28 August 2001

U.S. Small Business Internet Use Reaches 57 Percent

A National Federation of Independent Business study shows that 57 percent of small U.S. businesses now report that they are using the Internet for business-related activities. Communication by e-mail with clients, customers and suppliers is the most common kind of cyberbusiness.

The study released August 28 finds that 35 percent of all small employers have developed a site on the World Wide Web. That represents 65 percent of those who reported that they are using the Internet. But sales aren't a major activitiy on the sites, the survey respondents revealed. Only a quarter of those with Web sites reported conducting sales in a virtual showroom; only 8 percent believed that their sites had helped increased profits, either directly, or by attracting more customers.

The NFIB study of small business Internet use is available at http://www.nfib.org.

National Federation of Independent Business
NFIB National Small Business Poll

"The Use and Value of Web Sites"

Small-business owners have difficulty remaining technologically current. The problems are not only cost, but the learning curve involved. Computer and Internet technologies are good examples. However, it is clear that small-business owners for the most part have no choice but to adopt new technologies in some fashion, including computer and Internet technologies. In fact, some argue that the Internet, in particular, offers small business a unique opportunity to overcome the economies of scale that often bar them from competing effectively against larger firms. Others view the Internet's impact differently arguing that brand names enjoy enormous advantages on the Internet and that costs to drive consumers to a firm's Web site are beyond the capacity of smaller firms. Still, the Internet and business Web sites are facts of life. Small-business owners must compete in a market-place where the Internet and business Web sites are ubiquitous and where they are central to the business strategies of many. Hence, this edition of the National Small Business Poll focuses on the use and value of small-business Web sites.

Executive Summary

• Fifty-seven (57) percent of all small employers use the Internet for business-related activities. The most common business applications of the Internet in small firms are communicating by e-mail with suppliers and customers and gathering business-related information, such as prices, new products, etc.

• Sixty-one (61) percent of small employers on the Internet (35 percent of all small employers) report they have a business Web site. Most were created recently. The average life span of small-business Web sites is just 21 months.

• Small-business Web sites most often generate income indirectly. They stimulate potential customers to buy, but the actual transaction usually occurs in the small employer's place of business or by phone, fax, or e-mail. Just 24 percent with a Web site report sales made directly from their sites.

• The overwhelming majority of sales made directly over the Internet by small businesses are made to consumers and non-business entities.

• Twenty (20) percent of those selling directly over the Internet say that they charge sales tax on everything sold; 33 say they charge it on some sales; 42 percent charge sales tax on none of their Internet sales. The current turmoil regarding the applicability of state sales tax on Internet transactions leaves small-business owners confused over their legal responsibilities.

• The cost of creating and operating a Web site, both in direct outlays and employee hours, appears modest. However, about one in three does not know the cost suggesting that the site is not a cost center or that the cost is negligible.

• The most frequently noted benefit of a Web site is additional customers. However, just eight percent feel the site has increased business profits.

• The most frequently cited reason for not having a Web site (by those on the Internet, but not having one) is that their products or services don't lend themselves to sale on the Internet. The next most frequently mentioned reason is that they simply don't see any benefit in having a site. However, nearly half expect to have one in the next 12 months.

• One-third of those not now using the Internet for business-related activities expect to be on the Internet within the next 12 months.

• Sixteen (16) percent report not using a computer in their businesses. This percentage is virtually unchanged over the last four to five years.

• Though high-speed Internet service is available to relatively few small businesses, almost 60 percent of small employers believe that they have access to it and another 16 percent are not sure. However, those feeling that high-speed Internet provides no competitive advantage outnumbers those who believe it provides a significant competitive advantage by 6 to 1.