Lockdown Economy Netherlands

Prior to the COVID-19 pandemic, the Netherlands experienced a high degree of digitalization which might have cushioned businesses from the dire effects of the health crisis. At the same time, the existing fiscal prudence made it possible for swift government response and support measures to firms, which prevented extreme financial effects and a rise in unemployment. The International Labour Organisation (ILO) indicates that the Netherlands is expected to lose 0.7% of working hours in 2021 compared to a loss of 2.7% in 2020 [1]. On the other hand, the Netherlands economy contracted by 3.7% in 2020 [1], which is considered the worst performance since the second world war.

The pandemic and the introduction of lockdown measures affected small businesses both in the Netherlands and the global sphere. As a result, the Netherlands introduced a range of measures to support Small and Medium Enterprises (SMEs). This included tax holidays and loans for SMEs. At the same time, support was geared towards self-employed professionals affected by the pandemic. Recently, the adoption of the “new normal” across the world has seen governments, including the Netherlands, reverse some of the measures intended to cushion the population against the effects of COVID-19. For instance, at the end of August 2020, the Dutch government announced the planned dissolution of some economic support measures for businesses affected by the pandemic by 1st October 2021 [2]. Despite these efforts, a number of interviewed business owners stated lack of funding as their key challenge.

Through the Lockdown Economy interviews with small business owners, Think Tank AlterContacts virtually traveled across the Netherlands to understand the impact of the pandemic on them. Based on these interviews, several key challenges can be highlighted. This article provides an outline of the challenges and attempts to offer policy recommendations.

Adapting to Digital and Hybrid Business Models

The COVID-19 pandemic demonstrated that a shift in business models is indispensable. Reaching new platforms became a way to connect with clients and find more partnerships. During the pandemic, most companies had to close physical premises due to the lockdown restrictions. At the same time, small businesses struggled to enter digital platforms and carve their own niche there. The OECD [3] states that it takes digital skills and buy-in of the platforms for SMEs to flourish in that space. It also requires both direct and indirect costs to maintain a presence on digital platforms. The fears connected with online and hybrid business models range from what information to share and how to share it to what security or reputational risk they pose to the small business if it chooses to enter the digital platform.

Some of the interviewees outlined their needs regarding the digital space which included: 

• support in digital sales and marketing; 

• increasing brand visibility (indicated by the number of comments and feedback they receive online); 

• social network by connecting with more people; 

• reaching new platforms to connect with clients

• finding partnerships with other experts in the field of practice. 

If these needs are addressed, small businesses will flourish in the digital space.

Call to Action: Develop programs that empower SMEs to explore and utilize the digital tech

The Netherlands offers training subsidies with the intention of getting the most out of digitalization and automation. Following the feedback from the interviews, this should be customized to meet the specific needs of small businesses. The OECD notes that the pandemic has strengthened the role of digital platforms for SMEs, which now offers them an avenue to widen their customer and sales base. The government should therefore facilitate the provision of the necessary infrastructure to develop the tech skills and resources required by SMEs to embrace the digital business model. 

At the same time, small businesses should be made aware of the existence and benefits of these programs. The OECD is encouraging governments to develop policies to increase SMEs’ skills and awareness in the digital space. Some of the online platforms that can be adopted include online markets and mobile payment systems.

New Marketing Strategies

Most businesses in industries that were strongly affected by the pandemic, such as restaurants and accommodation, sent out a plea for support in marketing. A number of them found it challenging to figure out the most effective strategy for dealing with the COVID-19 restrictions. Specifically, there was a need to determine the path and pace for the expansion of businesses following the pandemic, as well as find the right resource to finance possible growth. During the pandemic, the interviewed businesses in food-service operations were considered a high-risk investment, which created an additional challenge for them in identifying possible funds for marketing and brand visibility.

Call to Action: Implement programs that provide capacity-building on marketing strategies for small businesses

Small enterprises require insights and guidance on how to make the most of their location, price, product, and promotion to attain optimal sales. It will allow the businesses to have competitive products and services that are well-priced and attractive for consumers.

Mentorship and Capacity Building Opportunities

Some of the interviewed small businesses had challenges in accessing COVID-related subsidies. They did not meet the eligibility criteria for financial help from the Dutch state. In particular, one of the business owners was looking for an experienced lawyer who would help him navigate the government system or make his voice heard. Another interviewee pointed out the importance of being mentored in creating growth opportunities and embracing online interactions to boost business.

To gain missing knowledge and skills, the interviewed businesses saw opportunities in networking, connecting online, and having a conversation with each other to help in growing businesses. A few of the areas they needed help with internally were improving administration, effective bookkeeping, purchasing systems, and tracking inventory. Externally they had challenges in increasing visibility, marketing their services, expanding to other locations, and developing business strategies, and securing funds.

Call to Action: Launch capacity-building and mentorship programs for small businesses

Financing and technical assistance coupled with mentoring are key to the sustainability of SMEs [4]. It is important to define and design mentoring programs to help SMEs identify what expected success looks like and how to get there. Small businesses need both training of critical business skills and mentors who can offer ongoing support.

For example, Think Tank AlterContacts launched the Lockdown Economy interviews where small business owners and self-employed professionals shared their insights, challenges, and successes during the COVID-19 global pandemic to inspire, motivate, and encourage other entrepreneurs around the world. However, funding the initiative has been a hurdle.

CONCLUSION

Any thriving economy needs the contribution of small businesses. While a government can pursue initiatives to protect its citizens from the harsh economic conditions brought about by the pandemic, it is key to keep revisiting these strategies. This will act as an evaluation and a means to avoid the exclusion of some businesses and inclusion of other emerging issues. This article makes a clarion call to governments to not only have programs that support small businesses but also create an operational and regulatory environment that makes them thrive.

Written by Gayline Vuluku, an economist and a public policy analyst

Edited by Christine McKenzie

Editor-in-Chief - Julia Skupchenko

REFERENCES

[1] - International Labour Organization, https://www.ilo.org/shinyapps/bulkexplorer34/?lang=en&segment=indicator&id=HOW_2LSS_NOC_RT_A 

[2] - Dutch Government, https://www.government.nl/latest/news/2021/05/27/support-package-for-jobs-and-economy-to-be-continued-in-third-quarter 

[3] - OECD, https://www.oecd-ilibrary.org/sites/1386638a-en/index.html?itemId=/content/component/1386638a-en

[4] - https://www.springimpact.org/wp-content/uploads/2020/07/Effective-Mentoring-of-MSMEs-Full-Report.pdf 

[5] - Think Tank AlterContacts, Lockdown Economy Netherlands interviews. Available at: https://youtube.com/playlist?list=PLtxviGuiJz5KyxKF6nanG5t2UAQrPmB_C