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The SES Web Entrepreneurship SurveyFall 2000
A Profile of Canadian Small Businessesand Electronic
Commerce
Industry Canada Electronic Site License
SES Canada Research Inc.Toronto, Canada
www.sesresearch.comwww.sesresearch.comwww.sesresearch.comwww.sesresearch.com
http://www.sesresearch.com
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The SES Web Entrepreneurship Survey SES CANADA RESEARCH INC.
Industry Canada Site License - Fall 20001
December 2000
Dear Reader,
For over a decade, SES has provided strategic research,
executive counsel andinnovative solutions to Canadas leading
decision-makers. As part of itspractice of tracking public opinion
and business trends, the firm launched theSES Web Entrepreneurship
Survey in the Spring of 1999.
We believe that having timely and accurate data on emerging
on-line businesstrends is critical to corporate and government
decision-makers involved in theInternet. Conducted every six
months, the SES Web Entrepreneurship Surveyidentifies opportunities
and assists subscribers in understanding theperceptions of small
businesses as they relate to the commercialization of
theInternet.
With a final sample target of 1,000 small businesses, the SES
WebEntrepreneurship Survey is one of Canadas most significant
researchbenchmarks on small businesses and the Internet.
Nikita James Nanos Bruce KirbyManaging Director Senior
Consultant
SES Canada Research Inc.,401-250 Consumers Road,Toronto,
CANADAM2J 4V6tel 416.821.3160fax 416.821.3052
http://www.sesresearch.comhttp://www.sesresearch.comhttp://www.sesresearch.com
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Industry Canada Site License - Fall 20002
1.0 EXECUTIVE
SUMMARY.................................................................................................................
41.1 WHO ARE THE INTERNET
USERS?......................................................................................................
51.2 WHAT IMPACT WILL THE INTERNET HAVE ON BUSINESS?
................................................................
51.3 HOW BIG IS THE SMALL BUSINESS E-COMMERCE
MARKET?.............................................................
61.4 WHAT ARE SMALL BUSINESSES DOING ON THE INTERNET?
.............................................................. 71.5
WHAT'S
NEXT?..................................................................................................................................
81.6 KEY FINDINGS FALL 2000
SURVEY................................................................................................
81.7 KEY FINDINGS SIX MONTH
TRENDS...............................................................................................
9
2.0 MARKET
OVERVIEW...................................................................................................................
102.1 DECISION-MAKER PROFILE
.............................................................................................................
112.2 BUYING AND SELLING USING THE INTERNET
..................................................................................
112.3 SIZE AND SCOPE OF ELECTRONIC COMMERCE
ACTIVITIES..............................................................
192.4 SIZE OF THE SMALL BUSINESS E-COMMERCE MARKET
...................................................................
222.5 INTERNET
CONSULTANTS................................................................................................................
22
3.0 ATTITUDES TOWARD ELECTRONIC COMMERCE
........................................................... 243.1
IMPORTANCE OF
INTERNET..............................................................................................................
243.2 IMPACT ON BUSINESS
......................................................................................................................
283.3 BENEFITS &
BARRIERS....................................................................................................................
33
4.0 E-BUSINESS
ACTIVITIES............................................................................................................
364.1 COMMUNICATIONS AND INFORMATION
...........................................................................................
364.2 ELECTRONIC COMMERCE
TRANSACTIONS.......................................................................................
393.8 BANKING AND
PAYMENTS...............................................................................................................
413.9 SUMMARY OF ACTIVITIES
...............................................................................................................
43
5.0 CONCLUSION
................................................................................................................................
44
6.0 DEMOGRAPHIC
TABLES............................................................................................................
45
7.0 INTERNET & E-COMMERCE
ACTIVITIES.............................................................................
54
8.0 SURVEY METHODOLOGY
.........................................................................................................
748.1 SAMPLE SELECTION
........................................................................................................................
748.2 CONFIDENCE LIMITS
.......................................................................................................................
758.3 FIELD
PROCEDURES.........................................................................................................................
768.4 TRAINING
........................................................................................................................................
768.5
VALIDATION....................................................................................................................................
778.6 CODING
........................................................................................................................................
78
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TABLE OF CONTENTS
http://www.sesresearch.com
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The SES Web Entrepreneurship Survey SES CANADA RESEARCH INC.
Industry Canada Site License - Fall 20003
LIST OF TABLES
TABLE 1 SCOPE OF INTERNET IMPACT ON BUSINESS
.............................................................
45TABLE 2 TYPE OF INTERNET IMPACT ON BUSINESS.46TABLE 3 PAST
E-COMMERCE ACTIVITY
.....................................................................................
47TABLE 4 FUTURE E-COMMERCE
ACTIVITY................................................................................
48TABLE 5 OUTSIDE CONSULTANT USE
.........................................................................................
49TABLE 6 CURRENT INTERNET
USE...............................................................................................
50TABLE 7 INTERNET AND BUSINESS
SURVIVAL.........................................................................
51TABLE 8 INTERNET AND NEW BUSINESS
OPPORTUNITIES....................................................
52TABLE 9 INTERNET AND PROFITABILITY THREAT
..................................................................
53TABLE 10
E-MAIL.................................................................................................................................
54TABLE 11 WEBSITE FOR EXTERNAL
COMMUNICATIONS.........................................................
55TABLE 12 WEBSITE FOR INTERNAL
COMMUNICATIONS..........................................................
56TABLE 13 CONDUCTING BUSINESS
RESEARCH...........................................................................
57TABLE 14 SELLING YOUR GOODS AND/OR SERVICES
...............................................................
58TABLE 15 MAKING TRAVEL
ARRANGEMENTS............................................................................
59TABLE 16 PURCHASING COMPUTER EQUIPMENT AND
SOFTWARE....................................... 60TABLE 17
PURCHASING OFFICE
SUPPLIES....................................................................................
61TABLE 18 FINDING A NEW SUPPLIER FOR
GOODS......................................................................
62TABLE 19 FINDING A CONSULTANT FOR SERVICES
..................................................................
63TABLE 20 SENDING ELECTRONIC INVOICES TO
CUSTOMERS................................................. 64TABLE
21 RECEIVING ELECTRONIC BILLS FROM
SUPPLIERS.................................................. 65TABLE
22 ELECTRONICALLY PAYING BILLS THROUGH YOUR BANK
.................................. 66TABLE 23 PROVIDING CREDIT CARD
INFORMATION FOR PURCHASES................................ 67TABLE
24 ELECTRONICALLY RECEIVING PAYMENTS
..............................................................
68TABLE 25 TRACKING BANK ACCOUNT
BALANCE......................................................................
69TABLE 26 SUBMITTING A BANK LOAN
APPLICATION...............................................................
70TABLE 27 SUBMITTING TAX RETURNS TO THE
GOVERNMENT.............................................. 71TABLE 28
REMITTING TAXES TO THE GOVERNMENT
...............................................................
72TABLE 29 ACCESSING GOVERNMENT
SERVICES........................................................................
73
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The SES Web Entrepreneurship Survey SES CANADA RESEARCH INC.
Industry Canada Site License - Fall 20004
1.0 EXECUTIVE SUMMARY
For Canadian entrepreneurs, some of the thrill of the Internet
is gone. Sixmonths ago at the height of the tech stock boom
expectations for theInternet and e-commerce were at an all-time
high.
The views expressed in the Fall 2000 SES Web Entrepreneurship
Survey are notquite the same. After a year of steady growth in the
number of Canadian smallbusinesses engaged in electronic commerce
(from Spring 1999 to Spring 2000),the last six months have actually
produced a marginal decline from 41%engaged in electronic commerce
transactions last Spring to 40% this Fall.Similarly, Canadian
entrepreneurs are now more skeptical about theimportance of the
Internet and its benefits than they were earlier.
The survey, conducted by SES Canada Research, interviewed a
randomlyselected national sample of 1,000 Canadian decision-makers
from businesseswith 50 or fewer employees. Interviews were
administered to individuals atthe small business who were
responsible for decisions related to the Internet.This survey
report is part of a longitudinal study of Internet trends
trackedevery six months.
