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Insight of the Month: 3 Types of Businesses that Thrived in 2020

A collection of podiums showcasing trophies and awards.

We talked about 2021 as if the pop of a cork would create a magical reset. The pandemic rages on, and political unrest in the U.S. has hit a record high since the new year.

It’s a new year, but the same challenges persist. We found silver linings in 2020, from resilient business owners to positive environmental impacts, but overall it was a rough year to run a business.

Though many businesses closed in 2020, maybe for good, many others sprung up in the face of crisis. And some thrived.

Though many businesses closed, maybe for good, many others sprung up in the face of crisis. And some thrived. 2021 is still a murky time to start or grow a business, but our research shows that opportunity exists— not just for hand sanitizer manufacturers.

We surveyed* business owners about their performance over the past year and their outlook for the future. Among their responses, some trends emerged. Here, we’ll explore three business types that thrived in 2020 and make predictions of the most profitable small businesses to pursue this year.

Three types of businesses that thrived in 2020

From our research, we defined a “thriving” business type as one whose founder had a higher than average rate of satisfaction with business performance and a higher than average rate of a positive outlook on the future of their businesses.

While there have been some clear winners—we don’t even have to look at the numbers to call out loungewear brands and home fitness businesses—our research revealed some unexpected standouts.

Those thriving business types—and our predictions for the most profitable small businesses to start in 2021—are:

  1. Health and beauty businesses
  2. Subscription businesses
  3. Companies that sold both B2B and B2C

1. Health and beauty businesses

The numbers: 55% of founders of health and beauty businesses reported being satisfied with business performance in the past year. (The average across all business types was 38%.) While the past year’s performance indicates success, an even higher percentage expects continued success. 79% of health and beauty founders reported having a positive outlook in the following months.

Why these businesses thrived

Under the category of health and beauty, you’ll find personal care items like hand sanitizer and soaps. These products were in high demand, especially during the pandemic, with increased concern about surface transmission. Another side effect of rolling lockdowns was the impact on the beauty service industry. Consumers diverted their beauty spending to at-home spa and salon experiences.

With the slow rollout of vaccines and the continued need for self-care, we predict that health and beauty businesses will thrive through 2021.

High-potential health and beauty businesses to start in 2021

If you’re looking to create a good health or beauty business this year, consider the changing needs of consumers. We identified trends that emerged in 2020 that are here to stay.

Businesses that can sell online and offer multiple delivery methods will win. Pair that approach with product ideas that are in high demand:

  • Personal care products like hand soap and sanitizer
  • At-home spa rituals like face masks
  • Beauty technology like massage guns, massage chairs and recliners, smart mirrors, and makeup refrigerators was exploding trends in 2020

? Quick start tip: Spin a beauty business quickly by considering reselling or white label. For more on these models, consult our guide to starting a makeup line.

2. Subscription businesses

The numbers: 63% of founders who sold subscriptions were satisfied with business performance, compared to 55% of founders who did not sell subscriptions. We identified two subscription models commonly used by businesses that thrived in 2020:

  1. Replenishment model: subscribers receive the same or similar products each cycle.
  2. Membership model: subscribers have access to exclusive products or perks.

Why these businesses thrived

Our consumer trends research found that buyers were more likely to shop from businesses that offered convenience, say through online purchasing options and multiple choices for delivery or pick up. Subscriptions provide an easy way for customers to receive the products they frequently buy without making numerous trips to stores—and risk exposure.

Even early in the pandemic, it was reported that subscription box businesses were experiencing a surge. Many replaced a lack of connection to activities that brought joy with delight delivered regularly to doorsteps.

High-potential subscription businesses to start in 2021

We recently announced that Shopify has made selling subscriptions on our platform more accessible. If you own a business, you can add a subscription option to help you increase predictable revenue and customer loyalty. If you’re starting from scratch, meet the needs of consumers right now:

  • Basics like diapers and personal care (replenishment model)
  • Self-care boxes
  • Current product trends that work well with subscriptions: non-alcoholic beverages, puzzles, board games, nail polish

? Quick start tip: Read our quick guide to adding subscription options to your existing business. If you’re starting from scratch, reach out to existing subscription box businesses to see if you can partner up. Including your product in a popular box can increase your reach and exposure.

3. Businesses that sold both B2B and B2C

The numbers: 62% of founders who sold B2B and B2C were satisfied with business performance in 2020, while only 53% of B2C-only business owners reported the same. This model was most common among those running businesses in the food and beverage industry, with 53% of those surveyed reporting selling both B2C and B2B.

Planned business expansion is an obvious indicator of a business’s current success. Among those who sell both B2B and B2C, 24% reported that they planned to expand their business into new product areas shortly.

Why these businesses thrived

Reaching new customers and getting products into their hands became increasingly challenging as stores shuttered and delivery providers were overwhelmed. Those who used multiple channels or models to reach customers had a better chance of survival in 2020—and a high potential to be profitable in 2021.

For example, a brand that sold its handmade skincare wholesale to beauty retailers may have seen its B2B business dip with the closure of these partner stores but could supplement the loss by selling the same products B2C via an online store.

High-potential B2B/B2C businesses to start in 2021

In 2020, Shopify announced the launch of Handshake, a wholesale marketplace for retailers and suppliers. If you already sell direct-to-customer, consider adding wholesale to the mix and increase your exposure to new markets. If you’re a wholesaler, spin up a direct-to-customer arm of your business to make up for sales that the pandemic has impacted.

If you’re an aspiring entrepreneur looking for a product idea, many can be sold both B2B and B2C. Our findings indicate that combining these will give you a better chance of having a profitable small business. Start with our resources to help you find a product, or tap into some recent product trends:

  • Workout gear like exercise bands and yoga mats
  • Health and beauty products
  • Home decor items like rugs and furniture

? Quick start tip: Take your existing B2C business to a B2B audience by consulting our guide to selling wholesale.

Although the global economic outlook for 2021 still looks grim, there are opportunities for independent businesses to thrive. The ideas identified by our research have a high potential to be profitable small businesses if you stay connected to changing trends and customer needs. We’re continuing to uncover insights to help you succeed. Sign up below to receive monthly updates direct to your inbox.

 

Special thanks to our friends at Shopify for their insights on this topic.
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