Confident online businesses set for expansion in 2009
Online businesses are an increasingly important part of the economy – Mandelson
A large majority (64%) of online businesses are confident about the future and more than three-quarters are planning to expand their businesses during 2009, according to eBay’s new Online Business Index.
The Index shines a light on an increasingly successful part of the British economy, compiled from data and survey responses from hundreds of small and medium-sized online retail businesses, collectively turning over an estimated £785 million in 2008 alone. The Index reveals that:
- 64% of online businesses feel confident about theimmediate business outlook, according to survey findings, with only 15% expressing pessimism.
- The turnover of online businesses grew even faster in 2008 than it did a year previously, eBay data reveals – growth in the last quarter of 2008 stood at an average of 28.6%, up from 23.4% in the last quarter of 2007.
- 78% plan to expand or diversify their businesses according to the survey, with only 22% saying they have no such plans this year.
- More than half of those surveyed – 54% – expect rising sales, with a further 30% expecting sales to remain stable.
- Exports by online businesses are surging, with eBay data demonstrating a 128% increase in the last year alone.
The Index also reveals that online businesses are realistic about the challenges they face as a result of the economic downturn. While half of online businesses surveyed still expect revenue to grow this year, one in four have set lower revenue targets. And with many sourcing supplies from outside the United Kingdom, 51% believe that exchange rates will be a constraint on the growth of their business over the next 12 months, while 50% mentioned the cost of supplies as a limit on growth. Consumer demand is also a concern, with 48% thinking it is likely to constrain growth.
Exchange rates represent an opportunity as well as a challenge, however. Although 68% of those surveyed say that it has pushed up the cost of supplies, 44% also say that it has boosted sales to other countries – underlining how the internet is enabling entrepreneurial businesses to reach new markets.
eBay is not the only trading platform employed by businesses included in the Index – on average, the online businesses covered by the survey obtain 56% of their revenue through eBay, 22% through other sites and 23% through bricks-and-mortar outlets. The businesses included in the Index generated an estimated turnover of £785 million in 2008 – more than half of it generated online. These figures demonstrate how thousands of traditional businesses are seizing the opportunity for growth by expanding online.
Welcoming the launch of the Index, Business Secretary Lord Mandelson said: “Britain’s entrepreneurs and small businesses are the lifeblood of our economy. It is encouraging to see so many online businesses planning for expansion. As this survey shows, although all small businesses are facing a tough economic climate, many are embracing the Internet as a means of reaching new export markets. With e-commerce representing an increasingly important part of the British economy, it is therefore vital that we continue to invest in next generation broadband as part of our Digital Britain agenda and to support our small businesses through these difficult times.”
Commenting on the findings of the report, Mark Lewis, Country Manager for eBay in the UK said: “This group of online businesses is bucking almost every trend in terms of retail performance and confidence, yet their story is sometimes lost in the doom and gloom reported on the UK economy.
“These businesses are succeeding because they can make rapid decisions, price competitively and adapt quickly to meet changing consumer demand.
“The internet is demolishing barriers to trade and is bringing extra cash into the UK economy. It is essential online businesses continue to enjoy the freedom to build on these opportunities.”
David Dinsdale, Director at businesslink.gov.uk added: “The internet has become a powerful tool for businesses to strengthen themselves during the economic downturn. A website is a simple and cost effective way for businesses to reach a wider market. It is excellent news that so many online businesses are feeling confident in the current economic climate. However, for businesses that have concerns about the economic situation, Business Link offers a wealth of guidance, support and interactive tools to enable them to develop and maintain a successful online business.”
One online businessman who is confident about the future is Liverpool-based Mark Radcliffe, who sells electronic accessories through the internet. In 2008 alone he turned over £5 million and employs 22 full-time staff, with plans to hire more this year.
Radcliffe added: “In just three years, I’ve established a business that sells 40,000 items a month – a business that continues to grow, despite the tough trading environment we’re seeing. Key to my success has been flexibility, both in terms of stock and pricing and of course, by offering great customer service. There can be no greater expression of the confidence I have than my plans this year to increase my workforce and increase the size of my warehouse.”
The Online Business Index is a major new quarterly survey of companies trading on the internet. The Index has been compiled using survey responses from 410 of eBay’s top sellers, each of which is registered as a business, has an annual turnover of more than £139,000 and employs an average of 7 people. The Index also employs sales data from the top 1000 sellers on eBay, whose turnover in 2008 amounted to an estimated £785 million. Methodology for Online Business Index: -> The Online Business Index was compiled from sales data from eBay’s top 1,000 business sellers, and survey responses from 410 of the top 2,000 business sellers on the site. -> Survey questions covered business activity through both other websites and bricks-and-mortar outlets as well as eBay. Due to the availability of data, the portion of the Index covering sales data relates to sales on eBay only. -> Survey fieldwork was carried out by independent research consultancy FreshMinds through an online survey which ran between Friday 6 February and Monday 2 March. -> All those covered by the Index are registered as businesses on the eBay site and have annual turnover of between £139,000 and £7.1 million. -> The average turnover of the Top 1000 sellers on eBay was £440,000 in 2008, while the median turnover was £347,000.