Advancing with E-Commerce

The Australian National Office for the Information Economy (NOIE) commissioned Ernst and Young to examine small business in Australia that had introduced e-commerce into their operations. The purpose of the report was to demonstrate the business benefits of e-commerce and to assist small businesses to undertake their own cost-benefit analysis.

Objectives

For the majority of participants in the case studies (62 per cent) e-commerce was viewed primarily as an opportunity to improve the efficiency of their business operations. For the remaining businesses (38 per cent) the primary opportunity was potentially higher sales to new and existing markets.

Financial investment

The majority of companies (65 per cent) invested less than $15,000 in e-commerce which includes the value of their time (46 per cent of these companies spending less than $5,000). Thirty five per cent of businesses spent more than $15,000.
For all businesses the biggest component of establishing e-commerce was the cost of developing a website (59 per cent). Most businesses outsourced this task to a professional web developer but some constructed their own websites.
The most significant hurdle for businesses was finding the right website developer. In a number of cases businesses were dissatisfied with the work of their first web developer and needed to use a second developer to get the right result.
On average 55 per cent of the gross benefit of e-commerce came from efficiency savings and the remaining 45 per cent from additional revenue.
On average the largest ongoing cost as a proportion of total ongoing costs was website maintenance (54 per cent) although this applied much more to businesses that made a medium or large e-commerce investment than those that made a small investment.
The highest cost for small investors was the value of time spent responding to e-mail correspondence generated by the website.

Revenue & cost savings

Businesses that made small and medium-sized investments in e-commerce saw a higher proportion of their return come from additional revenue while those making a large investment reaped the most benefit from business efficiencies.
Efficiency savings generally came from leveraging electronic communications, using the website as a marketing tool, and using the Internet to conduct financial transactions online. A combination of these efficiencies allowed some businesses to grow without having to employ more staff or to otherwise engage staff in more satisfying and profitable activities.

Non-financial benefits

The key non-financial benefits were improved customer service and improved relationships with other businesses such as suppliers.

Likely future outcomes

Businesses that established an Internet presence as a way of marketing their products and/or services are typically now looking to introduce electronic ordering to their websites to capture more orders from customers that are looking for the convenience of Internet shopping. Some are capturing customer details to improve marketing efforts.
As a logical next step those businesses that have introduced e-commerce may also seek to capture further efficiencies by using e-commerce to better integrate their business processes particularly those processes involving the management of their supply chain.

For introductory information, please see our whitepaper "The Beginner's Guide to E-commerce".