While there has been no recent growth in the number of small
businesses usingthe Internet to buy or sell goods, there has been a
jump in the amount boughtand sold. In addition, while the total
number of Internet users has remainedflat, the extent to which the
current Internet users take advantage of the newcommunications
medium has broadened significantly.
The result has been an increasing polarization between those who
are using theInternet and those who are not. The small businesses
not currently using theInternet are more skeptical about its
effects and the benefits it can bring to theirbusiness. Skepticism
does not reflect a negative concern about e-commerce or afear that
it will harm their business. Instead, Internet non-users
simplyperceive the Internet as irrelevant to their day-to-day
operations.
Internet users have also grown more questioning of the Internets
impact andits ability to transform their business. However, the
tempering of their viewshas not prevented them from finding new
ways to incorporate the Internet intoall aspects of their
business.
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Industry Canada Site License - Fall 20005
There is no question that last Spring represented the peak of a
wave of hopeand anticipation regarding the Internet and e-commerce.
In its wake,expectations are more modest and growth is slower, but
for those using theInternet it continues to become a deeper, richer
experience.
1.1 Who are the Internet Users?
The number of Canadian small businesses using the Internet has
not changedsignificantly, considering the margin of accuracy for
the research, since the Fallof 1999. (Fall 1999 74.1%, Spring 2000
73.5%, Fall 2000 76.5%).
The profile of small business Internet users has remained
consistent in thecurrent SES Web Entrepreneurship Survey. The two
factors most closelycorrelated with Internet adoption continue to
be the size of the business and theage of the key decision-maker.
Businesses with the most employees are thosemost likely to use the
Internet. Almost nine out of every ten (88%) of smallbusinesses
with 25 to 49 employees report using the Internet. Similarly,
thelikelihood that a small business will be using the Internet
declines as the age ofthe key decision-maker increases.
Although the gap is relatively small, male entrepreneurs (78%)
haveconsistently been more likely to use the Internet than female
entrepreneurs(75%). This difference increases significantly when
the depth of usage isanalyzed. For example, 50% of male small
business decision-makers are usingthe Internet for e-commerce
compared to 31% of women.
1.2 What Impact Will the Internet Have on Business?
Canadian entrepreneurs remain enthusiastic about the potential
offered by theInternet and e-commerce, although some views have
tempered over the pastyear. The vast majority of small businesses
believe the Internet will have somesignificant effect on their
business, with 40% saying that impact will be major.
While still high, the number of small business decision-makers
who believe theInternet will have a major impact on their business
is significantly below what
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The SES Web Entrepreneurship Survey SES CANADA RESEARCH INC.
Industry Canada Site License - Fall 20006
it was last Spring. This is particularly significant among those
using theInternet today. Six months ago, 57% of Internet users
believed it would have amajor impact on their business. Now, only
46% do.
At the same time, some of the optimism about the Internet has
waned. Amongall Canadian small businesses, 78% believe it will have
a positive impact. Whilea large number, it is the first time in the
history of the SES Web EntrepreneurshipSurvey that the positive
response has fallen below 80%.
Some of this shift in attitudes is likely linked to the changes
that have takenplace in the media and the external environment.
When the stock market andparticularly Internet stocks were booming,
the optimism tends to be reflectedin media stories describing the
boundless possibilities of electronic commerce.When the markets
reversed, so did the coverage, and a growing skepticismcrept into
the views of entrepreneurs.
1.3 How Big is the Small Business E-commerce Market?
While the number of businesses engaging in electronic commerce
has notincreased, the scale of their e-commerce activity has grown
significantly. Thiscontinues to reflect the fact that new
e-commerce entrants tend to begincautiously and build business over
time.
From Fall 1999 to Spring 2000, the number of e-commerce
participants grew,but the average level of activity declined. From
Spring 2000 to Fall 2000, thenumber of small businesses engaged in
e-commerce remained flat, but theaverage level of activity increase
markedly
Last Spring, the average small business had purchased $1,300 in
good andservices over the previous year. This Fall, that average
had increased to $2,500.Overall, SES has estimated that the last
year has seen Canadian smallbusinesses spend $720 million buying
goods and services. This represents amarginal decline from Fall
1999.
For small businesses selling over the Internet, the average
value of the pastyears sales was $2,600 (down from $3,700) last
Fall. However, the growth inthe number of businesses participating
in e-commerce sales has produced anoverall growth in the market
from $240 million to $350 million.
Increasingly, small businesses in Canada are migrating from
beingpredominantly an e-commerce market for other businesses to
target offering
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The SES Web Entrepreneurship Survey SES CANADA RESEARCH INC.
Industry Canada Site License - Fall 20007
their goods and services via the Internet. In addition, those
transactions bothbuying and selling are becoming more focused on
dealing with otherCanadians, both businesses and consumers.
An important question for future study will be whether the
average value oftransaction increases in the future. As existing
e-commerce participants becomemore comfortable with the Internet as
a transaction medium and as moreopportunities exist to expand
business by exchanging invoices and paymentselectronically the
overall volume of business should increase. Given theincreasing
intensity of other Internet activities, the e-commerce market
willlikely reflect the same behaviour.
1.4 What are Small Businesses Doing on the Internet?
As described above, the overriding trend that appears in the
Fall 2000 survey isthe increasing intensity of small business
Internet use. While the overallnumber of Internet users has
remained flat, the number engaging in virtuallyevery Internet
activity studied has increased.
This has been particularly significant for activities where
entrepreneurs areusing the Internet to communicate or gain
information. E-mail continues to bethe dominant Internet activity
with almost 97% of Internet users saying theyused it. More than
half also use the Internet to conduct research, accessgovernment
services, and access their bank accounts. An area of
substantialgrowth has been the number of small business Internet
users who have decidedto establish their own website to communicate
with customers and suppliers.This has jumped from 59% to 67% over
the past six months.
However these are not the only activities which are being
adopted by Canadiansmall business. While not as widely adopted, the
percentage of businessesengaging in a wide variety of e-commerce
and financial transactions continuesto grow. One of the fastest
growing activities is using the Internet to access abank account.
In 18 months, the percentage of Internet users engaging in
webbanking has grown from 25% to 51%.
The growth in both use of Internet-based government services and
Internet-based banking reflects the role of supply in adoption of
new technology. Asthere have been more opportunities presented for
small business to engage in aparticular activity, the numbers doing
so have increased significantly. Some of
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The SES Web Entrepreneurship Survey SES CANADA RESEARCH INC.
Industry Canada Site License - Fall 20008
the more complex activities such as remitting taxes or applying
for a bankloan for which there are limited opportunities available,
continue to producethe lowest levels of adoption and have not
reflected the growth pattern of otheractivities.
1.5 What's Next?
The rush of hype and excitement surrounding the Internet has
gone, and in itswake the rate of adoption of the Internet and
e-commerce by Canadian smallbusinesses has slowed down.
However, there is no evidence that Canadian entrepreneurs are
abandoningeither the Internet or e-commerce. In fact, in a variety
of ways, those currentlyusing the Internet are finding new and
valuable ways to move their businessinto the on-line world. As the
Internet increasingly becomes integrated into allaspects of the
operations of small businesses, it will grow increasingly vital
totheir success and future.
More than anything else, the continued positive experience of
Canadian smalle-businesses will ultimately persuade the laggards of
the value and benefits ofthe Internet and the opportunities
presented by electronic commerce.
1.6 Key Findings Fall 2000 Survey
! 76% of all small businesses in Canada currently use the
Internet.! 40% of all small business decision-makers have bought or
sold
something over the Internet during the past twelve months.! 44%
of small businesses have plans to buy or sell over the Internet
during the next year.! The average amount purchased by Canadian
small businesses over
the Internet was $2,500.! The average amount sold by Canadian
small businesses was $7,600.! The Canadian small business market
for Internet e-commerce
purchases was $720 million over the past year.! Canadian
entrepreneurs have sold approximately $590 million
during the past twelve months.
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Industry Canada Site License - Fall 20009
1.7 Key Findings Six Month Trends
! Perceptions of the significance of the Internet have declined
as thenumber of entrepreneurs who believe it will have a major
impacton their business declined from 48% to 40%.
