eBay for Small Business

The Online Business Index - One Year On

Online businesses weather recession but reveal there’s a long way to go

On the first anniversary of eBay’s Online Business Index, which has tracked the attitudes and performance of up to 700 businesses over the past 12 months, the latest findings reveal that this important sector of the UK economy has fared better than most, although the experience has been far from pain free.

The number of online businesses meeting their sales targets has remained high and relatively stable over the past year with 70% of online firms meeting those targets, only 2% down on last year. Despite this success, it has not been without its difficulties with the number saying they found it hard to do so surging by 11%.

The number of firms expressing fear about the future has also dropped to just 9%, down 6% on this time last year. External economic pressures are easing as well, as the fall in the value of sterling has resulted in a 14% drop in fears about exchange rates. The number of firms struggling with access to finance has halved, as banks finally appear to be lending to SMEs.

Inflation fears ease
The Index also reveals that fears of inflation have eased over the past year, with two-thirds of online firms expecting prices to remain stable, 12% up on last year. The number of firms expecting prices to rise has fallen by 10%, despite inflation rising in the economy overall.

Confidence for the year ahead
With pressures easing, online firms (65%) are confident about the outlook for their businesses over the next three months and 57% of businesses have raised their overall sales targets for the year ahead.

Not over yet
But despite clear signs of resilience, online businesses are still awaiting sustained recovery in the wider economy. According to the Index, concerns about consumer demand remain high at 45%, only 2% down on last year. 55% of respondents also cite that supply costs continue to act as a barrier to growth, up 5% in a year.

Commenting on the findings, Mark Lewis, Managing Director of eBay in the UK, said: “Since its launch a year ago, the Online Business Index has helped us to track how this vital sector of the UK economy has fared throughout the recession.

“While the past 12 months have proved difficult, these online businesses have bucked many economic trends. They have been forced to adapt to succeed, and the flexibility that ecommerce provides means that most have risen to the challenge and emerged stronger and more confident. While these latest findings show that we are not out of the woods yet, online firms have proved their ability to prosper despite tough conditions.”

The recession has proved positive for many online businesses. Businessman Andrew Rowson took over his high street family business selling towbars, cycle carriers and roof bars in 2003 and recognised the opportunity to develop an online presence. He commented: “As more people embarked on caravanning holidays in the UK during the recession, I saw my turnover rise to £2million, up from £1.2million a year ago.”

However, the recession has made selling more difficult for some. Chris Dawson decided to start trading professionally on eBay when he was made redundant six years ago. He has since run a successful business through the site, selling computer equipment, laptops and memory cards. Chris said: “I’ve had a tough recession, as supply dried up with large companies not updating their IT infrastructure and not buying new or liquidated stock. However running an online business allowed me to adapt, by sourcing a different type of product and finding a new revenue stream.”

Notes to Editors:

Methodology for Online Business Index - The Online Business Index is eBay’s regular barometer tracking the performance of companies trading on the internet, mapping the attitudes of hundreds of online firms. - The survey was conducted by independent research consultancy FreshMinds, using seller information provided by eBay. Survey fieldwork was carried out online between 8 January and 25 January 2010. 705 businesses responded to the latest survey - Previous surveys were conducted in January, April and September 2009 - On average, the businesses covered obtained 61% of their income from eBay, 13% from their own website, 7% from Amazon. While 15% of their income came from their own bricks and mortar businesses - All survey respondents are registered as businesses on the eBay site and have an annual turnover of at least £50,000 on eBay alone, excluding other sources of income. The largest group of respondents (41%) were businesses with a turnover between £100,000 and £199,000. - All figures in this report have been rounded to the nearest percentage point. As a result, figures may not always add up to 100%.