SMEs make profit from Internet

Nearly three quarters of ecommerce sites run by small and medium-sized enterprises (SMEs) are profitable, according to latest research figures.

And those SMEs are increasingly turning to IT professionals and web-designers as their first source of information about ecommerce solutions, but they then tend towards building the sites in-house.

The highlights of the third independent annual survey of the ecommerce market for SMEs are:

• the high level of profitability of ecommerce sites seen in 2002 has been sustained in 2003;
  
• over half of SMEs are planning to invest in further development of their sites;
  
• in the retail sector, nearly half of businesses now use a boxed software solution in preference to custom-built design;
  
• spending more on a bespoke site does not increase profitability.

The survey was conducted by pfa Research for software vendor, Actinic. Chris Barling, CEO of Actinic said: "The results of this year's survey indicate a growing maturity in the SME ecommerce sector, and companies now regard the Internet as more important to their business than they did in 2002. We can also see a profile emerging for what makes sites profitable. Typically, profitable sites are built using a boxed solution, and have a total cost of implementation of at least £1000."

The report shows that ecommerce adoption rates, future plans and attitudes remain similar to last year. SME merchants are increasingly looking to web designers and IT professionals as a first source of advice, but more ecommerce site building is being done in-house. Factors influencing site profitability are starting to emerge, according to the report.

Ecommerce site profitability

• 71 per cent of sites are profitable in 2003 - similar to the 72 per cent last year.
  
• Companies whose sites are profitable are focused on customer relationships and service.
  
• Bespoke design does not increase profitability.
  
• No site built with an investment of less than £1000 was profitable - but greater investment did not guarantee greater profit.
  
• Shortage of skills is still a barrier to profitability for some.

Sources of advice and construction

• Web designers and other IT professionals have become more important as the first source of information about ecommerce, but more companies are turning to in-house expertise for the final building of the site.

"Where did you go for your first source of advice about ecommerce?"

2001 2002 2003 Friend/ Colleague 28% 27% 26% Web designer 15% 16% 26% Internet 5% 28% 5% Consultant/Reseller/Vendor 8% 9% 16%

"Who built your web store?" 2001 2002 2003 Myself / in house 32% 17% 39% Product developer / software vendor - 14% 11% Web designer 35% 36% 37% ISP / hosting 12% 5% 0% Consultant / professional organisation 11% - 18% Colleague / friend 2% 17% 3% IT Reseller 9% 2% 3% Other 2% 9% 0%

Ecommerce adoption

• In the retail sector, almost half of SMEs are now using a boxed software solution, either for a site they have built themselves, or as part of a complete solution they have purchased.
  
• The overall rate of adoption of ecommerce among small and medium businesses has fallen somewhat, from 26 per cent to 21 per cent.

Future plans and intentions

• A majority of businesses - 53 per cent - are planning to invest in further development of their sites.
  
• There has been no significant change in the percentage of businesses that do not have an ecommerce site but are planning to implement one. Those that have actively decided not to implement ecommerce have done so for purely business rather than technical reasons.

Business importance of the Internet

• Companies regard the Internet as more important to their business than in 2002, particularly for providing information on goods and services and for taking orders.

The research was based on interviews with 185 companies selected at random from an independent database. The companies were spread evenly across the retail, wholesale and manufacturing sectors. All had web sites and between one and 249 employees. Another 214 were willing to be interviewed but did not have a web site.

This survey tends to bear out one of the themes in the recent UKTECH seminar 'Threats and Opportunities' where Andy White identified the increasing opportunities coming from the SME market for freelancers. However, although the IT professionals and web-designers are getting their feet through the door as the first source of information for SME, the customer is tending to turn in-house for implementation.

Susie Hughes