Small Businesses Still Shy Away from E-Commerce

Small businesses are establishing Web sites primarily to advertise and promote their business, rather than to conduct e-commerce, according to a survey by The Gallup Organization for Verizon Information Services.

The “Second Annual Small Business Internet Survey” found that the number of small firms that established a Web site to advertise and promote their business increased 123 percent over last year (21 percent in 2000, compared to 8 percent in 1999). Conversely, small businesses establishing a Web site primarily to sell products decreased 48 percent during the same period (13 percent in 2000 compared to 25 percent in 1999).

“Research indicates that many consumers use the Internet to window shop — to research and browse before they buy from local merchants,” said Patrick Marshall, group VP, marketing, of Verizon Information Services. “While transactional e-commerce may not be right for all small businesses, even the most local business can benefit from establishing a Web site to promote their products and services.”

Web sites seem to have been a worthwhile investment to the companies that have established an online presence. Fifty-five percent of small businesses with a Web site report the site has broken even or has paid for itself in increased business. Forty-eight percent of small businesses with a Web site say their site has met or exceeded their expectations, compared to 33 percent in 1999. Additionally, 57 percent found that creating a Web site was an easy process, rating it a 7 on a scale of 1 to 10.

Small businesses with a Web site are also enthusiastic about the future impact of the Internet on their business. Sixty-five percent describe the Internet as important to the future of their business, rating its importance 7 or higher on a scale of 1 to 10.

The survey also found that while many small businesses have yet to adopt the Internet as a marketing tool (only 27 percent of small businesses have a Web site), those small businesses that are online may be ahead of their offline competitors. The data suggests that small businesses with a Web presence have a broader geographic reach, have a greater understanding of the Internet as well as how to conduct Internet transactions, and know more about how their customers and competitors are using the Internet.

For example:

  • 48 percent of small businesses with a Web site believe their customers come from outside a 50-mile radius. Only 20 percent of small businesses without a Web site believe the same.
  • Companies with a Web site rated themselves 8 on a scale of 1 to 10 for their general understanding of the Internet, compared to those without an Internet presence, who rated themselves 6.
  • Companies with a Web site rated themselves 7 out of 10 for their understanding of how their customers and competitors are using the Internet, compared to those without an Internet presence, who rated themselves less than 5.

“Small businesses without a Web site may be at a disadvantage compared to their competitors who are online,” Marshall said. “We believe that all small businesses can benefit in some way, whether using it for marketing and selling, or researching vendors, purchasing products, and communicating with customers. As online applications become easier to use and consumers grow more comfortable with e-commerce, we expect more small businesses to move into the e-commerce arena.”

And with the busy e-commerce season upon us, what of the small business that do use the Web to conduct transactions? Small and mid-sized e-businesses are more prepared for holiday shoppers this year, according to a recent survey of 1,390 Internet merchants by ePublicEye. The survey found that 93 percent had secure credit card processing up from 85 percent in October of 1999, and the need to allay consumer’s privacy concerns has also caught on, as 91 percent reported they have privacy policies published on their Web site.

Beyond the basic issues of credit card security and privacy, the ePublicEye survey found that 83 percent have inventory tracking, 92 percent offer order tracking, 92 percent have return polices posted on their Web sites, and 72 percent offer an unconditional money back guarantee.

“This year we’ve seen the sophistication of small and mid-sized Internet merchants jump by leaps and bounds,” said Errol Smith, CEO of “We believe this is due in part to the ubiquitous media attention that has been given to online security and privacy issues and to the proliferation of turn key Web stores that automatically equip small e-businesses with the fundamentals required to conduct commerce online.”

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