Small businesses face barriers to growing e-commerce

Electronic commerce the marketing, promotion, buying and selling of goods and services electronically, particularly via the Internet is experiencing unprecedented growth according to a report by the U.S. Small Business Administration's Office of Advocacy.

The report, "E-Commerce: Small Businesses Venture Online," uses existing research to provide an overview of small businesses' use of e-commerce and identify a number of issues in the expansion to e-commerce.

As much as 35 percent of small businesses maintain their own Web sites, according to the report.

While e-commerce is used for customer identification, advertising, consumer sales, business-to-business transactions and some business-to-consumer point-of-sale transactions, small firms encounter several barriers to e-commerce.

Barriers include initial start-up costs, difficulty attracting and keeping technologically skilled personnel to service the site and customers, security of a small business' data, and consumer trust.

"The use of e-commerce opens a universe of new venues for small businesses and consumers to exchange information, goods and services," said Jere W. Glover, the SBA's chief counsel for advocacy.

"Consumers are on the Internet because of the price and choice available to them there. Small businesses built Main Street, and they will likely lead the way in the future to a virtual market square," Glover added.

In the report, 78 percent of small-business owners with Web sites said the ability to reach new and potential customers was the main reason for their presence on the Internet.

Businesses are more likely to be online to identify customers and promote product and services before the point of sale.

Research showed that small businesses that utilize the Web have higher annual revenues, averaging $3.79 million in 1998, compared with $2.72 million for all small businesses.

Online sales now account for less than 1 percent of total retail sales in the United States.

However, online retail marketing is experiencing about 200 percent annual growth, with online traffic doubling every 100 days.

Small businesses earned $3.5 billion in e-commerce sales in 1997, and projections for online sales for the beginning of the next decade range widely. Different sources peg the figure at from $25 billion to more than $300 billion.

The report is available on the Office of Advocacy's Web site at

www.sba.gov/advo/stats/e_comm.pdf.

Technical questions regarding the report may be addressed to Victoria Williams at 202-205-6530.

The SBA's Office of Advocacy was created by Congress in 1976 to protect, strengthen and effectively represent the nation's small businesses within the government.

As part of its mandate, the office conducts policy studies and economic research on issues of concern to small business.

It then publishes data on small business characteristics and contributions.

[[In-content Ad]]