WASHINGTON, D.C.— Electronic commerce—the marketing, promotion, buying, and selling of goods and services electronically, particularly via the Internet—is experiencing unprecedented growth, according to a report recently released by the Office of Advocacy. E-Commerce: Small Businesses Venture Online uses existing research and provides an overview of small businesses’ use of e-commerce and identifies a number of issues in the expansion to e-commerce.

As many as 35 percent of small businesses maintain their own Web site. While e-commerce is used for customer identification, advertising, consumer sales, business-to-business transactions, and some business-to-consumer point of sale transactions, small firms encounter several barriers to e-commerce. Barriers include initial startup costs, difficulty attracting and keeping technologically-skilled personnel to service the site and customers, security of a small business’s (or its customers’) data, and consumer trust.

"The use of e-commerce opens a universe of new venues for small businesses and consumers to exchange information, goods, and services," said the SBA’s Chief Counsel for Advocacy Jere W. Glover. "Consumers are on the Internet because of the price and choice available to them there. Small businesses built Main Street, and they will likely lead the way in the future to a virtual market square."

Seventy-eight percent of small business owners with a Web site declared the ability to reach new and potential customers as their main reason for having one. Businesses are more likely to be online to identify customers and promote product and services before the point of sale. How use of the Internet helps small firms is unclear, but research shows that small businesses that utilize the Web have higher annual revenues, averaging $3.79 million in 1998, compared with $2.72 million for all small businesses.

Online sales currently account for less than 1 percent of total retail sales in the U.S.; however, online retail marketing is experiencing about 200 percent annual growth, with online traffic doubling every 100 days. Small businesses earned $3.5 billion in e-commerce sales in 1997, and projections for online sales for the beginning of the next decade range widely — from $25 billion to over $300 billion — depending on the source.

E-Commerce: Small Businesses Venture Online is available on the Office of Advocacy’s Web site at www.sba.gov/advo/stats/e_comm.pdf. For technical questions about the report, contact Victoria Williams in Advocacy’s Office of Economic Research at (202) 205-6530.

The SBA’s Office of Advocacy was created by an act of Congress in 1976 to protect, strengthen and effectively represent the nation’s small businesses within the federal government. As part of this mandate, the office conducts policy studies and economic research on issues of concern to small business and publishes data on small business characteristics and contributions. For instant access to small business resources, statistics and research visit the Office of Advocacy’s home page at http://www.sba.gov/ADVO/.