Hanging In There

Despite volatile economy, industrial small businesses still optimistic about e-commerce

New York and Purchase, NY  October 17, 2002  Although the economy remains uncertain, industrial small businesses are turning to the Internet to level the competitive playing field and expand beyond their geographical borders, according to statistics released in Industrial Small Business Outlook, an Internet-based survey conducted by Thomas Regional Directory Co. and MasterCard, which generated responses from 5,000 industrial small businesses nationwide.

The small businesses, such as distributors, manufacturers, service companies and their suppliers, are also citing payment cards (credit, debit and prepaid cards) as an important factor in managing operations and cash flow.

According to the survey, 75 percent of the respondents said they expect their businesses to grow in the coming year, with one out of three respondents expecting significant growth. In addition, the study shows that industrial small businesses are using their resources to reach new markets and increase sales opportunities  including e-commerce  and to more efficiently manage credit and cash flow.

Industrial small businesses are using the Internet for competitive advantage and the opportunity to expand beyond their geographical borders. According to the Industrial Small Business Outlook, 29 percent of respondents sell online, and 40 percent of those are selling more online now than they did last year. More than half of the companies that are selling more online now (53 percent) attribute this growth to their ability to expand into new markets.

The survey said the trends benefit buyers, too, since they allow buyers to meet new suppliers beyond their geographic boundaries. Thus, the trend of online buying is growing with 80 percent of industrial small businesses buying products and services online. Forty-four percent expect to buy more online in the coming year.

"The Internet has proven to be a lifeline for industrial small businesses, allowing them to reach new targeted audiences in a cost-effective manner," said Eileen Markowitz, president of Thomas Regional Directory Co. "As more products and services become available online in the coming year, we expect to see an increase in online activity, not only in sourcing information, but in e-commerce and requests for quotes for custom work."

The Industrial Small Business Outlook also uncovered the use of payment cards (credit, debit and prepaid cards) as an important factor in managing operations and cash flow. The report explained that, historically, industrial suppliers have been slow to embrace payment cards, often relying on conventional reconciliation methods such as purchase orders and paper checks. However, as the economic climate has shifted, the mindset of the seller has also shifted to, "Will I get paid, and how soon?"

"Sixty-five percent of small industrial businesses agree that accepting payment cards simplifies collections, and 63 percent said it improves cash flow," stated Steve Abrams, senior vice president, MasterCard Corporate Payment Solutions.

In addition, 56 percent said payment cards eliminate the need for credit checks for new customers. For specifically online sellers these benefits increase, with 80 percent claiming it simplifies collections, 79 percent saying it improves cash flow and 68 percent stating it eliminates the need for credit checks for new customers.

The survey was conducted via broadcast e-mails that were sent to 93,400 users of the Thomas Regional Directory information products during the summer of 2002. A profile of the respondents revealed that 69 percent are owners or partners in their firms and the companies, on average, have six employees.