Embracing the E-Vision: Why SMEs must rise to the online challenge

The September 2012 Sensis Business Index survey of Australia’s small to medium enterprises (SMEs) has some interesting findings. This regular survey of around 1,800 SMEs takes the pulse of the 99% of all Australian businesses that have fewer than 200 employees.

The study’s findings show a decline in confidence amongst small business owners. This is the third successive quarter of declining confidence among SMEs. Driving this gloomy outlook is the lack of spending by customers. The top three concerns of small business operators were a lack of work or sales, concern over the economic climate and problems with cash flow, bad debts and profitability.

When asked about their plans for the next financial year the most commonly mentioned issue was to increase their firm’s digital presence. As shown in the figure below, almost half of all small business operators who were surveyed indicated that they planned to do more online.

The online behaviour of Australia’s SMEs

To understand what Australia’s SMEs are, or are not, doing online we can refer to the Sensis e-Business Report for 2012. This annual survey examines the online experiences of SMEs and draws from the same database that the Sensis Business Index does, but also includes a consumer survey of around 1,000 people.

Sensis Business Index – Small and Medium Enterprises, September 2012. Source: Sensis Business Index and Sweeney Research – September 2012.

This study suggests that 95% of SMEs have a computer of some form, with around 92% of these firms connected to the internet. Most of these internet connections were via broadband, but around 20% of these businesses were seeking faster connections.

Not surprisingly computer ownership increases as the size of the business grows. For example, 100% of firms with over 10 employees have computers. However, what is interesting is the pattern of eCommerce behaviour by SMEs. The study found that 62% of SMEs have websites with 62% of these firms receiving payments online, but only 51% are using the internet to take orders.

Most of these online sales (87%) were with customers in their own city or town. Only 51% were using the internet to sell at a national level and only 27% were using it to sell overseas. When asked about their interest in eCommerce 39% said they had no intention or interest in engaging in eCommerce.

This resistance to engaging with eCommerce appears to be driven by fear and a lack of technical skill. For example, 78% of the SMEs expressed concern over the risk of being hacked. Another 67% said that they lacked the expertise and knowledge of computing to allow them to undertake eCommerce.

As shown in the graph below, the proportion of Australian SMEs trading over the internet has grown steadily since 2001. However, the relatively low number of firms using it for national and international commerce remains a concern.

Sensis e-Business report 2012 – Australian SMEs trading over the internet historical trends. Source: Sensis e-Business Report and Sweeney Research 2012.

The Sensis Business Index reports that only 11% of the SMEs surveyed were actively engaged in exporting. This is a fairly low proportion of firms and much less than is common in the United States and Europe. Recent concerns by SMEs, particularly in retailing, of competition from online overseas competitors highlight the need for our small firms to embrace the internet as a tool that can widen their market reach.

The internet is a positive force for helping SMEs internationalise. This was the conclusion of a paper published in the International Journal of Internet Marketing and Advertising in 2008. It was authored by Shane Mathews and Marilyn Healy from Queensland University of Technology. They noted that the internet enhances a small firm’s access to overseas markets and the ability of the firm to access information and knowledge while also expanding its networks.

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