Forrester: Net may bypass small firms in US

Forrester: Net may bypass small firms in US

The outlook is far from rosy for small and medium-sized merchants in the US that want to take their businesses online, according to a Forrester Research report.

The Forrester forecast predicts a drop in such companies' percentage of online sales from the current figure of barely 9 per cent to 6 per cent by 2003. The single-digit figures reflect an off-balance picture, as small and medium-sized retailers get approximately 50 per cent of all offline retail sales, Forrester said in Tuesday's announcement of the report.

However, even that number is on its way down, according to Charlene Li, Forrester's senior analyst in New Media Research.

"It used to be up around 70 per cent 15 or 20 years ago," she said. "The 'Wal-Marting' of America is definitely happening, and small businesses are losing out to the bigger retailers, which are just continuing to solidify their position offline as well as online."

A number of factors, including technology, brand, financial costs and scale of operations give the bigger national merchants the upper hand on the Net, according to Forrester. The cost of building a full-featured commercial Web site alone, which Forrester estimates is "well over" $US1 million, is enough to keep the majority of smaller American businesses out of the game.

Even offline, the large merchants are offering very real advantages to consumers, Li said, and are "far superior to most local retailers. There are always exceptions, but by and large that's the case. In a large bookstore, you can get coffee, sit in a comfortable chair, lounge for hours -- it's really an experience."

The days of local businesses focusing strictly on retail -- particularly on products like books, music and software, for which online stores are already scoring 20 per cent of sales -- may be numbered, but those offering services will be better off, according to Forrester.

"That's not to be underplayed," Li said. "At some point, you'll want a personal experience, and you can't get that online. There's still an opportunity online for small and medium-sized businesses to drive traffic to their offline stores, and that offers a way for them to differentiate themselves. It is pretty dismal when you look at the numbers, but there is that silver lining in the dark clouds."

Forrester surveyed 20 national and 30 local marketers to gather the information for its report, Local Commerce Goes National. Taken together, the marketers expect their online sales to more than double by 2002: they predict that today's figure, 8 per cent of total revenue, will jump to 17 per cent. They also expect to bump the percentage of their online budgets that they spend on Web advertising (28 per cent) up to 33 per cent during the same period, according to Forrester.

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