! The shift in perceived importance was greatest among
smallbusinesses currently using the Internet, where those
describing it ashaving a major impact declined from 57% to 46%.
! Internet security continues to grow as a concern for Canadian
smallbusiness decision-makers as 25% of those not currently using
theInternet cited it as a barrier, up from 16%.
! Despite security concerns, the percentage of small
businesseswilling to provide credit card information over the
Internet hasgrown from 19% to 25% in the past six months.
! International e-commerce transactions are increasingly focused
onbilateral trade with the U.S. as 93% now say it is their
primarytrading partner, an increase of 11% since last Spring.
! The scale of e-commerce activity has grown significantly, with
theaverage purchase total for small businesses increasing from
$1,300to $2,500. The total small business market grew 75%.
! The magnitude of e-commerce sales by small businesses also
grew,with average sales increasing from $2,600 to $7,600,
representing a68% jump in the total Canadian market.
! E-commerce is increasingly being used for basic
businesstransactions by all Canadian small businesses:
! those using the Internet to book travel increased from29% to
37%;
! those using the Internet to purchase computer hardwareand
software increased from 21% to 28%; and,
! those using the Internet to purchase office suppliesincreased
from 14% to 24%.
! Bank-mediated financial transactions have also been
growingrapidly. Among all Canadian small businesses, the
percentageusing the Internet to check their bank accounts has grown
from29% to 39%and, and pay bills has grown from 22% to 29%
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The SES Web Entrepreneurship Survey SES CANADA RESEARCH INC.
Industry Canada Site License - Fall 200010
2.0 MARKET OVERVIEW
The Internet bubble has burst. The collapse of most dot com
stocks over thelast six months has been reflected in a renewed
skepticism among Canadiansmall business decision-makers regarding
the Internet and e-commerce.
This change in views is apparent in the responses to the Fall
2000 SES WebEntrepreneurship Survey. After a year of steady growth
in the number ofCanadian small businesses engaged in electronic
commerce, the 40% whoreport having done so this Fall is actually a
slight decline from the 41% lastSpring. Similarly, Canadian
entrepreneurs in Fall 2000 are more skepticalabout the importance
of the Internet and its benefits than they were in Spring2000.
However, the end of the hype does not mean the end of the
Internet nor theend of e-commerce. While there has been no recent
growth in the number ofsmall businesses using the Internet to buy
or sell goods, there has been a jumpin the amount of goods and
services bought and sold. In addition, while thetotal number of
Internet users has remained flat, the extent to which
currentInternet users take advantage of the new communications
medium hasbroadened significantly.
The result has been an increasing polarization between those who
are using theInternet and those who are not. The small businesses
not currently using theInternet are more skeptical about its
effects and the benefits it can bring to theirbusiness. However,
this skepticism does not reflect a negative concern about
e-commerce or a fear that it will harm their business. Instead,
Internet non-userssimply perceive the Internet as irrelevant to
their day-to-day operations.
Small businesses using the Internet have also grown more
questioning of theInternets impact and its ability to transform
their business. This tempering ofviews has not prevented them from
finding new ways to incorporate theInternet into all aspects of
their business.
There is no question that last Spring represented the peak of a
wave of hopeand anticipation regarding the Internet and e-commerce.
In its wake,expectations are more modest and growth is slower, but
for those using theInternet it continues to become a deeper, richer
experience.
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The SES Web Entrepreneurship Survey SES CANADA RESEARCH INC.
Industry Canada Site License - Fall 200011
2.1 Decision-maker Profile
For the past 12 months, the number of Internet users has
remained essentiallyflat considering the margin of accuracy for the
research (Fall 1999 74.1%, Spring2000 73.5%, Fall 2000 76.5%).
However, as we will describe below, the mannerin which those small
business Internet users are using the Internet has
changedsignificantly.
The profile of small business Internet users has remained
remarkably consistentacross multiple waves of the SES Web
Entrepreneurship Survey. The onlydemographic qualities closely
related to Internet usage are the size of thebusiness and the age
of the principal decision-maker.
Larger businesses are more likely to have adopted the Internet
than smallerones. While almost 9 in 10 (88%) businesses with 25 to
49 employees arecurrently using the Internet, only 59% of those
with less than 5 employees aredoing so.
Similarly, small business decision makers between the ages of 18
and 29 aremuch more likely to use the Internet than those led by
individuals over the ageof 50. Of the younger group, 85% are using
the Internet for their business,compared to only 62% of the oldest
group.
Much less significant, but consistent over time has been a small
difference inInternet use tied to gender and region. Men continue
to use the Internet at arate slightly higher than women (78% vs.
75%), although women slightlyoutnumber men in the total sample.
Similarly, businesses based in WesternCanada are slightly more
likely to be using the Internet while those in Quebecare slightly
less likely to do so. (Ontario and Atlantic Canada have
consistentlybeen very similar and fall between the other two
regions.)
2.2 Buying and Selling Using the Internet
While three-quarters of Canadian small businesses have been
using the Internetfor the past year, many have not taken full
advantage of all the capabilities andservices it has to offer. The
Internet is used for a variety of activities,
includingcommunications, information gathering, electronic commerce
and banking.Entrepreneurs tend to progressively incorporate the
Internet into their day-to-
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The SES Web Entrepreneurship Survey SES CANADA RESEARCH INC.
Industry Canada Site License - Fall 200012
day business over time by gradually expanding the scope of
activities in whichthey engage.
During the past 12 months, 40% of Canadian small business
decision-makerssurveyed have used the Internet either to buy or to
sell goods and services. Thistotal is a marginal decline from the
41% who reported engaging in e-commerceduring the Spring 2000 SES
Web Entrepreneurship Survey. After steady growthover the previous
year, the 2000 results indicate a temporary stalling of e-commerce
growth among Canadian small businesses. Additional responsesimply
that future growth will occur, but at a slower pace than in the
past.
The last three waves of the SES Web Entrepreneurship Survey have
shown agradual flattening of the rate of Internet and e-commerce
adoption amongsmall businesses. From the Spring to the Fall of
1999, both the number ofInternet users and the number engaged in
e-commerce activities increasedsignificantly. Over the next six
months, to the Spring of 2000, the percentage ofInternet user
remained flat, but those engaged in e-commerce continued togrow.
Over the past six month, both Internet usage and e-commerce
haveremained flat.
Past E-Commerce ActivityHave you bought or sold goods or
services using the Internet
in the past twelve months?
No59%Busines Only
16%
Both Business and personal
15%
Personal Only10%
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Naturally, almost all of the small business decision-makers who
have engagedin e-commerce are those using the Internet for their
business. However, a smallpercentage (9%) of those not using the
Internet for business have engaged in e-commerce for personal
purposes. A negligible number (
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Industry Canada Site License - Fall 200014
The differences between men and women as Internet users are
reflected evenmore strongly in their e-commerce activities, and
have actually increased overthe past six months. Small businesses
led by men are significantly more likelyto have engaged in
electronic commerce than those led by women (50% of menversus 31%
of women). This gap has increased significantly over the past
yearbecause men have continued to adopt e-commerce in increasing
numbers,while women have not. (see Chart Comparison of E-commerce
Activities byGender, next page).
Comparison of Past E-commerce ActivityHave you bought or sold
anything using the Internet for either personal
or business use in the past twelve months?
19%
10%
18%
10%
12%
12%
0% 5% 10% 15% 20%
Both business andpersonal
Personal only
Business only
Male Female
Comparison of Past E-commerce Activity: Fall 1999 and Spring
2000
Have you bought or sold anything using the Internet for either
personalor business use in the past twelve months?
50%
47%
40%
31%
34%
31%
0% 10% 20% 30% 40% 50% 60%
Fall 2000
Spring 2000
Fall 1999
Male Female
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The number of small businesses engaged in actively buying or
selling throughthe Internet will likely continue to increase over
the next twelve months, butmore gradually than it has in the past.
One-fifth of those who have not done soin the past have plans to
buy or sell goods or services at some point in the nextyear.
