Since the coronavirus pandemic hit countries worldwide earlier this year, forcing intermittent closures and lockdowns, small businesses in particular have struggled to remain open, with many lacking the capital and infrastructure to quickly adjust to new business models. In urban areas especially, small businesses have noticed drastic revenue declines due to a sharp downturn in foot traffic, as many people hunkered down at home and shopped online to avoid the risk of infection.
Tel Aviv-based digital wallet startup Colu has been helping cities increase civic engagement by rewarding residents for actions like shopping locally, volunteering, taking part in events, and discovering different neighborhoods. Founded in 2014, Colu uses a city coin system to motivate residents to fuel the local economy and connect people, businesses, and institutions.
During the partial lockdown in Tel Aviv (and across Israel) starting in mid-March, Colu helped the city’s economic recovery through reward programs on its app. From March 17 to 31, small businesses saw USD 145,000 in revenue, with a total economic impact of around USD 4 million by May. Business owners also reported that around 30% of their economic activity came from Colu users, and the city saw 8.7 times return on investment on city investments, according to the company.
“The mission of Colu is to help cities unlock their true potential and become a place that really empowers individuals and makes people feel connected to each other, but also to causes that they believe in, and create something that we call community in the city,” Elad Erdan, global business development manager at Colu, tells NoCamels. “We feel that small businesses have a really big part in this ecosystem we call a city, because small businesses are not only a place that create jobs for people or where people hang out, it’s also the places that give cities their character.”
The Colu app rewards residents for taking urban actions that preserve the spirit of the city, which can range from buying local to recycling to taking public transportation. Through the Urban Stories feature, residents can learn about city initiatives and programs, local businesses and their proud owners, and cultural gems and community organizations contributing to the city’s diversity.
To update residents on local businesses, Colu brings merchants on board directly onto the app, sometimes with little involvement from these businesses. Redeeming businesses can accept city coins as a form of currency, which can be converted into real money a few times per month.
“We are providing the onboarding for the businesses, we’re giving the customer support for the business, and we’re using it as a marketing platform for the business for them to get more customers and to spread their story,” Erdan says.
Colu has a six-step plan to help cities stimulate their local economy. The company works with cities to conduct analyses focused on strengths, weaknesses, opportunities, and threats (SWOT), then creates a specialized app with custom currency. Local businesses and sponsors are brought on board to the app, and the app is subsequently launched. Residents can then download the app and accumulate coins through civic engagement efforts, which can then be redeemed at small businesses throughout the city. The app also reveals insights like return on investment, rewards allocated vs. spent, active users, and awareness statistics.
The app also incorporates elements of gamification like a coin reward system, achievement celebrations with custom graphics, and challenges like “The Girl Power Challenge,” which incentivizes residents to spend money at women-owned businesses to earn additional coins.
In the wake of the pandemic, Colu has listed five ways cities can use its services to cope with the challenges of the global health crisis: first, for smarter crisis communications to convey accurate information and courses of action; second, to collect volunteered data and information from residents for emergency response purposes; third, to encourage residents to volunteer and help with relief efforts; fourth, to encourage preparedness so residents can take proactive steps to stock up on supplies, for example; and fifth, to help communities and small businesses recover.
Tel Aviv success story
According to Erdan, if only 15% of purchases made on Amazon were made at local businesses, local small business revenue would increase by USD 17.6 million, with an additional USD 88,000 in municipal revenue per year (for a city of some 200,000 residents). With this in mind, Colu looked towards urban regeneration along Jaffa’s Jerusalem Boulevard, which as a result of the ongoing light rail construction, had seen a significant reduction in foot traffic and up to five store closures per week.
With more than 100 small businesses impacted by road closures, Colu partnered with the Tel Aviv Municipality and other anchor institutions like the Tel Aviv Foundation to boost the local economy. Using Tel Aviv Coin, Colu offered a 30% cashback as a benefit for every purchase in the area, with a USD 150,000 reward budget funded by Tel Aviv Municipality.
In just 45 days since the app’s launch in 2018, the area saw a 745% increase in commerce and USD 700,000 in small business revenue, according to the company. The app recorded 23,000 transactions as a result of this cashback system and elements of gamification.
“This [system] is how we create a circular economy and the money goes back to the city, so the city can spend this money on minorities or different behaviors that promote social good, like walking in the city or traveling by bus,” Erdan said.
Colu also works in Haifa and launched operations in Belfast last year. It operated in East London and Liverpool before discontinuing its services earlier this year.
Earlier this year, Colu entered into a partnership with the city of Akron, Ohio, on a custom app called Akronite. Instead of city coins, the app uses Blimps, which were inspired by Goodyear Blimps native to Akron. Many elements of the app are also inspired by toys since Akron used to be the largest manufacturer of toys in the United States.
According to Heather Roszczyk, innovation and entrepreneurship advocate for the City of Akron Mayor’s Office of Integrated Development, many small businesses along Akron’s Main Street have suffered as a result of a large construction project similar to that of Jerusalem Boulevard in Jaffa.
“At the height of the pandemic in Northeast Ohio. . . we were seeing businesses have to close their doors all around us, and there was so much concern about, you know, what can we do to help these businesses,” Roszczyk tells NoCamels. “Colu had a product that was absolutely ready to go, proven with a track record in other cities, and we knew we could have an extremely rapid response to try and help these businesses as quickly as possible.”
Similar to in Tel Aviv, Colu has onboarded many small businesses in Akron onto the Akronite app and will continue promoting businesses through rewards. Erdan said that each business sector will have different cashback and benefit mechanisms, as well as features with local business owners.
Colu will also promote minority-owned businesses through the Akronite app, from Black-owned businesses to shops promoting the LGBTQ community.
“During Women’s History Month, for example, we could put an extra reward for shopping at female-owned businesses, or we can give an extra reward for shopping at Black-owned businesses,” Roszczyk explains. “There’s all kinds of customizable options on the app that we can use to highlight specific segments of businesses.”
The Akronite app is currently in its beta version, yet Roszczyk says that it has received an “extremely positive response.” Akronite will be fully launched by the end of July, and the city will be spending USD 60,000 to launch the app and support its rewards program. The app will first be launched in Akron’s downtown and by a nearby university.
Response to COVID-19
In response to COVID-19, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed in the United States as a USD 2 trillion economic stimulus bill. While the CARES Act saved many failing small businesses from permanently closing, much of these funds went directly to local businesses as loans or grants without encouraging resident consumption.
“The problem is that these kinds of grants really are one-time savers, so you’ll get money for the income that you just lost in the past few months, but we don’t see any kind of long-lasting behavior that these grants are set to generate or create,” Erdan says.
Colu’s app is special because it is “focusing more and more on shopping locally and saving small businesses,” he tells NoCamels.
“Many different industries have gotten hit, but local businesses like restaurants, movie theaters, beauty and cosmetics stores—these kinds of businesses are seriously damaged, and what we’re doing right now is help residents go back to the streets during reopening, while also fostering a sense of community.”
This article first appeared in NoCamels, which covers innovations from Israel for a global audience.