NFIB

Sink or Swim: Small Business and E-Commerce
01/ 28/ 2004

Our Feb./March 2004 issue showed readers how e-commerce is growing among the country's smallest companies. Are you ready to move online? Justin Longenecker, professor emeritus at Hankamer School of Business at Baylor University, offers these tips for online success:

1. Why do you think many small businesses resisted e-commerce sites for their own businesses for so long?

No doubt there are many reasons. E-commerce requires skills and know-how that are quite different from those involved in many traditional business operations. Many small business owners feel uncomfortable with the technology involved and have a limited staff to deal with such matters. Also, they may not be fully aware of the potential benefits or uses applicable to their particular businesses. Also, they are reluctant to embark on a course of action that may reequire considerable time and money - both of which are very scarce resources in many small businesses. It's also possible that some small business owners may think that a local business does not benefit by having a Web site to appeal to the community in which it is located. These days, even local customers may do some of their research on the Web.

2. What advantages do small businesses have over large national companies when it comes to setting up shops online?

If a small business serves a niche market, its Web site allows it to develop a relationship with a particular group of customers based on the special interest they share in common. Strong customer relationships is a potential advantage of any small business and a Web site may facilitate communication and selling to a specialized group of customers and in appealing to potential customers. A large corporation's Web site may be less adept at this point. However, I do not see the Web site as a major competitive advantage in competing with large corporations. The Web site does allow many small firms to expand their market reach to areas not otherwise open to them, so perhaps this could be regarded as becoming more competitive.

3. What are some important things to consider before launching an e-commerce site?

In many ways, adding a Web site is much like starting a new business. Therefore, it demands careful planning of the Web site and also the production or ordering and delivery of whatever is being sold. The business must arrange for maintaining inventory. And shipping the product may involve an entirely new process. If sales are made through the Web site, a secure payment process that protects the privacy of the customer is needed. Some of these functions may be outsourced. The new business should be monitored step by step and modifications and adaptations made as needed. Before beginning, the owner should project, as carefully as possible, the costs and added revenue. One small retailer remarked, as the Web site began to produce results, "I must decide whether to devote my time to this Web business or to my regular business." He was experiencing stress he hadn't anticipated.

In most cases, this means getting competent help in designing the Web site and providing for updating and maintenance of that site. Good consulting assistance is quite likely needed by most startups in managing the content of the site and making sure they have adequate resources for the new business.

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