More Small Businesses Going Online

Two more surveys have found that small business owners are increasingly taking their businesses online and purchasing online, they just aren’t using the Web to sell much of anything.

The 19th annual Dun & Bradstreet Small-Business Survey was conducted in February and March of 2000, and found that 40 percent of small businesses have their own Web sites, up from just over a quarter last year, and that 70 percent now have Internet access, up from 57 percent last year. But while 31 percent of the small-business decision-makers responding to the survey said the Internet had helped them, nearly 60 percent said the Web had no measurable impact on their business. The number of small businesses saying they advertised on the Web in 1999 fell 10 percent from the survey done one year ago.

“Small business owners are proceeding cautiously into the realm of e-marketing,” said William Doescher, senior vice president, The Dun & Bradstreet Corp. (D&B) “D&B’s survey showed a notable decline in the use of the Web for marketing and for business research. In fact, the only area of Internet use that drew more small businesses to the Web in 1999 was purchasing goods and services for the business.”

Nevertheless, e-commerce still saw a slight increase over last year’s survey. This year’s survey found 38 percent of small companies with Web sites transacted business with customers over their sites, up from 33 percent in the previous survey. On average, 8 percent of 1999 revenues came from their Web sites, down slightly from 12 percent in 1998.

D&B also found a notable change in the way small businesses use the Internet. The top use of the Internet among small businesses is email, but every significant usage category slipped this year, with the exception of purchasing goods and services for the business. Forty-three percent said they used the Web for this purpose, up from 38 percent in last year’s survey. Use of the Internet for research at work showed the greatest declines — from 71 percent to 58 percent for business research and from 64 percent to 50 percent for personal research.

Small Business Use of the Internet
Use 1999 1998
E-Mail 71% 76%
Business Research 58% 71%
Personal Research 50% 64%
Purchase Goods/Services
(business use)
43% 38%
Purchase Goods/Services
(personal use)
31% 35%
Sell/Market Products 26% 29%
Source: Dun & Bradstreet

Small businesses owned by women were more likely to have Internet access than their male-owned counterparts (67 percent vs. 63 percent). They were also more likely to conduct research on the Web — both business research (62 percent vs. 52 percent) and personal research (60 percent vs. 44 percent). They were also more likely to purchase goods and services than their male-owned counterparts — either for business (46 percent vs. 34 percent) or for personal use (42 percent vs. 25 percent).

Minority-owned businesses also use the Web to conduct business research more often than do other businesses (64 percent vs. 54 percent). They also buy business goods and services more often (53 percent vs. 37 percent) and sell and market their products more frequently (39 percent vs. 23 percent) than do non-minority-owned businesses.

The D&B survey also found that larger small businesses (those with between 26 and 100 employees) were much more likely to report having their own Web page or site, but every size category showed an increase over last year. Home-based businesses continued to lag behind in this area, but still showed growth, with nearly a quarter now boasting Web sites vs. 16 percent a year ago. Forty percent and 41 percent of minority and women-owned businesses, respectively, indicated they have Web pages, also up significantly from last year in both cases.

A survey by PSI Global also found e-commerce initiatives to be lacking. PSI Global’s annual Small Business Survey found small businesses of all sizes have quickly embraced the Internet as a new information channel, but many have no plans for true e-commerce. According to the survey, two-thirds of US small businesses are online, and 30 percent of them have a Web site, up from 24 percent in 1998.

“Most of these companies are not taking full advantage of the Web to sell products and services,” said Roger Swales, president and CEO of PSI Global. “It is important to note that a mere 3 percent of these companies currently use sophisticated electronic payments and cash management services. This translates into tremendous opportunities for providers of online banking, merchant processing, and Web hosting services, particularly in the high-growth segment of the business market.”

PSI Global’s survey of 876 businesses with annual sales of $500,000 to $10 million found that 8 percent of the companies use their Internet sites to sell online or provide customer service. Most of the businesses have been selling online for about a year and predict that 15 percent of their revenue in the year 2000 will come from the Internet.

The study also found that 19 percent of small businesses use the Internet as a communications channel for introducing products and services to potential customers. “These companies, for the most part, will continue to operate ‘brochure-ware’ Web sites with no plans for true e-commerce activities,” said Maria Erickson, an executive VP at PSI Global.

The findings by both D&B and PSI Global are in line with similar findings released recently. According to a report by Access Markets International (AMI) Partners and Inc. Magazine, an estimated 600,000 small businesses were selling their products and services via e-commerce sites in 1999 up from 400,000 small businesses in 1998. The value of such transactions rose from $14 billion (1998) to $25 billion (1999), representing an increase of 79 percent.

International Data Corp. (IDC) has conducted research that found e-commerce is the wave of the future for small businesses. According to IDC’s research, the number of US small businesses engaged in e-commerce will increase from 400,000 in 1998 to nearly 2.8 million in 2003. Overall, most small businesses have annual revenues less than $5 million, but IDC found that the average annual revenues of companies that regard the Internet as important are significantly higher than those that rate it less important.

Other findings of the IDC research include:

  • Of 7.5 million small businesses, 11 percent were engaged in e-commerce activity in 1999
  • Only one-third of Internet-enabled small businesses have a home page, but intentions are high
  • Small businesses that regard Internet-related revenue as important tend to have been in business for a shorter period of time than other small businesses
  • Less than 20 percent of small businesses are selling online (taking orders over the Internet or by phone or fax).

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