Sink or swim? SMEs drowning in e-commerce

"It is time for small businesses to focus on their future prosperity via e-commerce," says Robert Gottliebsen, founding chairman of AUSe.NET, The Australian Electronic Business Network.

Sink or Swim? is the latest report prepared for The National Office for the Internet Economy (NOIE) to provide information on the attitudes to and experiences of SMEs to e-commerce. The report is the second edition and builds on the initial work done in the joint AUSe.NET/DOCITA 1998 publication, Taking the Plunge.

According to the report, government and large corporations are seeking to encourage the rapid take-up of e-commerce by mandating that their suppliers do business with them online. This practice promises to drive e-commerce through the business community much faster than many realise.

Only a fraction of SMEs are actively engaged in e-commerce, the report said, despite the enormous strides made in the adoption of technology and the internet. Taxation changes this year have acted as a powerful incentive SMEs to computerise their business; however, less than half the businesses surveyed thought e-commerce was relevant to their business operations.

SME resistance to moving online is based on a sense that their customers are not yet ready to buy online as well as concerns about the safety and reliability of buying goods. Those SMEs using the internet for business transactions are generally still the innovators in their industries.

Higher income earners represent 22 per cent of the Australian population but have 47 per cent of discretionary spending power. Eighty per cent of high income earners are connected to the internet and this market should not be ignored by SMEs, the report said.

Large enterprises are radically re-engineering their business operations and compelling their suppliers to deal with them exclusively online. This will force many SMEs to engage in e-commerce.

In the foreword to the report, Gottliebsen writes: "My fear is that up to 20 per cent of our SMEs will fail solely because they failed to adopt e-commerce as an essential way of doing business. I strongly believe that in the future you will be able to measure the prosperity, or the failure, of small enterprises by their rate of adoption of e-commerce and its integration into their business strategies."

The report concludes that the first step in adopting e-commerce is the establishment of a web presence. According to the report, an inability to understand the benefits for business and concerns about up-front costs and maintenance procedures underlie most SMEs' resistance to establishing a dedicated web presence.

Most SMEs connected to the internet are using it for low-risk, low-cost and high-benefit activities. These are primarily communication, research and information sourcing about products and services, suppliers, customers and competitors.

Initiatives to encourage SMEs to adopt e-commerce should focus on the construction of a dedicated website and the greater use of the internet for procurement and sales.

The report identifies the types of SMEs likely to require further assistance in embracing e-commerce and outlines broad types of assistance they may benefit from.

This report outlines findings from qualitative research undertaken by Jones Donald Strategic Partners (JDSP)in May and June this year. The research was also used to analyse a quantitative research study by Sweeney and commissioned by NOIE and Pacific Access. It can be downloaded in pdf format from the NOIE site.

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