Small business growth strong despite Omicron wave, according to Xero data
Anthony Gardiner, founder of the Fussy Dog pet food company, says the Covid-19 pandemic has been a great time to be in the business of catering for pampered pooches.
Gardiner started the business after he lost his job back in March 2020, and turned to making a high-end gravy powder for canines that could convince fussy dogs to eat their dinner without their owners having to break the bank.
Since then business has been booming. Fussy Dog Co. products were stocked in 140 stores across the country and sales had consistently doubled every few months.
Data from Xero from February showed that more SMEs (small-to-medium enterprises) were finding themselves in similarly strong positions in the early months of the year, as sales picked up despite a surge of Omicron cases.
* Small hospitality businesses’ trade is starting to bounce back after months of struggle, Xero says
* Small businesses are getting paid more quickly than they did pre-Covid
* Recovery from Covid-19 continues for SMEs but hospitality down on this time last year
But even for Gardiner and his successful small business, things have not been entirely smooth sailing.
“As a small business with no money for marketing almost all of our sales come from people seeing our products on the shelves. So if anything happens that makes people feel less confident to go outside, such as an Omicron peak, then we see a definite dip in sales,” Gardiner said.
But despite the dips in sales, the overall story for Fussy Dog Co. was one of growth. The business was expanding its production to a 1000 square foot warehouse and was considering exports to Australia and China.
Gardiner also developed a bacon-flavoured teeth cleaning powder for dogs, which he enjoyed trying himself.
“It is good to use in the morning, but it is a bit strange going to bed at night with a bacon flavoured mouth. But it keeps your teeth clean.”
Data from Xero showed other SMEs have also fared well during the Omicron period with sales in February up 13.3 per cent year-on-year.
Xero managing director for New Zealand & Pacific Islands, Craig Hudson, said the surge in sales was led by strong performance in the construction and manufacturing industries, which were up 16.8 per cent and 15.7 per cent respectively.
“Our small business community is now used to adapting to disruption. The data shows the sector has done incredibly well so far with Omicron, however there are still challenges ahead with cases peaking in March,” Hudson said.
The only sector to decline in sales in February was hospitality, which was down 3 per cent.
All sectors saw wage growth this year; the average was a 4.3 per cent rise in February, which followed a 3.7 percent rise in January.
Hudson said while wage rises were a good sign for the economy in general, it could drive up the cost of consumer goods.
“It’s a pressure point for small businesses that will ultimately drive up the cost of operations and could contribute to inflation if not matched by increased productivity.”
Hudson said New Zealand’s SME economy had performed better than Australia and the United Kingdom in February according to the Xero Small Business Index.
Infometrics principal economist Brad Olsen said the Xero data showed the benefit of everything SMEs had learned while staying afloat during the Covid-19 pandemic.
“We are seeing that nimbleness coming through, the ability they have learned to be able to change operations swiftly. It is surely reassuring to see those numbers coming out of Xero,” Olsen said.
But at the same time, businesses were not completely out of the woods, and there were still some major global issues to face, Olsen said.
Higher mortgage rates, and high rates of inflation would make it harder for SMEs to get households to spend on their goods and services, he said.
“Businesses should be nervous about what is coming. New Zealand is in a very different position to what it has been in over the last few years. With Covid in the community at the same time as greater economic headwinds are starting to come forth.”
Olsen said globally many countries had seen an economic bounce back towards normal levels after the Omicron wave rolled through.
“But we do continue to see differences in business fortunes across different industries. Tourism operators remain hard hit, despite the excitement around borders reopening. It is just a reminder that the SME economy has many different players, and there is not a single story to tell.”