, December 17, 2019
There are some striking similarities in the ways small businesses were screwed over by big corporates this year.
Digital platforms built on the premise of extracting value from small businesses have proliferated across the economy in recent years and this trend continued in 2019.
Driven by popularity among consumers, these apps, web portals and marketplaces are beloved by tech investors, who salivate over commission-based revenue models because they deliver returns as a function of consumer demand, rather than small business budgets.
That makes scaling, or as the cool kids like to call it, becoming a ‘unicorn’, all the easier. But on the flip side, small businesses are forking over their margins, feeling as though they can’t escape a new generation of consumers relishing new forms of convenience.
Disruption is inevitable and those SmartCompany has spoken to this year have overwhelmingly accepted that, while consistently arguing for more sustainable business practices on the part of their big business partners.
Without further ado, here are the standout ‘David versus Goliath’ battles of 2019.
Meal delivery: Uber chomps the hand that feeds
If you’ve spoken to the owner of your local cafe, restaurant or takeaway shop this year, you might have heard about the ongoing reckoning for independent operators in Australia’s $20 billion hospitality industry.
In the words of one restauranteur, “it’s the hardest it’s ever been“, as meal delivery platforms such as UberEats and Deliveroo bite into margins and convince hordes of shoppers to order-in rather than dine-out.
Restaurant & Catering Industry Association figures estimate that average profit margins at Australian restaurants have sunk from about 10% before meal delivery companies arrived in Australia to between 2-4% this year.
And while there are plenty of businesses who have made meal delivery deals work for them, these margin pressures ask difficult questions of entrepreneurs, many of whom did not even design their menus for home delivery.
UberEats, the largest of the platforms in Australia, managed to bite the hand feeding millions of dollars to its overseas investors particularly hard in 2019.
In July, the company was forced to amend its standard form contracts after the ACCC discovered allegedly unfair terms in its deals with restaurant partners.
As it turns out, UberEats contracts left restaurants holding the bag for refunds they had no control over, meaning that small businesses were left responsible even if a delivery driver stole food en route to drop-off.
Putting a cherry on the cake (or salt in the wound), UberEats forked over what is estimated to be several million dollars for an ad campaign featuring Kim Kardashian in November, even as restaurants complain about exorbitant commission rates.
Uber wasn’t the only multinational platform leaving a bad taste in the mouths of small businesses though. As the SMH reported earlier this year, the latest entrant to the market, US-headquartered DoorDash, was accused of signing up restaurants to its platform without their permission.
It appears some small businesses can’t even say no anymore.
Facebook: Holding back an industry
With 17.3 million users, personal data farm Facebook has become a daily fixture in the lives of many Australians who trade free access to social media for monetisation of their personalities, worth about US$72 per person, according to the ACCC.
For small businesses, the advent of social media platforms has been transformative, to the point that being unable to use Facebook is a material detriment to digital marketing capabilities.
Small businesses operating in Australia’s burgeoning hemp food industry have found this out the hard way, told their wares are not welcome on Facebook, despite being legal for sale and consumption Down Under.
Wielding its market power like a sword while claiming to be holding a shield, Facebook says it’s a global platform and hemp foods aren’t legal everywhere.
But that hasn’t stopped the multinational from allowing other products banned in certain parts of the world free reign on their website in an apparent double standard the company refused to explain when asked.
Small businesses operating in the industry say the discrimination has held back the growth of their industry at a crucial time of renewed consumer interest in hemp products.
Franchising’s horrible year
The scandal-plagued franchising sector notched up another year of small business exploitation in 2019.
Disgruntled Retail Food Group franchisees are preparing a class action to seek compensation for the business practices of their franchisor in the Michel’s Patisserie network, while it also emerged in May that the company was deliberately extending use-by dates on food.
Meanwhile, the body that’s supposed to represent franchisees, the Franchise Council of Australia, is doing the opposite, advocating in favour of franchisors at the expense of small business owners, according to a parliamentary committee.
There are efforts underway to overhaul the regulation of the entire sector in the wake of a comprehensive parliamentary inquiry earlier this year.
But even those efforts have been marred in criticism as late as concern builds that meaningful reforms have been taken off the table, or aren’t being considered.
SEO sharks: Buyer beware
Complaints about dodgy search engine optimisation (SEO) firms have been flowing into SmartCompany’s inbox at a steady rate since March, after Jade Benn, director of online retailer HART Home Decor, spoke about her own experience being ripped off.
From aggressive and unfair lock-in contracts, to sales-led marketing strategies that over-promise and under-deliver, to outright scams, SEO is a well-known minefield for small business owners.
In many ways, it’s not surprising. The task is as technical as it is necessary in the modern world of e-commerce — two factors that when combined in the gob of an unscrupulous sales professional make for some of the biggest corporate rorts Australia has ever seen.
SEO is no different, and there’s no shortage of large companies out there taking advantage of small businesses in this area right now. Been scammed? The small business ombudsman wants to hear from you.