Those entrepreneurs intending to engage in e-commerce in the
future includeboth Internet users and non-users. A majority (53%)
of Internet users intend tobuy or sell something using the Internet
in the next year. However, only 16%of small businesses not
currently using the Internet have plans to engage in e-commerce in
the near future.
Both of these results represent substantial declines from the
Spring 2000 SESWeb Entrepreneurship Survey, when 64% and 38% of
Internet users and non-users, respectively, had future plans to
engage in e-commerce.
Comparison of Future E-commerce ActivityDo you plan to buy or
sell anything using the Internet for either personal or
business
use in the next twelve months?
36%
23%
6%
25%
72%
6%
4%
7%
0% 10% 20% 30% 40% 50% 60% 70% 80%
No
Both business andpersonal
Personal only
Business only
Non-userUser
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The SES Web Entrepreneurship Survey SES CANADA RESEARCH INC.
Industry Canada Site License - Fall 200016
Both the lack of growth in electronic commerce activity
reflected in the Fall2000 survey and the drop in future
expectations represent a significant change
from the previous patterns. The reported past e-commerce
activity from theSpring 2000 survey closely matched the future
activity that had been forecast ayear earlier. At the time, the
future e-commerce plans of Canadianentrepreneurs indicated that 57%
intended to engage in e-commerce over thenext 12 months.
However, at the half-way point of that year, there has been no
increase in e-commerce activity. In addition, there has been a
substantial drop in futureplans as of the Fall of 2000. Now, only
44% of small business decision-makersplan to engage in e-commerce
over the next year. This would represent a smallincrease over
current activity.
This break in the trendline reflects less excitement over the
importance andpotential of the Internet, and a more modest
expectation for the pace ofadoption. Of course, just as the
forecasts from six months ago proved overlyoptimistic, so may the
current expectations be overly conservative. Newopportunities may
cause e-commerce adoption to re-accelerate just as it hasslowed
down in recent months.
Comparison of Future E-commerce ActivityDo you plan to buy or
sell anything using the Internet for either personal or
business
use in the next twelve months?
36%
23%
6%
25%
72%
6%
4%
7%
0% 10% 20% 30% 40% 50% 60% 70% 80%
No
Both business andpersonal
Personal only
Business only
Non-userUser
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Industry Canada Site License - Fall 200017
The differences in e-commerce activity between the different
demographicgroups mirrors the differences in overall Internet use.
As with the genderdivide described above, the gap between the
largest and smallest companieshas also increased over the past six
months. For companies with fewer thanfive employees, 22% of the
decision-makers have used the Internet to buy orsell something in
the past twelve months, a substantial decline from 37%reported
during Spring 2000. For businesses with 25 to 49 employees,
thenumber engaged in e-commerce has increased from 47% to 56% over
the sameperiod.
This gap is also reflected in future e-commerce plans,
particularly regardingplans to engage in e-commerce for business
purposes. However, as with theoverall future plans, expectations
for future e-commerce activity by allbusinesses have declined since
last Spring. (see Chart - Future E-CommerceActivity by Business
Size, below).
Past and Future E-commerce Activity - by Survey
15% 19% 15%21% 19%
11% 10%
17% 15%17%
16%
27%
21%
17%
5%9%8%7%
0%
10%
20%
30%
40%
50%
60%
Spring 1999FuturePlans
Spring 2000Past E-
Commerce
Fall 1999 FuturePlans
Fall 2000Past E-
commerce
Spring 2000FuturePlans
Fall 2000FuturePlans
Both business and personal Personal only Business only
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The SES Web Entrepreneurship Survey SES CANADA RESEARCH INC.
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While overall the trend in small business e-commerce has been
increasing, notall entrepreneurs currently using the Internet to
conduct business plan tocontinue doing so. 12% of respondents who
stated they had bought or soldgoods or services over the Internet
during the past 12 months state they do notplan to do so in the
next 12 months. This number has not increasedsignificantly, but is
now larger relative to the percentage of small businesseswho have
not engaged in e-commerce, but plan to do so in the future.
Entrepreneurs who have used the Internet for both personal and
business e-commerce are those most committed to continuing its use
in the future. Only5% stated they did not have plans to engage in
e-commerce over the nexttwelve months.
The progression of small business to the Internet and then to
e-commerce willnot be as smooth as had been expected. While small
businesses continue to usethe Internet and e-commerce for their
business, the rate ofd adoption tends toincrease or decrease
depending on the external environment and economictrends. The
questions raised about the viability of Internet business
modelsover the past six months have clearly affected the attitudes
of small businessdecision-makers and their actions.
Future Business E-commerce Activity - by Business SizeDo you
plan to buy or sell anything using the Internet for either personal
or business use
in the next twelve months?
12%
21%
19%
21%
18%
15%
23%
27%
0% 10% 20% 30% 40% 50% 60%
Fewer than 5employees
5 to 9 employees
10 to 24 employees
25 to 49 employees
Both business andpersonal
Business only
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2.3 Size and Scope of Electronic Commerce Activities
To further assess the extent to which Canadian small businesses
are engagingin electronic commerce, survey respondents indicating
that they had bought orsold goods or services were asked additional
questions regarding the extent ofthat business and with whom it was
conducted.
Similar to last Spring, close to half (46%) of small businesses
conducted almostall of their e-commerce transactions with other
Canadian consumers andbusinesses. However, there has been a small
shift towards entrepreneurs whoprimarily engage in transactions
with foreign counter-parties. Overall, thisrepresents a slight
decline in the share of transactions conducted betweenCanadians,
and a slight increase in those transacted with international
clients.
The international transactions that take place are heavily
weighted towards theUnited States. When asked which foreign country
did they conduct the mostbusiness with, 93% identified the U.S.
This total is an 11% increase from thenumber of small business
decision-makers who identified the U.S. six monthsago, and a return
to the same level of U.S. business identified in Fall 1999.
Comparison of Location of E-commerce ActivityWhat percentage of
those Internet transactions occurred with a Canadian
supplier or customer?
47%
42%
11%
46%
35%
19%
0% 10% 20% 30% 40% 50%
90% or more
10% to 90%
10% or less
Fall 2000Spring 2000
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While there were not many entrepreneurs who identified a country
other thanthe U.S., most of them (4.2%) identified Europe as the
primary site for theirinternational business. This too represents a
substantial shift from Spring 2000and a return to a level similar
to Fall 1999.
Each of these respondents was also asked to state the dollar
value of theirtransactions separating buying and selling over the
past twelve months.While the total number of small businesses
engaging in e-commerce has notincreased since last Spring, the
amount of Internet business being conductedhas grown
substantially.
For those using the Web to buy goods and services, the median
response was$1,000 in annual purchases, double the median of last
Spring. Close to half(46%) stated they had bought less than $500 in
goods and services. Almostone-fifth (19%) indicated total purchases
exceeding $5,000. This represents asignificant shift from the
Spring 2000 results when only 4% of respondentsreported purchases
exceeding $5,000.
The increase in the quantities small businesses are selling over
the Internet iseven more noticeable than that for purchases. The
median response whenasked the dollar value of Internet sales was
$5,000. Six months ago, it was only$500. Only 9% said they had had
sales less than $500 and 35% stated that theyhad exceeded
$20,000
The charts on the next page show the breakdown in both purchases
and sales inthe Spring 2000 and Fall 2000 surveys. (see Charts
Internet Purchases andInternet Sales, next page). The shift in this
distribution reflects the growingexperience that Canadian small
businesses have with electronic commercetransactions.
From Fall 1999 to Spring 2000, the number of entrepreneurs
engaging in e-commerce transactions increased, but the average size
of those transactionsdeclined. Over the last six months, there were
relatively few new e-commerceparticipants, but the amount of
business they conducted grew significantly.
