Report: Small Business Use of Internet to Grow Slightly

Analysts say that predicted growth in the online activity of small businesses may not be huge, but it still represents an opportunity for CRM providers.

A recent study by JupiterResearch predicts that 82 percent of small businesses will be using the Internet to do business by 2011.

"The Internet is an extremely important medium to market to [small businesses]," said Sonal Gandhi, an analyst at JupiterResearch and the lead author of the report.

The study predicts only a modest increase from todays levels. According to the report, 78 percent of small businesses, or almost 20 million, regularly use the Internet today.

Gandhi said that 81 percent of the surveyed online businesses use the Web for e-mail and that 79 percent go online to shop.

In fact, according to Gandhi, small businesses made more than $43 billion in business purchases online in 2005. Ninety percent of online small businesses have less than five employees, and these businesses account for half of all online spending by small businesses, according to the report.

"The growth of the overall online small business market and decision makers increased comfort with doing business online will impact their total online spending," said JupiterKagan president David Schatsky in a statement. (JupiterResearch is a division of JupiterKagan.)

"Companies that target small businesses should take advantage of the size and openness of this market online," Schatsky added.

The percentage of small businesses—defined in the study as companies with fewer than 100 employees—selling to customers online is actually low, partly because many small and midsize businesses are not retail operations, Gandhi said.

The big question is whether the SMBs using the Internet to make purchases will develop a Web presence of their own, said Max Engel, an analyst at Frost & Sullivan.

Engel said he expects smaller companies will do exactly that as they become increasingly Web-savvy, adding that vendors selling items to SMBs could benefit from better integration of their respective businesses.

For example, a manufacturer could automatically send an e-mail to an SMB inquiring about inventory levels after a certain amount of time has passed between the SMBs regular orders, he said.

"Its the way the world works for larger businesses," Engel said.

Michael Speyer, an analyst at Forrester Research, said that growth in SMBs online activity could be a boon for CRM (customer relationship management) solution providers. However, Speyer does not expect the number of SMBs using the Web to increase dramatically in the future.

"Those companies that are going to go to the Web have probably already made the leap at this point," he said.


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