Small Business Survey: Small Business Should Bite the Online Bullet

Cathy Santosus,

Small business merchants in search of new customers and increased sales this holiday season would be well advised to get online.

Eighty-one percent of small businesses that maintained an online presence during last year's holiday season reached new customers, leading to an increase in sales and profitability, according to results of a Harris Interactive (Nasdaq: HPOL - news) survey released by Yahoo! (Nasdaq: YHOO - news)

Of those small businesses with e-commerce capability during the 2001 holiday season, 59 percent said being online allowed them to increase sales, with an average increase of 29 percent. More than half (54 percent) said it increased their profitability.

Gartner research, too, shows an increase in the proportion of revenue generated online by small business. "Thirty percent of small businesses with a Web presence and fewer than 20 employees now generate more than 25 percent of their revenue online," Mika Krammer, research director of the small and mid-size business group at Gartner, told the E-Commerce Times.

Reasons for Online Presence (Search Engine Optimization is Crucial)

The ability to reach new customers was the most important reason for having an online presence, according to the Harris survey, with 74 percent of respondents saying it was the reason why they took their business online. Respondents also said they were seeking higher visibility and increased sales. Competitive advantage and reduced costs were other, less important reasons cited for taking the online plunge.

However, most small businesses are still relying on offline sales for the majority of their revenue, Krammer said. "Less than 10 percent of small businesses are generating a significant portion of their revenues online."

Hosted Services Improving

Fortunately, it has never been easier or cheaper for small merchants to create an online store. Inexpensive hosted services now offer more functionality and ease of use, making the value proposition of conducting business online relatively straightforward.

For example, shopping carts and other e-commerce tools are commonly available with virtual domain hosting service packages for as little as US$50 per month. Small merchants also can use an online store hosting service, such as Yahoo! Store, the e-commerce package from Microsoft's (Nasdaq: MSFT - news) bCentral, or the storefront options of Web site building services, such as Homestead and BigStep, which recently was acquired by Fort Lauderdale, Florida-based hosting company Affinity Internet.

Added Impetus

The approaching holiday season likely will serve as an added impetus for more small businesses to take the leap online. The number of stores coming online with Yahoo! Store tends to ramp up at the end of the third and beginning of the fourth quarters, Bud Rosenthal, vice president of Yahoo! Store, told the E-Commerce Times.

"Growth in the number of stores has been very aggressive to date, up 40 percent from last year," he said. The Yahoo! Store platform currently hosts more than 20,000 merchants, according to Rosenthal.

Yahoo! Store combines Web hosting, a shopping cart, and catalog and transaction processing tools with targeted traffic generation. Yahoo! Store's biggest differentiation, according to Rosenthal, is its ability to drive targeted traffic to merchants.

Krammer agreed. "Yahoo! provides a funnel or pipeline for small businesses to generate some kind of revenue versus going to a one-off provider that might be local and high-touch but doesn't have that ability to generate traffic," she said. According to Nielsen//NetRatings data provided to the E-Commerce Times by Yahoo, Yahoo! Shopping had 27.4 million unique visitors in August.


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