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Small Businesses Internet SalesPercent of sellers in each
category
13%
32%
15%
23%
17%
4%
5%
16%
27%
48%
0% 10% 20% 30% 40% 50% 60%
$0 to $100
$101 to $500
$501 to $1000
$1001 to $5000
$5001 and up
Fall 2000Spring 2000
Small Businesses Internet PurchasesPercent of purchasers in each
category
25%
41%
9%
21%
4%
15%
31%
13%
22%
19%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
$0 to $100
$101 to $500
$501 to $1000
$1001 to $5000
$5001 and up
Fall 2000Spring 2000
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2.4 Size of the Small Business E-commerce Market
Based on the dollar values that respondents ascribed to their
e-commercebusiness, an estimate of the overall small business
market was developed.Using the responses from the survey, an
overall average was calculated of$2,500 for each small business
using the Internet for e-commerce purchases and$7,600for e-commerce
sales.
By applying this average to the overall percentage of Canadian
entrepreneursengaging in e-commerce and estimates from Statistics
Canada of the totalnumber of small businesses in Canada, an
approximation can be derived of thetotal Canadian market.
The estimated size of the small business market, as a purchaser
of goods andservices, is $720 million. This represents a very large
jump from the estimatesgenerated based on the Spring 2000 SES Web
Entrepreneurship Survey. The totalnumber of businesses using the
Internet for purchases did not increase, but theamount they
purchased jumped markedly, producing overall market growth
of75%.
For small businesses using the Internet to sell goods and
services, the increasewas even more significant. Their total
revenue for the past twelve months wasapproximately $590 million.
This reflects a 68% increase in total sales from the$350 million
market estimate based on the Spring 2000 survey. (While
averagesales for small businesses exceed purchases, the number
currently selling is lessthan the percentage currently buying, so
the overall market is less.)
The overall estimate, therefore, is that the Canadian small
business e-commercebalance of transactions between buyers and
sellers is now negative $130million. This is larger than the Spring
of 2000, but smaller than the Fall 1999result. While Canadian small
businesses have significantly expanded theirInternet-based sales,
their purchases have grown even faster.
2.5 Internet Consultants
Incorporating the Internet, and particularly e-commerce, into
your business isnot a simple task. Consistently, a significant
number of entrepreneurs identifythe complexity of the Internet as a
reason for not using it. Another solution for
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some small businesses is to find external support to help their
Internet andelectronic commerce efforts.
The small business entrepreneurs surveyed were asked whether or
not theyhad ever hired or considered hiring an outside consulting
firm to help them dobusiness on the Internet. 21% indicated that
they had hired an outsideconsulting firm to help them, an increase
of almost 4% from last Spring andalmost 8% over the past twelve
months. Larger businesses were more likely touse consultants. 34%
of businesses with 25 to 49 employees have engaged aconsultant,
while only 12% of those with fewer than five employees
had.Naturally, almost all of those using a consultant are Internet
users.
Hired Outside ConsultantHave you hired -- or considered hiring
-- an outside consultant to help with your
Internet business?
62%
9%
26%
79%
9%
6%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
No
Yes, has considered
Yes, hired
Non-UsersUsers
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3.0 ATTITUDES TOWARD ELECTRONIC COMMERCE
The attitudes of Canadian entrepreneurs are closely linked to
their actionsregarding the Internet and e-commerce. Three-quarters
of Canadian smallbusinesses are using the Internet in their work
and 40% are using it to transactbusiness.
To better understand the forces either helping or hindering the
adoption of theInternet and e-commerce in Canada, small business
decision-makers wereasked to provide an assessment of the
importance of the Internet and how theybelieved it would affect
their business.
Those using the Internet for business are more likely to view it
both as animportant development and to view the Internet as
positive for their businessand its future. However, as the stock
market bubble surrounding Internetstocks burst, so did some of the
more extreme views regarding the Internet andits impact on small
businesses.
However, the shift in views has not been towards more negative
opinions, butrather towards greater indifference. This is
particularly true among the quarterof small business
decision-makers that have not adopted the Internet. Inprevious
waves of the SES Web Entrepreneurship Survey, the primary
reasonInternet non-users had stayed away was that they didnt
consider it importantenough. Over the past six months, this apathy
has only increased.
3.1 Importance of Internet
The number of small business decision-makers who believe the
Internet willhave an impact on the future of their business
decreased for the first time. ThisFall, 16% stated that they
believe it will have no impact on their business, a sixpercent
increase since the Spring. Almost four in ten (37%) entrepreneurs
notusing the Internet say it will not have an impact on their
business
These results are actually very close to the views expressed
during the Springand Fall of 1999. Clearly, at the height of
Internet mania the expectations ofsmall business decision-makers
got caught up in the excitement and producedthe unusual results of
last Spring.
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Not surprisingly, Internet adoption by small businesses is
closely linked totheir views regarding the importance of the
Internet and whether they believeit will impact their future. Only
10% of Internet users believe the Internet willnot impact the
future of their business, while almost half (46%) believe it
willhave a major impact.
Small businesses not currently using the Internet have very
different views.Only one-fifth (20%) believe the Internet will have
a major impact on theirbusiness and 37% say that it will simply
have no effect. For both users and non-
Impact of Internet on BusinessDo you believe the Internet will
have a major impact, minor impa
or no impact on your business?
M ajor Im pact
40%
M inor Im pact
41%
N o Im pact
16% Unsure
3%
Internet Impact on Business -- by Survey
39% 40% 48% 40%
40% 41%39%
41%
17% 15% 16%10%
0%
20%
40%
60%
80%
100%
Spring 1999 Fall 1999 Spring 2000 Fall 2000
No ImpactMinor ImpactMajor Impact
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users, close to four in ten believe the Internet will have some
impact, but that itwill be minor.
The decrease in perceived importance of the Internet has
affected both Internetusers and non-users, although those not using
the Internet changed their viewsthe least. The hype surrounding the
importance of the Internet particularlyinfluenced the views of
Internet users. One year ago, 47% believed the Internetwould have a
major impact on their business. That increased to 57% last
Springand dropped back to 46% this Fall. The comparable numbers for
those notusing the Internet were 18% to 22% to 20%.
In addition to the direct question about the importance of the
Internet, thesmall business decision-makers were asked whether they
agreed or disagreedwith a number of statements that reflected the
importance of the new medium.
When small business decision-makers were asked whether they view
theInternet as critical to the survival of their business, similar
results wereobtained. Among business Internet users, 40% either
agreed or strongly agreedwith that statement, an decrease of 4%
over six months, but still significantlyhigher than in Fall
1999.
For non-users, overall agreement grew slightly to 20%, but
three-quartersdisagreed. Significantly, 25% of small business
decision-makers not using theInternet said they strongly disagreed
with the statement regarding thecriticality of the Internet, almost
twice the percentage of Internet users.
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As with the opinions on the importance of the Internet, the
change in views ofInternet users has been more significant than
those of the non-users. Over thepast six months, Internet users
have become less likely to view the Internet ascritical to the
survival of their business. Most significantly, the percentage
whostrongly agreed with the statement was cut in half from 12% to
6%.
Comparison of User and Non-user Internet ImpactDo you believe
the Internet will have a major impact, minor impact
or no impact on your business?
10%
42%
46%
37%
38%
20%
0% 10% 20% 30% 40% 50%
No Impact
Minor Impact
Major Impact
Non-UsersUsers
Comparison of Internet Users by SurveyThe Internet is critical
to the survival of your business.
13%
45%
34%
7%
11%
44%
32%
12%
13%
52%
27%
6%
0% 10% 20% 30% 40% 50% 60%
Strongly Disagree
Disagree
Agree
Strongly Agree
Fall 1999Spring 2000Fall 2000
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3.2 Impact on Business
There are two aspects to the potential effect that the Internet
and e-commercecan have on Canadian small businesses. First, as
discussed above, what is themagnitude of the Internets impact does
it change the entrepreneurs business?Second, what is the direction
of that change is the impact positive ornegative?
Overall, three-quarters of small businesses asked (76%) stated
the Internetwould be positive for their business. This is a
marginal decrease from theresponses received last Spring. However,
only 1% said they believe theInternets impact will be negative,
also a marginal decrease. The remainingbusinesses those who says
the Internets impact will be neutral increase from15% to 21%.
