More SMBs take on e-business, online procurement

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A new e-business report has revealed that Australian SMBs are increasingly buying and selling online, with many smaller companies with one to 19 staff believing that the internet improves their customer service.

A new e-business report has revealed that Australian SMBs are increasingly buying and selling online, with many smaller companies with one to 19 staff believing that the internet improves their customer service.

A new Sensis E-business Report found that 55 percent of smaller companies placed orders for products or services online in the past year, up from 45 percent. Sensis sponsored Sweeney Research to survey 1800 SMBs in May by phone.

Some 74 percent of medium-sized businesses -- those with 20 to 200 staff -- placed orders online in the past year, up from 64 percent.

Online buying and selling were the internet applications experiencing the strongest growth in the SMBs. Another 12 percent of SMBs were expected to start taking orders online within the next year. Another 11 percent were expected to take up email marketing in the next 12 months, the report said.

Further, online purchases represented more than five percent of total purchasing activities for 60 percent of SMBs, up from 47 percent a year ago. That reversed last year's decline, the report said.

"At the top end of the spectrum, 12 percent of SMBs that bought online reported that the majority of their procurement was conducted online," the report said.

Sensis also found a rise in the proportion of businesses paying online with a rise from 66 percent to 73 percent. The most common online purchase made by SMEs in the year was computer software, followed by airline bookings, stock and merchandise and equipment.

Online selling also increased, with 39 percent of smaller businesses -- up from 32 percent -- and 50 percent of mid-size businesses - up from 49 percent -- accepting orders online in the past year.

"The proportion of online businesses that indicated they took more than five percent of their total sales orders online increased over the year from 43 percent in 2003 to 51 percent in 2004," the report said.

Eight percent of SMEs who used e-commerce to sell made most of their sales online.

Some 73 percent of SMBs in the hospitality sector indicated their websites were effective. Conversely, only 42 percent of SMBs in the health and community services sector believed their websites were effective.

"Growth-oriented businesses were more likely to feel that their website had increased the effectiveness of their business than those businesses that were not aiming for growth - 56 percent compared to 45 percent," the report said.

At the same time, 59 percent of SMBs that had adopted e-commerce indicated they had recovered the investment they had made, with a further 27 percent saying their ROI from e-commerce had exceeded 50 percent.

However, 43 percent of online SMBs believed they could not use e-commerce. "The number one SME concern in relation to e-commerce was once again security and the ability of people to hack into their systems," the report said.

Spam was a major problem for 34 percent of online businesses, since it caused a loss of productivity. Some 42 percent of online SMBs had already bought software to combat spam. However, 27 percent of online SMBs said they had taken no action at all to address spam.

Some 94 percent of SMBs reported owning a computer. Forty-one percent owned at least one notebook computer. Computer ownership was slightly higher in metropolitan areas at 95 percent, compared to 93 percent for regional SMBs, and lower in Tasmania, at 87 percent.

Finance and insurance-based businesses had 100 percent computer ownership. However, just 90 percent of retailers owned a computer.

"Some 72 percent of SMEs that are connected to the internet identified the provision of better service to customers as the major reason for having introduced the internet into their business, an increase from the 68 percent of SMEs that identified this as their main reason last year. Some 78 percent of medium businesses connected to the internet identified this issue, while a lower 71 percent of internet-connected small businesses gave this response."

Second most important reason for internet connectivity was to make business transactions cheaper, with 50 percent of SMBs nominating that reason, up from 43 percent last year. Sixty-three percent of finance, insurance, transport and storage SMBs said the internet was used to make business cheaper.
 
However, 21 percent of SMBs still saw no need for the internet, down from 29 percent last year. Wholesale traders were the industry sector most likely to say the internet was not necessary and regional businesses were more likely than metropolitan businesses to say so. Retailers were more likely to say that the internet offered no business advantage.

A total 14 percent of SMBs are not connected to the internet. Four percent of those believed they would connect to the internet in the next year. Number one use, for 94 percent of SMBs that were connected, was email. The next most important use was to browse for information.

"Strongest resistance to future internet connectivity, by business size, came among those businesses that employ between one to two employees, with 13 percent stating that they were not expecting to connect to the internet," the report said.

The 2004 Sensis E-business Report survey excluded SMBs in the agricultural sector.

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