What about the internet ?
Our reaction to the world of internet purchasing highlights the challenge we face in the changing economic environment: we have the ability to purchase directly from global markets but we still seek out a personal touch to guide us through the choices available.
US internet sales are running at about 3-4% of overall US retail spending. Just 3% - accounting for a tiny percentage of US consumer spending and hardly a sign of the ‘end of main street selling’. Of course, the share of internet sales is growing steadily, and in some goods and service market segments the internet is a significant player. The hot segments are items that are readily substitutable – like a book, CD, DVD or airline seat.
Our main use of the internet is not purchasing, but personalised research. US internet group Jupiter Research found that in 2004 the internet accounted for some 18% and rising of pre-purchase queries. Sensis found a complementary pattern in Australia, with 77% of us liking to do our own pre-research and 43% of us doing it on line.
Many of Australia’s small businesses are using the internet. The latest Sensis e-business report found that 88% of Australia’s small and medium sized businesses have internet connections – 63% of these via broadband.
While connections have continued to grow, small business uses of the internet are still based mostly on communications – communications with people (including suppliers and buyers) via email, and on product research. More than 80% of businesses connected to the internet nominated these uses, but only half of those connected nominated ‘promotion of my business’ or ‘taking orders and payments’.
The pattern of use of the internet by small businesses and the caution it implies about actually doing their business online mirrors the mixed feelings the medium evokes in consumers.
Remember the ‘paperless office’ from the 1980s? And promises in the 1990s that the internet would see the end of newspapers, books and whole lot of other things we take for granted? Newspaper readership in Australia is rising, not falling, especially for regional papers – the one’s with local feel and focus. Sydney’s two main daily newspapers increased their circulation by 3% and 5% over the year to mid-2005. Contrary to expectations that we would all be reading the same news online by now, we are still reaching for something we can hold in our hands and which has a local angle.
The way we are using the internet clearly shows an upside and a downside for small businesses.
The upside is the strengthening interest shown by many buyers in trawling wider markets for the products and services that best meet their needs. Why is this a plus for small business? Because a credible, knowledgable and passionate business owner (or an equally passionate staff member) can provide the market knowledge these customers are looking for. After all, they should be the experts in their field.
The openness to wider choice and the parallel hunger for information means that more and more customers are looking for help in making purchasing decisions. The internet is clearly a very important tool in this process, but so is a relationship with an expert.
Implication for small business
A trusted and knowledgable small business can be the knowledge broker in a choice-filled world
But there is also a downside. The risk for the small business is that the internet inquiry will turn into an internet purchase, or that a customer will use the recommendation provided by a small business to then go to the web to find the ‘best price’ for the choice they have made.
Implication for small business
Being a knowledge broker alone will not guarantee sales
The solution to both these implications is for small businesses to keep focus on the strength of the seller-buyer relationship – one that is increasingly based on trust and shared value. With a strong and valued relationship with their best customers, small businesses will be in the best position to benefit from the internet rather than lose from it.