As with other attitudes, Internet users are more likely (80%) to
view theInternet positively than are non-users (51%). However,
neither group isinclined to be pessimistic towards the Internet
future. Instead, non-Internetusers were simply more inclined to
believe that the Internets impact will beneutral (37% for
non-users; 20% for users). Over the past six months, bothInternet
users and non-users have shifted towards a more neutral stance.
In addition to Internet users being more optimistic than
non-users,entrepreneurs who perceive the Internet as having a
significant impact on theirbusiness are more optimistic than those
who see it as less significant. Amongsmall business decision-makers
who say the Internet will have a major impacton their business, 90%
say that impact will be positive. For those who say it willhave a
minor impact, only 64% believe it will be positive. Again, the
differencebetween the two groups is the proportion who believe the
Internets impactwill be neutral. Very few of either group forecast
a negative effect.
Interestingly, this split has actually widened over the past six
months. Whilethe overall number of small business decision-makers
who believe the Internetwill have a major impact on their business
has declined, those who believe itwill have that impact are even
more optimistic. For those who believe theInternets impact will
only be a minor one, the percentage viewing it as positivehas
declined by 7%.
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Small business decision-makers surveyed were also asked whether
they believethe Internet will open new business opportunities for
them or whether it willthreaten their profitability. Again, the
overall results indicate business Internetusers are more positive
than non-users.
In addition, the number of respondents who agreed or strongly
agreed with thestatement about new opportunities continued to
increase, although with moretempered views. One year ago, a total
of 61% of entrepreneurs supported thestatement. This has since
climbed to 73% last Spring and 81% today. However,over the last six
months, the percentage who strongly agreed with thestatement
declined by 7% (from 27% to 20%). This was more than offset by
anincrease in those who agreed from 47% to 61%.
Internet Impact by SignificanceBreadth and type of impact of
Internet on small businesses in Canada
2%
32%
64%
1%
9%
90%
0% 20% 40% 60% 80% 100%
Negativ e
Neutral
Positiv e
Major Impact
Minor Impact
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The number of small businesses who agreed or strongly agreed
that theInternet posed a threat to their business continued to
decline (although lesssignificantly over the past six months than
over the previous six months).Again, it reflects some moderation of
views towards the effect that the Internetwill have.
Finally, every respondent was asked the open-ended question, If
you were todescribe the Internet and its future impact, if any, on
the Canadian economy,what words would you use?
While this question produces a mix of responses, they tend to
cluster into twomain groups. The most common answers focused on the
significance of theInternets impact on the economy (huge,
significant change, structural change)and the belief that the
Internet would have a positive effect (more productiveeconomy,
positive impact, increased sales, more convenience).
The general structure of the response to this question has
remained consistentacross all four waves of the SES Web
Entrepreneurship Survey. More than 80% ofrespondents choose a term
that falls into one of the two groups representingimproved
productivity or structural change. However, in previous waves
of
Comparison of Fall 1999 and Spring 2000The Internet will
threaten our profitability.
11%
61%
21%
4%
19%
57%
14%
4%
21%
62%
12%
1%
0% 10% 20% 30% 40% 50% 60% 70%
Strongly Disagree
Disagree
Agree
Strongly AgreeFall 2000
Spring 2000
Fall 1999
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the survey, both groups of responses were similar in size. This
Fall there was asignificant shift in top-of-mind views towards the
significance of the Internetover its positive effects. (See Table
Open-ended Impact Question, next page).
As with the questions discussed above, this appears to reflect
some mellowingof the views of small businesses. When asked to pick
a way to describe theInternet, they still jump to terms that
indicate a substantial change in theirbusiness or industry. It is
the magnitude of change that appears to dominatetheir thinking, and
it has crowded out the optimism reflected in surveysconducted last
Spring or the preceding Fall.
However, consistent through all the SES Web Entrepreneurship
Surveys is the factthat very few small business decision-makers are
fearful of how the Internetwill change their lives.
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Open-ended Impact QuestionIf you were to describe the Internet
and its futureimpact, if any, on the Canadian economy, whatwords
would you use?
User Non-User% %
Group 2 Change 71.1 72.8Huge changeSignificant ImpactStructural
Change
Group 1 Productivity 10.8 5.5Increase ProfitsMore Productive
EconomyPositive ImpactIncrease SalesMore JobsMore Information
Average Impact 7.5 9.3Globalize Economy/More Competition
4.5 3.9
Passing Fad /Useless 1.2 4.6Black Market/Hurt Economy 4.0
2.3
TOTAL 98.1 98.4
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3.3 Benefits & Barriers
While less than one-in-four Canadian small businesses say they
do not use theInternet in any way, they still represent a
significant segment of the potentialmarket. To assess what has been
preventing them from engaging in e-commerce, the non-Internet users
were asked an open-ended questionregarding why they were not on the
Internet.
The results have remained remarkably consistent for the past 18
months. Eventhough the subset of non-users has declined from 39% of
the sample to 23.5%,the reasons they identify for not using the
Internet are largely unchanged.There are no major barriers
preventing Canadian entrepreneurs from using theInternet.
Small business decision-makers not using the Internet simply do
not see it as apriority. They are much less likely than Internet
users to view the Internet ascritical to their business and less
likely to believe it will have a major impact ontheir future
success. When asked to describe what is keeping them off
theInternet, 61% state that their main reason for not using the
Internet is that it isnot necessary for their business, a
substantial jump from the 49% whobelieved it was not necessary
during Spring 2000.
Most of the other small business decision-makers not currently
using theInternet gave responses that also indicated it was simply
not a priority. Theyincluded:
! Dont know enough about it (2.1%);! Dont have the time to set
it up (6.0%);! Dont have a computer (11.9%); and,! Too expensive
(8.9%).
Over the past year, those not using the Internet have actually
grown less likelyto identify a practical barrier preventing them
from using it. Instead, they areincreasingly just waiting for the
killer app that will make the Internet and e-commerce something
they consider important to their business. It shouldnt besurprising
that people who resisted the temptation of the Internet at the
heightof the boom are continuing to resist it six months later.
All of the small business decision-makers were asked separately
to identify thekey benefits and barriers to using the Internet for
their business. Again, morethan half (56%) of the small businesses
surveyed simply could not name a
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barrier or stated that there were none. Among those who could
identify abarrier, the most commonly cited problems were a lack of
security (30%), thatservers are not reliable (16%), that it was too
expensive (12%) and the fact thatthe Internet requires a lot of
training (8%).
Small businesses using the Internet were more likely to cite
security (32%versus 25% for non-users) as a barrier to Internet use
than non-users. Thenumber of small businesses identifying security
as the primary barrier toInternet use has more than doubled from
12% in the Fall 1999 survey. Thisincrease in concern is reflected
in the responses of both Internet users and non-users and likely
results from the considerable media attention that web hackersand
e-mail viruses have received over the past year.
In addition to security, Internet users were more likely to
complain about thereliability of servers (18% for users versus 10%
for non-users) and the difficultyof finding information (8% vs.
2%).
Small businesses not using the Internet were much more likely
than smallbusiness Internet users to raise concerns about
impersonal nature of theInternet and claim their business is simply
too small to take advantage of it.Among non-users, 20% identified
its impersonal nature as a barrier, while only8% of Internet users
did. Similarly, 11% said the small size of their business wasa
barrier compared to 5% of those using the Internet.
When asked to identify the key benefits of using the Internet
for business, evenmore significant differences between users and
non-users emerged. Half ofnon-users simply could not identify any
key benefit to using the Internet,compared with 18% of Internet
users. The percentage of respondents whocould not name a benefit
has increased over the past six months for bothgroups.
Internet users were particularly likely to cite e-mail as a key
benefit of using theInternet. Among Internet users, 11% volunteered
e-mail as the Internetsprimary benefit compared to 6% of non-users.
Three in ten (29%) of Internetusers identified using the Internet
for research as a key benefit.
Non-users were more divided in their views of the benefits of
using theInternet. Most of the non-users who could identify a
benefit to using theInternet were split evenly between research,
using the Internet for advertisingor marketing, and the convenience
or time saving it offers.
