For the first time since I started tracking how small businesses leverage the Internet five years ago, I have noticed that a growing number small American retailers are starting to pass on the idea of creating their own ecommerce outlets, believing that the prime time to establish an online brand has passed and the window of opportunity is now closed.
Well, the truth of the matter is that the age of ecommerce is still at its very dawn and the expansion of the online retail market in the future is poised to be faster than anything we have seen before. Let’s examine a few factors to understand why.
1. Less than 20 percent of the world's population is online. While it may seem to us that the Internet has become such part of our lives -- some of us do not even remember how we used to find movie listings, the weather forecast, or our checking account balance before DSL worked its way into our homes and businesses -- most of the world's population is still not connected. According to Internet World Stats, in fact only 17.8 percent of the global adult population makes use of the Internet. Comparatively, in North America, the penetration of the Internet is about 69.5 percent of adults.
3. eCommerce is still representing only about 3 percent of retail volume. According to data from the Census Bureau of the U.S. Department of Commerce, only 3.1 percent of the retail revenue in the United States is generated online. This is growing at a steady pace of about 0.5 percent per year.
2. eCommerce is growing at about 20 percent per year. According to the eMarketer benchmark in 2006, the growth in U.S. ecommerce retail revenue over 2005 was 23 percent. For 2007, this number is forecast to be around 23 percent, based on comScore statistics for the second quarter of 2007.
4. Only 70 percent of Internet users has ever purchased online. According to a Pew Internet in American Life Project report, only about 70 percent of adult Americans currently online have ever made an ecommerce purchase.
Since the United States is a good indicator of what is happening in most of the “connected” world and a likely indicator of what will happen in emerging markets, this data gives us a good outlook at the potential magnitude of the ecommerce footprint worldwide.
What does this all mean though? This data denotes that there is a huge opportunity for serious businesses to succeed selling online, tapping in the about 85 percent of the potential market that is still idle, with absolutely incredible possibilities for many newcomers with the right offerings. It also tells us, though, that ecommerce today needs to be considered strategically, with at least a 10-year outlook, logistically developed for the long term, based on goods that are globally appealing and supported by global reach in marketing and fulfillment.
In order to succeed in capturing some of this potential, a few fundamental paradigm shifts need to occur among small online retailers:
- Appeal to current online buyers, but make things simple and understandable by newcomers. They are the most and there is where the money will be for the next ten years. European and North American consumers have clearly demonstrated that online businesses are valid destinations for all kind of shopping. With the world becoming flatter and flatter every day, the next decade will undoubtedly see the fast growing numbers of new Web users participating a global level in purchasing activities.
- Selling from the U.S. vs. selling to the U.S . The ecommerce growth is global, but the fastest pace of expansion is occurring and will keep occurring in emerging markets. Emerging markets tend to bypass legacy behaviors displayed by mature markets. In the case of ecommerce, this means finding direct access to goods not available in physical retail stores. U.S. entrepreneurs going online must to focus on the needs of the global market and sell from the U.S. rather than to the U.S., developing simple processes allowing for the fulfillment of orders regardless of what country they’re coming from.
- “Niche-bust” Focus on one niche and sell products that nobody else sells. Then, stick to it. Fewer items, all related, all associated with a specialty activity or need are what can mean the difference between success and failure. Maintaining a wide variety of goods and diverse inventory can be very taxing and difficult to sustain for the small retailer. “Niche-busting” can drive high profits, simpler operation, and easier to optimize marketing.
The numbers are quite clear. Even using conservative predictions, there are great opportunities to succeed for well-planned ecommerce sites, allowing any small business to gain access to global markets while requiring very limited start up funds.
Andrea Peiro is president and CEO of the Small Business Technology Institute, a non-profit organization created to foster the adoption of information technologies among small businesses.