Small Business Embraces Net, Shuns E-Commerce

Almost three-quarters of small businesses with PCs are now on the Internet, according to International Data Corp. (IDC), up from about two-thirds just a year ago. Small businesses are also moving quickly to establish their own home pages, with 2 million small firms maintaining their own Web sites, but when it comes to e-commerce, small business actions have not lived up to their expectations. At the end of 2000 only 725,000 small firms were actively selling online, even though a far greater number had planned to do so.

It has never been easier for small businesses to get up and running on the Internet. According to IDC’s report, “Internet Services to Small Businesses: Profiles of Portals, Aggreportals, Destinations“, more than 50 major companies are providing resources to help small businesses establish a Web presence, implement e-commerce or gain access to advanced services. A wide range of tools are available for both the “do it yourself” and the “do it for me” small business interested in doing more on the Internet.

But despite these resources, small businesses continue to sit on the sidelines when it comes to e-commerce.

“Inertia is a key factor,” said Raymond Boggs, IDC’s vice president for Small Business/Home Office research. “Although many small firms say they are going to implement e-commerce and begin selling online, it still requires more of an effort than simply setting up a home page.”

Other factors that are preventing some small businesses from stepping up to e-commerce, IDC found. Although many small businesses are retailers, an even larger number are service providers that may not be in a position to sell anything online.

Work flow issues, such as how incoming orders are handled, must be addressed before online selling can be effectively integrated into operations. Getting operations logically organized may be seen as the biggest chore in moving to e-commerce. Working with banks to establish merchant accounts and coordinating with other financial institutions can also be seen as a lot of work even though comprehensive solutions are available to take care of this.

EMarketer has also found a growing number of small business online. In 2001, eMarketer predicts 78 percent, or 5.9 million, of all U.S. small businesses are connected to the Internet and nearly half have active purposeful Web sites.

U.S. Small Business Internet Use (Thousands)
	1998	1999	2000	Annual Growth
Online	3,863	4,290	5,010	13.7%
Have Home Page	1,169	1,565	2,092	33.8%
Conduct E-Commerce	400	540	725	34.6%
Source: IDC, 2001