How small businesses can stand out and win over shoppers this holiday season

The holidays are an important time for small businesses, offering the opportunity to welcome new customers and showcase the unique products and experiences they bring to communities.

And while AI-powered tools are creating new ways for shoppers to discover small businesses, visibility is only one part of the holiday opportunity. Turning that discovery into a purchase requires small businesses to understand what shoppers value, what may prevent them from completing a purchase and which incentives can help them choose a smaller, less familiar business over a large retailer. 

Ahead of the holiday season, Xero surveyed more than 1,000 U.S. adults about their shopping preferences and what influences them to purchase from a small business. The findings reveal encouraging news: many shoppers are willing to change their usual habits, and even make some compromises, to support small businesses.

Shoppers are willing to meet small businesses halfway

One of the most encouraging findings is shoppers’ willingness to be flexible when purchasing from a small business.

More than half of consumers (53%) say they would shop in-store rather than online to buy a holiday gift from a small business instead of a larger retailer. More than a third (37%) would pay slightly more, while 28% would be willing to pay for shipping.

Shoppers understand the importance of supporting small and local businesses, even when it means giving up some of the speed or convenience offered by larger retailers. They are often willing to meet small businesses halfway, but still need to see the clear value in the products, services and overall experiences.

For small businesses, being transparent about pricing, shipping and availability can help shoppers make those decisions confidently.

Being different can be more important than being cheapest

Small businesses often stand out because they offer products and experiences that shoppers cannot find everywhere else. The survey results reinforce the importance of that distinction.

When shopping with a small business during the holidays, 26% of consumers say finding something unique matters most to them. Another 22% prioritize receiving good overall value, even when the item does not have the lowest price. Meanwhile, 18% say supporting the business or local community matters most.

This gives small businesses an opportunity to lead with what makes them different instead of competing solely on price. By emphasizing their local roots, demonstrating an understanding of nearby customers’ needs and reinforcing the value they bring to the local economy, small businesses can build a more distinctive position in their market and give shoppers a meaningful reason to choose them. 

Small businesses can also highlight the role each purchase plays in supporting their employees, suppliers and communities. These details can create a more meaningful connection with shoppers searching for thoughtful gifts during the holidays.

Trust and delivery can make or break the purchase

Holiday shopping is time-sensitive, which means unexpected costs or delays can quickly change a customer’s decision. 

More than one in four consumers (27%) say expensive shipping would be most likely to cause them to abandon a holiday purchase from a small business. Another 20% point to delivery times that are too long, while 15% cite a lack of reviews or trust in the business.

This puts greater emphasis on operational readiness during the holiday rush. Small businesses that align their pricing, fulfillment capabilities and customer promises will be better positioned to protect their reputations and make the most of increased seasonal demand. 

Clear communication should continue after checkout. Order confirmations and delivery updates can help customers feel confident that their gifts will arrive when expected, particularly during the busiest shopping weeks of the year.

A thoughtful offer can help shoppers take the first step

A well-planned offer can give customers another reason to try an unfamiliar small business. When choosing between a new small business and a larger retailer they typically use, 27% of consumers say a discount would be most likely to influence their decision. Free shipping follows closely at 24%, while 15% would be most persuaded by a personalized recommendation.

That said, this does not mean small businesses need to rely on steep discounts. A free-shipping threshold, introductory offer or tailored product recommendation can reduce uncertainty while protecting the value of their products.

Before launching a holiday promotion, owners should consider its potential effect on revenue, expenses and cash flow. Digital tools like Xero can help small businesses maintain a clear view of their finances and make informed decisions about pricing, inventory and seasonal offers.

The holiday season gives shoppers a reason to explore beyond their usual retailers, creating an important opportunity for small businesses to attract new customers and strengthen their position in the local market. 

Shoppers are willing to meet small businesses halfway, but earning their business requires more than competing on price. By emphasizing what makes them distinctive, building strong community connections, preparing their operations for seasonal demand and maintaining a clear view of their finances, small businesses can turn holiday interest into sustainable growth that continues well into the new year.