As online retail bucks the economic trend, why are so many small businesses still without a transactional site? Michael Norton, Managing Director, PayPoint.net takes a closer look…
In what has been dubbed the “digital age”, today’s consumers expect to be able to find everything they need online, and, more and more frequently, they want to be able to make payments online for products and services. So why is it that 69% of entrepreneurs have not yet made the move to e-commerce despite it being an extremely lucrative channel to market? It seems that fear of the unknown is a contributing factor in the hesitance to set up online payment facilities; there is an underlying assumption amongst smaller and inexperienced businesses that online sales is an area of the market that is ‘out of their league’.
From my experience, the way to make your business successful is to move it forward and constantly look for ways to develop your capabilities. Never assume that you do not have the ability to try something new; with this negative attitude, your business will not grow.
With all this in mind, it is important that entrepreneurs do not miss out on the opportunity to increase revenue through online sales. With an online presence the advantages are many, but as with all ambitions, there are some hurdles to overcome
The most obvious benefit to trading online is that it gives you greater reach to customers and drives sales. In PayPoint.net’s recent report, Powering Small Business Britain, 59% of the over 800 entrepreneurs surveyed identified this aspect as the biggest pull to e-commerce. Consumers look to buy everything online, from their groceries and taxi bookings, to their insurance. The internet is limitless in terms of it’s capacity to reach these customers: in the UK, 16.5 million homes have broadband which amounts to 63% of the population (Office for National Statistics, Statistical Bulletin, Internet Access Households and Individuals, 2009). Simply put, if you do not offer online sales, you are missing out on a huge chunk of the market.
Leading on from this of course, is the opportunity to “go international” through online sales. Whether you’re based in the UK or Timbuktu, through the internet you can sell your product all over the world. For example, Firebox.com, a successful UK online gift retailer who selected PayPoint.net to process their online payments, began with a very British market base, but found that as their business grew, international barriers were slowly broken down. They now have a base in the US and hope to crack the European market before too long. Whilst increased international development moves business forward, it also means a greater need for robust fraud solutions, the ability to offer purchases in a number of currencies and comprehensive 24/7 payment processing; all of which they have been able to achieve with ease using innovative payment technology.
But it is not just market share that increases through e-commerce. Consider the savings you can make if the majority of your sales activity takes place online.
Another PayPoint.net merchant, Urban Industry (a popular street and urban clothing retailer) started life in a shop in Eastbourne before deciding to move operations into a warehouse and do the majority of their trading online. Their new online presence meant they significantly cut down on costs of storage, rent, staff overheads and transportation of goods. They have also tried their hand at social media engagement and direct marketing, both of which lend themselves to a strong online presence.
Clearly there are many advantages to e-commerce and this is recognised by small businesses in Britain; the issue, is that entrepreneurs want to go online, but feel that this is not possible for various reasons, such as cost, fraud, or simply apprehension. So, how do attitudes need to change for this process to appear more accessible to SMEs?
It is important to prioritise where your business needs to invest its money and focus its energy. Deferring or cancelling less promising initiatives that might have been pursued allows a business to survive and eventually thrive again. Those companies most likely to prosper in the current economic climate are those giving attention and resources only to the projects that are most likely to generate near-term profits, and they end up deciding quickly which initiatives fit best with the company’s core business.
The downside of this rigorous prioritisation, however, is that it halts many potentially promising projects at an early point in their development and leaves them stranded inside the company – such as adoption of e-commerce. Over time, so many projects get abandoned that the company’s ability to grow beyond its core business is threatened. If focus is maintained for too long or with too much rigidity, it can become the enemy of growth. When the market recovers, the company lacks a foundation from which to recover. Ensure you calculate risks and find a good balance, so that you don’t miss out on the long-term agenda.
In our survey of 800 small businesses in the UK the managers and owners cited the complicated processes, expense and the investment required in developing staff inside the organisation as the barriers to e-commerce. It is, therefore, logical to recommend that small businesses in Britain look for open innovation with high quality partners to solve their online payment issues; tackle the problem together. By building a partnership and investing in it over a period of time the supplier will develop with your business to continue to deliver growth and progress.
Small businesses need to innovate in order to stay ahead of the pack, and one way to do this is to choose an online payment system that will help retain current customers, draw in customers from new markets and help build a strong online presence. The pre-conception that e-commerce is costly and cumbersome must be changed into a common understanding that is cost-effective, stream-lined and absolutely essential to entrepreneurial success.
By Michael Norton