Small and medium-sized businesses (SMBs) are the heart of the EU
economy. They make up almost all businesses and account for nearly two
thirds of the labour force, according to Eurostat
data.
SMBs have navigated a pandemic, high inflation, high interest rates
and changing consumer preferences — most notably by establishing online
sales capabilities to maintain competitiveness against larger
businesses.
In the latest edition of our ”Did you know?” series, we use
aggregated and anonymised Mastercard data to showcase the resilience of
SMBs in the EU.
Did you know?
Consumer spending at SMBs in the EU has proven resilient over the
last three years
In 2022, consumer spending at EU SMBs outpaced large businesses,
defined by an increase in the share of consumer spending online and
in-person at SMBs (see chart 1). The increase particularly affected
spending on hotels and at restaurants, as pandemic travel restrictions
eased and “revenge travel” defined spending preferences.
SMBs accounted for 82% of hospitality turnover and 86% of the
hospitality labour force in the EU as of 2022, according to Eurostat
data.1
This means that as small businesses reaped the rewards of the strong
recovery in travel and tourism after the pandemic, they drove the
recovery of the wider EU economy.
In 2023, spending at SMBs grew more slowly than at large
businesses. The surge in inflation and higher interest rates in 2023
squeezed consumers who became more price sensitive and traded down.
SMBs were more affected than larger businesses, who generally enjoy
more competitive terms with suppliers and better access to finance. SMBs
saw their margins squeezed, making it difficult to compete on price. In
addition, they continued to underperform online.
In 2024, spending at SMBs is now outperforming large businesses
across key industries. With inflation slowing significantly and interest
rates starting to fall, financial pressure on SMBs and consumers is
easing. Spending has especially accelerated at SMBs in the retail
(grocery) sector as inflation on food and non-alcoholic beverages has
slowed from a peak of 19.2% in March 2023 to 1.6% in July 2024. This
slowdown in inflation makes it even more impressive that the SMB share
of consumer spend increased during this time, and it likely reflects the
subtle trading up behaviour in the grocery category.
SMBs are underperforming versus large companies in the hotel sector.
This likely reflects the upmarket shift in the European travel sector.
Since luxury hotels require more capital investment, they are naturally
dominated by larger players.
Most EU countries show SMBs becoming more competitive in retail in
2024 — specifically in grocery, consumer electronics, and as travel
agencies in travel & entertainment (T&E). In addition, spending
at small clothing businesses is outperforming spending at large
businesses in countries like Austria, the Czech Republic, France,
Germany, Italy, the Netherlands and Portugal. A possible cause is that
smaller businesses are becoming more competitive by increasing their
online presence and tailoring their offerings to account for consumer
price-sensitivity and preference for experiences.
Source: Mastercard Economics Institute
SMBs gain share in the online-only space
E-commerce penetration in the EU differs by business size. In
2022, 44% of large businesses in the EU had an e-commerce presence,
compared to only 21% for small businesses, according to OECD figures.
SMB e-commerce penetration ranged from over 30% in Ireland and the
Nordics to below 20% in southern European countries like France, Greece,
Italy and Portugal.
However, e-commerce has provided an important platform for SMBs
in Europe to compete against larger businesses, and their presence
online is growing. The SMB share of online spending has increased since
2021 (see chart 2), most notably in the T&E and retail
sector.
In online retail, SMBs have gained market share notably in
sectors like sports stores, electronics and furniture in several
countries. Even outside of retail, in industries like professional
services, the SMB share of online spending has also increased.
The increase in SMB share of online spending in the T&E and
retail sectors is apparent in most European countries, but the magnitude
differs among them. The increase in online T&E spending is large in
Italy, Denmark, Slovakia and the Czech Republic, while Sweden, Romania
and Portugal have the highest increase in the SMB share of online retail
spending.
Source: Mastercard Economics Institute
Throughout our ‘Did you know?’ series, we have looked under the hood
of consumer spending to show how households shift their consumption to
suit their needs in an ever-changing economic environment. In this blog,
we show that SMBs are similarly adapting to the changing economic
environment and its changing consumers.
This adaptability has allowed SMBs across the EU to remain
competitive during a challenging economic period. As the headwinds of
the past few years subside, the Mastercard Economics Institute sees SMBs
as poised for growth.
To learn more about economic insights from the Mastercard Economics Institute, contact your Mastercard representative or request a demo.
Notes & Disclaimer
About the Mastercard Economics Institute
Mastercard Economics Institute launched in 2020 to analyze macroeconomic trends through the lens of the consumer. A team of economists, analysts and data scientists draws on Mastercard insights - including Mastercard SpendingPulse™ - and third-party data to deliver regular reporting on economic issues for key customers, partners and policymakers.
This Mastercard Economics Institute presentation (This "Presentation") and content or portions thereof may not be accessed, downloaded, copied, modified, distributed, used or published in any form or media, except as authorized by Mastercard. This presentation and content are intended solely as a research tool for informational purposes and not as investment advice or recommendations for any particular action or investment and should not be relied upon, in whole or in part, as the basis for decision-making or investment purposes. This presentation and content are not guaranteed as to accuracy and are provided on an "as is" basis to authorized users, who review and use this information at their own risk. This presentation and content, including estimated economic forecasts, simulations or scenarios from the Mastercard Economics Institute, do not in any way reflect expectations for (or actual) Mastercard operational or financial performance.
Footnotes
Small and medium-sized businesses are defined as those
who employ up to 249 people. Hospitality refers to the accommodation and
food services sector.↩︎