting the highest technology adoption rates.

The pain at the pumps consumers continue to feel as prices climb above $2 a litre won’t be dissipating anytime soon, warns Dan McTeague, President of Canadians for Affordable Energy.

“The problem is a shortage of oil,” says the former Liberal MP and long-time energy ‘watchdog’.

He says Russian President Vladimir Putin knows the world is vulnerable right now and has made it geopolitical and weaponized oil supplies in Europe through the invasion of the Ukraine, which has only magnified the issues already facing the other two major energy links in the world – namely Canada and the U.S. and OPEC (Organization of the Petroleum Exporting Countries).

“We’ve completely destroyed the Canada/U.S. relationship,” says Dan, referring to the political decision to ‘kill’ proposed pipelines in North America and notes that OPEC, which cut oil production to keep prices at a certain level, is looking towards Asia and markets of the future.

As well, factor in a slowdown of world economies during the two years of the pandemic which resulted in a decrease in the demand for oil, resulting in oil companies putting a stop on drilling for new supplies or slowed, or even stopped, some refineries. Now, these same companies continue to have a tough time ramping up production to keep pace with demand.

It’s a dire situation, which Dan says he discussed in the fall of 2021 in an interview with Driving.ca, long before Russia launched its Ukrainian invasion. In the article, one of the things he points to is the introduction of the Trudeau government’s Clean Fuel Standard (CFS) which he bluntly referred to as ‘another tax dressed up as a clean-air credit’ that is going to cost average Canadians even more at the pumps. The CFS is set to be introduced Dec. 1 of 2022.

Taxes, of course, remain one of the largest components of fuel prices in Canada accounting for at least 34% of the average pump price.

Breakdown of gas taxes in Ontario:

• Federal excise tax - 10 cents/ per litre
• Federal carbon tax - 11.1 cents/ per litre
• Ontario tax - 14.7 cents/ per litre
• GST/HST - 22.9 cents/ per litre.

This translates into a total amount of 58.6 cents/per litre worth of taxes in Ontario, on top of the base price of which near the end of May was 139.6 cents/ per litre. On average, this is in line with many provinces, except for Alberta which is 29 cents/per litre and Manitoba at 43.8 cents/per litre. Overall, Canadians are paying an average of 51.2 cents/per litre of taxes.

But is there a solution? Ideally, supply and demand would have to become more balanced which could be accomplished in several ways:

• The war in Ukraine ends and countries begin buying Russian oil again;
• OPEC ramps up oil production;
• Other oil producers increase production;
• People start driving less;
• Society as a whole embraces greener energy solutions that don’t involve oil.

Dan believes the world is still a few decades away from turning fully away from oil and natural gas.

“We’ve got to get real about building pipelines again,” he says, adding we need to be more realistic when it comes to our current energy needs.

He says as it stands, there is not much business operators can do as they continue to deal with disrupted supply chains and expenses, especially around transportation costs.

“I think food costs are the next shoe to drop because of course fuel affordability is gone, and with it now comes everything else,” says Dan.

Positive online reviews and endorsements can be very important for small to medium-sized businesses.

Unfortunately, unscrupulous competitors or those with an ulterior motive can sometimes try to use these tools to their advantage and sabotage these businesses by posting negative fake reviews.

The Competition Bureau Canada is an independent law enforcement agency that ensures that Canadian businesses and consumers prosper in a competition and innovative marketplace. And fake reviews and ensuring truth in advertising in our digital economy are on the Bureau’s radar.

“Generally, anyone who posts fake endorsements or reviews could be liable under the Competition Act,” says Josephine Palumbo, Deputy Commissioner, Deceptive Marketing Practices Directorate, Competition Bureau.

Enforcing the Competition Act is a key responsibility of the Competition Bureau, and the Act’s deceptive marketing provisions prohibit any business from making materially false or misleading claims to promote a product, service or business interest. A ‘claim’, which refers to any marketing material – such as any in-store ads, social media messages, promotional emails, and endorsements, among other things – is ‘material’ if the general impression it conveys leads someone to take a particular course of action, like buying or using a product or service. When determining if such a claim is false or misleading, the courts will consider the ‘general impression’ it conveys as well as its literal meaning.

The Bureau has previously pursued enforcement action related to fake reviews. In 2015, the Bureau concluded that Bell employees were encouraged to post positive reviews and ratings on the iTunes App Store and the Google Play Store, without disclosing that they worked for Bell giving the impression they were independent and impartial consumers. The Bureau and Bell reached a consent agreement, putting an end to the practices, and sending a strong message that this kind of conduct is not tolerated.

And more recently, an investigation resulted in $5.8 million in penalties for FlightHub in 2021 after the Bureau determined the online flight-booking company made numerous false or misleading claims, even penning positive customer reviews to promote its services. Besides the penalties, as part of the settlement with the Bureau, FlightHub was required to remove any online reviews that were posted by or on behalf of the company but appeared to be from customers.

“Anyone who believes they have been misled by fake reviews or who has been approached with offers to post fake reviews, is encouraged to file a complaint with the Bureau using our online complaint form ,” says Ms Palumbo, adding the Bureau addressed the issue of fake reviews in a consumer alert in 2014 and in its Deceptive Marketing Practices Digest in 2015. Besides fake reviews, the Bureau recommends that SMEs contact them if they believe a competitor is engaged in price-fixing, bid-rigging or deceptive marketing. As well, they should be contacted if an SME believes a dominant business in the market is abusing its dominance to harm or discipline its competitors, or that a merger in their market would prove harmful to competition.

Besides fake reviews, the Bureau recommends that SMEs contact them if they believe a competitor is engaged in price-fixing, bid-rigging or deceptive marketing. As well, they should be contacted if an SME believes a dominant business in the market is abusing its dominance to harm or discipline its competitors, or that a merger in their market would prove harmful to competition.

“Enforcing Canada’s competition laws and advocating for increased competition in regulated sectors is good for all businesses,” says Ms Palumbo. “It promotes a level playing field where businesses have an equal opportunity to prosper based on their merits. Fair competition between businesses also drives them to innovate as they seek to attract consumers by offering better products and services than their competitors.”

The Bureau provides many resources to help SMEs comply with the law and avoid potentially devastating consequences of an investigation. These include guidance on establishing a Compliance Program.

In addition, the Bureau provides numerous tips and advice to SMEs to protect themselves from fraud.

To find out more,  please visit: https://bit.ly/3g9RBIH