Small Businesses to Spend $70 Billion Online by 2012

While 71 percent of small businesses already buy online, an influx of new businesses will drive further growth.

As the number of small businesses continues to grow over the next five years, they will be spending more money online, new research shows.

In a new report, "U.S. Online Small Business Market Category Forecast, 2007 to 2012," New York-based JupiterResearch projects that total online spending by small businesses will exceed $70 billion by 2012, up from $47 billion in 2006.

According to the report, an increase in the number of small businesses overall, rather than an increase in buyers among existing companies, will drive most of the growth in online spending.

"One of the interesting things we found is that online buyer penetration is maturing," said Sonal Gandhi, a JupiterResearch analyst and lead author of the report. With 71 percent of small businesses now buying online, there is limited potential for growth in the current market.

"You could say that the growth rate in online spending [among existing small businesses] is decreasing gradually," said Gandhi. "Or, to put it more accurately, it is not growing as fast as it has been in the past."

However, Gandhi added, "the number of total businesses is growing and that will contribute new buyers."

The report also says that major retail chains will continue to promote the online channel over others because it provides them with better margins.

In addition, "growing competition among online retailers for small-business spending will put pressure on them to offer promotions and incentives," said Gandhi.

As a result, small businesses are likely to provide online retailers with a greater portion of their business in the future.

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