Small business shift focus online

Small business is increasingly looking to online technologies and applications to improve business efficiency and effectiveness as more business owners look for a competitive edge in challenging economic conditions, a Sensis 2009 e-Business Report released today says.

The full statement is posted below:

Australian small businesses are spending less on computers, but focusing more attention on online technologies, according to the Sensis 2009 e-Business Report released today.

The special report, which is in its 14th year, explores how small and medium businesses (SMEs) use and purchase information and e-commerce technology. The results are based on interviews with 1,800 businesses. A separate release investigates how Australian consumers interact with technology, including social media and mobile internet.

Report author Ms Christena Singh said SMEs were looking to online technologies and applications to improve business efficiency and effectiveness in these challenging economic conditions.

"Spend on computer hardware and software by small and medium business operators has fallen considerably over the last two years, possibly due to high penetration levels and falling costs of laptops and other equipment.

"At the same time, businesses have begun focussing on online technology, becoming more creative with the way in which they market their products and services online, and more adventurous with the technology they purchase."

According to the report findings, one third of SMEs currently undertake email marketing, for example electronic direct mail (EDMs), with a further 12 per cent expected to take up the technology during 2010.

Approximately one quarter (24 per cent) of SMEs now undertake digital marketing activities, such as advertising on third-party websites and portals, with a further eight per cent expected to sign on in 2010.

"The penetration of email and digital marketing is at similar levels for both small and medium businesses, possibly a reflection of the relative cost-effectiveness of the medium compared with other marketing activities," she explained.

Online auction sites are also becoming an accepted channel to sell products and services, with approximately one in five SMEs (19 per cent) using the sites, with a further seven per cent penetration expected in 2010.

However, e-mail remains the number one use of the internet for SMEs (97 per cent), followed by obtaining product and service information (92 per cent), sourcing reference material (91 per cent), conducting internet banking (86 per cent) and using online directories (83 per cent).

SMEs are also purchasing a range of new telecommunications equipment. The report shows 62 per cent own a 3G mobile telephone with internet access, up 10 percentage points from 2008.

Use of wireless technologies for navigation and for mobile e-mail has also continued to grow. More than one third of SMEs (36 per cent) have a satellite navigation device, either in-car or hand-held, a rise of six percentage points in 12 months.

A mobile e-mail device, such as a Blackberry, is used by one in five SMEs (17 per cent), an increase of three percentage points over the year.

No growth was seen in the take up of a LAN network (at 56 per cent), and there has been a marginal decrease in the proportion of SMEs with an advanced telephony system such as a PBAX or IVR (at 30 per cent).

More than fifty per cent (54 per cent) of SMEs now have a website, with 13 per cent expecting to start a website over the next 12 months. Less than one-third of businesses have no intention of having a website.

Eight in 10 businesses in the accommodation, café and restaurant sector now have a website, while just two in 10 businesses have an online presence in the building and construction sector.

Seventy-one per cent of SMEs with a website said it improved business effectiveness, up from 65 per cent last year. The findings suggest a website improved business efficiency in the cultural, recreational and personal services sector (88 per cent) more than any other and least of all in the finance and insurance sector (48 per cent).

A website increased business effectiveness, according to the SMEs interviewed, by:
- Informing people about the business (18 per cent);
- Increased awareness (11 per cent);
- Exposure to a broader market (10 per cent);
- Easier for people to access (10 per cent);
- More enquiries (nine per cent);
- Extra sales (eight per cent).

The use of the internet for procurement rose strongly during the year, with increased penetration across all components of the procurement cycle. Approximately 74 per cent of SMEs now place orders over the internet, a rise of seven percentage points during the year.

Ms Singh noted one in five businesses now placed more than 50 per cent of their orders online.

The internet is used to pay for goods and services by 74 per cent of SMEs, an increase of three percentage points during the year. SMEs in the communications, property and business services sector are most likely to place orders through the internet (82 per cent), while SMEs in the building and construction sector are least likely (57 per cent).

On a national basis, SMEs in the Northern Territory are most likely to place orders online (86 per cent), with those in Western Australia the least likely (71 per cent).

Airline tickets (48 per cent) are the most frequently procured item online, a rise of 11 percentage points during the year. Software purchases are the second most popular purchases (47 per cent), followed by stock and merchandise (42 per cent), office supplies and stationery (40 per cent) and equipment (39 per cent).

Once the sole domain of large corporations, small businesses are now also selling goods and services online. Currently 56 per cent of SMEs take orders online, an increase of two percentage points over the year. Sixty-seven per cent of SMEs receive payments online, up four percentage points.

"For the first time, there were more small businesses than medium businesses taking orders online, indicating the barriers to entry including cost, risk and skills have declined," Ms Singh said.

Around the nation, SMEs in the Northern Territory are more likely to take orders online (70 per cent) with those in Western Australia the least likely (45 per cent).

In terms of the proportion of orders, SMEs in New South Wales are most likely to take the majority of their orders online, while Victorian SMEs are least likely.

"Improved return on investment could be one reason to explain the increase in online activity and e-commerce," she explained.

Currently, seven in 10 (67 per cent) businesses with an e-commerce strategy have already recovered their investment. A further seven per cent are expecting to recover their investment in the next year.

"Reduced concerns about e-commerce could be another reason for the increased activity we have seen during the year."

Concerns about hacking have remained the number one major concern for SMEs. However, the level of concern has reduced over the year, down three percentage points to 43 per cent.

Concern that e-commerce activity would result in a lack of personal contact with customers is unchanged at 22 per cent, while concerns about lack of expertise with computers has fallen five percentage points to 21 per cent. The cost and time to introduce new technologies also fell as a major concern, down six percentage points to 19 per cent.

Overall, 95 per cent of SMEs are now connected to the internet, up one percentage point over the year. Of the five per cent not connected to the internet, two per cent own a computer but have not connected to the internet, while the remaining three per cent do not own a computer.

The lowest internet penetration is in the cultural, recreational and personal services sector (91 per cent), the retail trade (93 per cent) and accommodation, cafe and restaurant (93 per cent) sectors.

SMEs continued to shift to broadband internet connection over the past year. Ninety-six per cent of businesses connected to the internet now use broadband, an increase of two percentage points over the year.

ADSL is the most popular form of broadband connection (56 per cent) followed by cable (20 per cent) wireless (12 per cent) and satellite (two per cent).

Of the SMEs without a broadband connection to the internet, almost half intend to obtain one in the year ahead.

The Sensis e-Business Report shows while there was an increase in business' online activity, there has been a considerable decline in expenditure of computer hardware and software.

Average expenditure by SMEs on computer hardware and software for the 2009 calendar is expected to be $8,500, down $2,500 from 2008 and $3,000 from 2007.

A significant reduction in expenditure is expected on computer hardware this calendar year, down $1,800 to $4,700. Falls in spending on hardware are expected in businesses of all sizes. SMEs are expecting to reduce the amount they spend on computer software by $600 this calendar, taking the average amount expected to be spent to $3,900.