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However, non-Internet users were significantly more likely than
Internet usersto cite advertising or marketing as a key benefit of
the Internet. Only 13% ofInternet users mentioned advertising
compared to 24% of non-users. This gaphas actually widened over the
last six months, although both groups were morelikely to identify
advertising and marketing as a benefit than they were
lastSpring.
Multiple waves of the SES Web Entrepreneurship Survey have
demonstrated thatthose not using the Internet are more likely to
see it as an advertising mediumthan are those using it, who tend to
focus more on its communications andresearch capabilities.
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4.0 E-BUSINESS ACTIVITIES
Recognizing the benefits of the Internet and choosing to use it
in your businessis only the first step along a path that leads to
widespread use of electroniccommerce. As described above, while 76%
of Canadian entrepreneurscurrently use the Internet, only 40% have
actually bought or sold goods orservices over it.
All of the small business decision-makers surveyed in the SES
WebEntrepreneurship Survey were asked about a series of Internet
and e-commerceactivities. Those currently using the Internet were
asked whether they alreadyengaged in the activity. All respondents
were asked whether they wouldconsider performing the activity using
the Internet or whether they wereactively planning to do so.
The results produced by the Spring 2000 survey were consistent
with previouseditions. Small business Internet users move towards
the Internet and e-commerce in phases. The responses have
consistently broken down into threeprogressive stages:
! Communications and Information! Electronic Commerce
Transactions! Banking and Payments
4.1 Communications and Information
Virtually every study of Internet usage has shown that e-mail is
the killer appof the new medium. 97% of Internet users (74% of all
small businesses) saythey use e-mail in their business. For 11%,
e-mail is the key benefit theyperceive in the Internet.
Closely behind e-mail in Internet activities is using it for
conducting businessresearch. Almost three-quarters (73%) of
Internet users say they use it forconducting research over the Web.
Almost 30% identified the ability to conductresearch as one of the
primary benefits of the Internet.
The combination of those two functions communications and
information represent the core uses to which the Internet is
applied by Canadianentrepreneurs. Closely related to those two is
establishing a website to allow abusiness to present information
about itself to the external world. Half of allsmall businesses
(and two-third of those currently using the Internet) report
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operating a website for external communication. In addition, 59%
of Internetusers have accessed government services over the Web.
All of these representcontinuing steady growth in the depth of
Internet use by Canadian smallbusinesses. Each wave of the SES Web
Entrepreneurship Survey hasdemonstrated that, even without growth
in the number of Internet users, thereis growth in the number of
ways the Internet is used.
The largest jump in these numbers is the percentage of small
business Internetusers who have established a website, which
increased from 59% to 67%. As thenumber of Internet users was
growing quickly, the proportion with a websitelagged the growth in
other activities. Presumably, it takes new businesses sometime to
get comfortable with the tools and capabilities of the Internet
beforethey actually try to establish their own site.
Smaller, but sizeable minorities of businesses using the
Internet have engagedin a number of related activities that are all
focused on communications andinformation. For example:
! 45% have used the Internet to find a supplier of goods or
services;
Business Internet User Activity ProfileE-mail - Research -
External Website - Gov't Services
28%
18%
19%
1%
9%
6%
5%
0%
4%
10%
3%
1%
59%
67%
73%
97%
0% 20% 40% 60% 80% 100% 120%
Access Gov 'tServices
External Website
Research
E-mailUsers Engaged
Users - Planning
Users - Consider
Users - No
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! 37% have established a web site for internal communications;
and,! 25% have searched for a consultant using the Internet.
While Internet use is closely correlated with the size of a
company, not allactivities are. Size does not tend to influence
whether businesses use e-mail oruse the Web for business research.
However, there is a significant gap betweenthe smallest and largest
businesses regarding whether they operate a websitefor either
external or internal communications. For example, among
businesseswith less than 5 employees, almost half (49%) of Internet
users currently have awebsite, but 78% of businesses with 25-49
employees do. Similarly, less thanone-quarter (23%) of the smallest
group of companies operate an Intranet sitefor internal
communications, but almost half (48%) of the largest companies
do.
The number of small business decision-makers currently not using
the Internetwho are either planning or considering engaging in
Internet activities continuesto increase. This has occurred despite
the increasing skepticism regarding theInternet voiced by the group
of entrepreneurs not currently using it. For
Business Internet Non-user Potential Activity ProfilePlanning to
engage in activity in the future
22%
37%
28%
38%
40%
50%
15%
27%
29%
24%
30%
45%
8%
8%
10%
21%
19%
30%
0% 10% 20% 30% 40% 50% 60%
Find a Consultant
Find Supplier
Access Gov't.Svces.
External Website
Research
E-Mail
Fall 1999
Spring 2000
Fall 2000
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Industry Canada Site License - Fall 200039
example, half of those not using the Internet are giving
consideration toadopting e-mail. Particularly significant over the
last six months is thepercentage planning or considering a website
for their business. This hasjumped from 24% of non-users last
Spring to 38% today.
The only exception is the insignificant decline in the number of
smallbusinesses not using the Internet who are considering using it
in the future toaccess government services. However, the 28% who
now say they are planningto remains almost three-times as high as
the 10% who said so during Fall 1999.
Fundamentally, the Internet is a communications network.
Communicationsand information activities are both the easiest to
perform by new Internet usersand require the least change in
existing business practices and habits.Naturally, they are the
functions Canadian entrepreneurs adopt first.
4.2 Electronic Commerce Transactions
The second stage of Internet and e-commerce adoption begins when
businessesmove beyond the exchange of information or communications
to actuallyconducting transactions. As described above, 40% of all
Canadian smallbusiness decision-makers have used the Internet
either to buy or sell goods orservices in the past twelve
months.
When specifically asked about selling over the Internet, 47% of
small businessInternet users say they are currently engaged in
doing so. Another 12% statethat they are already planning to do so
and a further 12% are considering it.
These numbers are essentially unchanged from last Spring
However, amongthe set of businesses not currently using the
Internet, there has been asignificant drop in those planning or
considering adopting it as a selling tool.While 40% of non-users
indicated an interest in selling over the Internet sixmonths ago,
only 29% are either planning (17%) or considering (12%) is
today.
Less popular but growing are a variety of transactional
electronic commerceactivities. Among small business Internet
users:
! 49% have already used the network to make travel
arrangements;! 37% have bought computer hardware or software over
the Internet;! 33% have received a bill using the Internet;! 31%
have bought office supplies using the Internet; and,! 23% have sent
an invoice.
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The three activities that reflect direct Internet-based
transactions (travel, buyinga computer, and buying office supplies)
have all continued to grow quickly inacceptance. The more
administrative activities (receiving bills and sendinginvoices)
have not been growing as quickly, likely reflecting the
additionalcomplexity of managing billing and paper requirements for
record-keeping.
Business Internet User Activity ProfileHas engaged in activity
in the past
31%
23%
33%
37%
49%
19%
25%
31%
29%
39%
16%
22%
27%
25%
32%
0% 10% 20% 30% 40% 50% 60%
Bought OfficeSupplies
Sent an Invoice
Received a Bill
Bought a Computer
Make TravelArrangements
Fall 1999
Spring 2000
Fall 2000
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3.8 Banking and Payments
The third stage of e-commerce adoption is the use of the
Internet for bankingand for making or receiving payments. These
types of activities tend to be themost difficult for small
businesses to adopt and raise the greatest concernsabout privacy
and security. It is one thing to send an e-mail and another toplace
an order for new office supplies, but it is something quite
different totrust the transfer of funds to this new medium.
Where Canadian small businesses have moved into using the
Internet forfinancial purposes, it has been driven by large service
providers who offerprecisely those guarantees about security and
reliability.
Basic electronic banking is the fastest growing Internet
activity. Half of smallbusiness Internet users (51%) have used the
Internet to check their bankaccount balance and 38% have used it to
pay bills. However, while these arebanking applications, they tend
to have more in common with thecommunications and information
activities above. Checking bank accounts (apure information
application) has grown quite rapidly, more than doublingfrom the
25% level in the Spring of 1999. Paying bills through a website
hasincreased almost as quickly from 21% to 38%. While there is a
transactionalcomponent to paying bills and a lower adoption rate in
practice the billpayment services are operated through major
financial institutions. The web-based function is merely to request
that the payment be made (which takesplace through existing payment
systems) and does not directly involvetransferring funds.
