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The Return of ECommerce

Figures from the Office of National Statistics show that internet-based sales are now worth more than £71 billion in the UK and the rise in internet trading is fastest among smaller businesses. Recent figures from research firm Forrester forecast that the average on-line shopper in the UK will be spending £1,670 each year by 2011. This would make the UK ecommerce market the largest in Europe. Jaap Favier, research director at Forrester, says this is because of early internet adoption in the UK and the greater penetration of credit cards, which provides a more or less universal payment mechanism in which consumers have confidence.

The top categories for on-line spending in the UK remain media and travel, but Forrester’s figures show that smaller sectors, such as toys, have doubled recently, and other sectors, including footwear, household goods and cosmetics, have grown by 67 per cent. These are encouraging figures for smaller, specialist suppliers, eyeing up the on-line market.

Smaller firms may have taken a little longer to get on-line than larger businesses that have greater IT resources, but there is every sign that small companies understand the potential of doing business on the web and are looking for ways to maximise digital sales. And whilst getting on-line can seem daunting, with a few simple guidelines, it should not be impossible and can bring major benefits to small firms.

Less is more

Neil Ellul, managing director of web development company For80 and former head of the European Ecommerce Association, says the first thing companies should do is – nothing. “It’s better to have no site than a bad site. There are a lot of people putting up a one-page web site, saying page under construction. That’s the kind of profile you don’t want.”

When the company is ready to put up a proper web site, Ellul’s advice is that less is more. “It is better to have a few well-designed pages than to bite off more than you can chew and start trying to do lots of things with technology just for the sake of it,” he says.

Ellul is similarly practical when it comes to what to do with the web site. “Don’t try and use ecommerce if you have nothing to sell,” he points out. Too many companies, according to Ellul, attempt to sell services on-line when what they should be doing is using the web site for marketing. “If you are an accountant, you will have lots of services, but you won’t sell those services on-line.”

One of the biggest benefits of ecommerce for small companies, particularly start-ups, is the low level of investment needed to get up and running. “Ecommerce is fantastic when you are starting up a business,” comments Georg Braun, one of the two directors of on-line motorcycle equipment firm Get Geared, which was started with an investment of just £1,000 and now takes between 600 and 800 orders a month (see box).

Chris Barling, CEO of ecommerce software supplier Actinic, agrees. “Anyone setting up a traditional retail shop has to buy the premises, pay rates, fit it out and fill it with stock. The cost is probably twice as much as setting up a business on-line.” Barling believes cost should certainly not deter any small business from looking at ecommerce. “Our entry-level product is under £50 to sign up, and then £20 a month, plus VAT, so at that level, if you haven’t got £100, there would really be a bit of a question about your business. And if you compare growth in standard retailing with growth in on-line retailing, there is no comparison. The opportunities really are all on-line.”

Blue-sky thinking

Barling accepts, however, that one of the main challenges for small businesses trying to get into ecommerce is that they don’t have time for a lot of blue sky thinking. “Unless there is an immediate demand, small businesses won’t necessarily think about starting an ecommerce channel,” says Barling. “Most plumbers, for instance, are busy rushing round, running their business. They don’t have time for BusinessLink seminars. It is generally when businesses get a bit bigger that they have a bit more time to consider these things.”

One of the biggest decisions small businesses face when they want to get into ecommerce is whether to build a site themselves or to outsource that process. Figures show that the level of firms intending to build their own ecommerce site has stayed fairly level, at just under half of all firms intending to get into ecommerce. Get Geared’s Braun is a keen proponent of do-it-yourself when it comes to ecommerce (see box), but Barling believes that many small businesses, which may lack high levels of in-house expertise, are being attracted by hosting services, where services are managed remotely by a specialist company on their own systems.

Whichever route a small business takes into ecommerce, sufficient thought does need to be given to on-going maintenance of the web site, and integration of web-based sales with existing systems and processes. Some in the industry argue that outsourcing maintenance would help many firms achieve the stability needed to cope with unpredictable changes in demand, which is a common problem for ecommerce sites. Retail outsourcer Xansa, not surprisingly, believes that outsourcing can help companies avoid the problem of poorly-performing sites, which can cost firms not only in sales that are lost, but in potential damage to their image.

One thing is certain: more small businesses than ever now have web sites. According to US research firm Yankee Group, almost 40 per cent of SMEs now have some form of ecommerce capability. So whether you choose to go it alone, with a self-built site, or outsource the process to trusted partners, there is little doubt that one way or another, many more SMEs are going to be into ecommerce by this time next year.