Slightly less popular, 31% of Internet users have submitted an
electronic taxreturn and 30% have received a payment
electronically. Like banking and billpayment, these are activities
in which a financial institution often plays anintermediary role,
and the Internet primarily serves as an access channel to
theexisting service.
For every financial activity measured, the percentage of
Internet users engagingin it has increased during the past six
months. Some, such as checking a bankaccount or paying bills, have
had significant increases. Others, such assubmitting a tax return
or applying for a bank loan have only increasedmarginally. (see
Chart Internet Activities Spring and Fall Comparison Banking and
Payments Activities, next page).
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One of the most interesting issues regarding small business
e-commerceactivities has been the willingness to provide credit
card information over theInternet. Over time, the percentage of
small business Internet users who saythey have provided credit card
information has doubled from 16% to 32%.However, a majority (55%)
of Internet users and three quarters (77%) of non-users say they
have not even considered providing credit card information overthe
Internet. While the willingness to provide a credit card number has
grown,there continues to be a significant amount of concern about
its safety. This isalso reflected in the number of Internet users
who have stated that security is abarrier to Internet use.
Even among those currently using the Internet, there is a
dichotomy betweenthose who trust it enough for a credit card and
those who dont. Interestingly,the shift from refusal to engagement
appears to derive from a change in
Internet Activities -- Spring and Fall ComparisonBanking and
Payments Activities
15%
19%
30%
31%
32%
38%
51%
15%
19%
22%
30%
26%
30%
39%
11%
14%
19%
22%
25%
29%
30%
8%
9%
15%
17%
16%
21%
25%
0% 10% 20% 30% 40% 50% 60%
Submit Bank Loan
Remit Taxes
Receive Payments
Submit Tax Return
Provide Credit cardInformation
Pay Bills
Check Bank Account
Spring 1999
Fall 1999
Spring 2000
Fall 2000
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perspective. Consistently, few Canadian entrepreneurs say they
are planning touse a credit card, but havent yet done so.
Finally, the two Internet applications least popular among small
businesses areactually remitting taxes on-line (19%) and using the
Internet to submit anapplication for a bank loan (15%). These
results are unchanged from sixmonths ago. In both cases, a major
constraint is simply that there are currentlya limited number of
opportunities to do so.
3.9 Summary of Activities
The difference between the different stages of Internet adoption
are particularlyprofound when the groups of activities are observed
together. The chart belowdemonstrates the average adoption rate for
Internet users for each of the threegroups of Internet activities
discussed above:
! Communications and Information! Electronic Commerce
Transactions! Banking and Payments
Two themes emerge. First, communications leads Internet adoption
followedby e-commerce and then financial activities. Second, all
three areas havereflected consistent growth over time. Even as
attitudes and expectations swingup and swing down, the Internet
continues to work its way into the core fabricof business life in
Canada.
Stages of Internet Adoption -- by Survey
57%53%
48%47%
37%32%
27%22%
14%20%
28%24%
0%
10%
20%
30%
40%
50%
60%
Spring 1999 Fall 1999 Spring 2000 Fall 2000
Communications & Information E-commerce Transactions Banking
& Payments
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5.0 CONCLUSION
The collapse of the dot com bubble has not brought about a
collapse of theInternet or e-commerce for Canadian small
businesses. It has slowed theirgrowth, and it has tempered some of
the runaway expectations for the Internetthat existed at its peak
last Spring.
However, while the number of Internet users and the number
engaged in e-commerce transactions has remained flat, those using
the Internet continue todo so in greater depth and regularity. The
breadth of Internet uses is expandingacross the board and the
amount of business being conducted electronically isgrowing
rapidly.
The hype may be gone, but the Internet remains, and day-by-day
it becomesmore and more entrenched in the daily fabric of business
for Canadianentrepreneurs.
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6.0 DEMOGRAPHIC TABLES
TABLE 1 SCOPE OF INTERNET IMPACT ON BUSINESS
Id like you to think of the future of your business. Do you
believe the Internet will have a major impact, minorimpact or no
impact on your business?
MajorImpact
MinorImpact
NoImpact Unsure
% % % %
All Respondents 40 41 16 3
RegionWest 36 50 11 2Ontario 34 41 22 3Quebec 52 32 13 2Atlantic
30 42 26 2
Internet UseUser 46 42 10 2Non-user 20 38 37 5
Number of Employees4 or less 27 35 35 45 to 9 43 41 13 310 to 24
41 46 12 225 to 49 47 40 11 3
Years in BusinessLess than 1 year 29 57 14 01 to 4 years 26 36
35 45 to 9 years 38 41 20 210 years or more 42 42 14 3
Respondent Age18 to 29 50 37 11 330 to 39 41 44 15 040 to 49 39
44 14 450 to 59 31 42 23 560 plus 48 26 22 4
Respondent GenderFemale 37 41 20 3Male 44 41 13 3
Note: Totals may not add up to 100 as a result of rounding.
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TABLE 2 TYPE OF INTERNET IMPACT ON BUSINESS
Based on your current business plans, do you believe this future
impact will be positive, negative or neutral?
PositiveImpact
NegativeImpact
NeutralImpact Unsure
% % % %
All Respondents 64 1 20 16
RegionWest 67 0 26 7Ontario 59 2 16 23Quebec 67 1 17 15Atlantic
58 0 24 18
Internet UseUser 72 1 18 9Non-user 37 0 26 37
Number of Employees4 or less 43 1 27 295 to 9 68 1 19 1210 to 24
65 1 21 1225 to 49 74 1 11 14
Years in BusinessLess than 1 year 43 14 29 141 to 4 years 40 4
31 265 to 9 years 65 1 14 2010 years or more 66 1 21 13
Respondent Age18 to 29 70 2 13 1430 to 39 69 0 20 1140 to 49 59
1 25 1550 to 59 60 0 22 1860 plus 74 0 7 19
Respondent GenderFemale 57 1 24 19Male 72 1 15 12
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TABLE 3 PAST E-COMMERCE ACTIVITY
Have you bought or sold anything using the Internet for either
personal or business use in the past twelvemonths?
Yesbusiness
only
Yes,personal
only
Yes, bothpersonal
andbusiness No Unsure
% % % % %
All Respondents 16 10 15 60 0
RegionWest 13 10 16 61 0Ontario 14 9 13 64 0Quebec 20 10 15 55
0Atlantic 12 14 14 60 0
Internet UseUser 20 10 19 51 0Non-user 1 9 0 90 0
Number ofEmployees
4 or less 9 7 6 78 05 to 9 15 13 15 58 010 to 24 16 7 17 61 025
to 49 23 13 20 44 0
Years in BusinessLess than 1 year 29 0 0 71 01 to 4 years 7 6 13
75 05 to 9 years 18 10 14 58 010 years or more 16 10 15 59 0
Respondent Age18 to 29 19 8 17 57 030 to 39 22 10 15 53 040 to
49 13 12 15 60 050 to 59 10 9 12 69 060 plus 0 4 15 82 0
Respondent GenderFemale 13 10 8 69 0Male 19 10 22 50 0
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TABLE 4 FUTURE E-COMMERCE ACTIVITY
Do you plan to buy or sell anything using the Internet for
either personal or business use in the next twelvemonths?
Yesbusiness
only
Yes,personal
only
Yes, bothpersonal
andbusiness No Unsure
% % % % %
All Respondents 21 5 19 44 12
RegionWest 16 4 22 44 14Ontario 19 7 15 42 16Quebec 28 3 19 46
5Atlantic 8 14 18 48 12
Internet UseUser 25 6 23 36 12Non-user 7 3 6 72 12
Number ofEmployees
4 or less 18 6 12 50 145 to 9 15 6 21 45 1410 to 24 23 3 19 45
1025 to 49 27 7 21 36 9
Years in BusinessLess than 1 year 14 0 14 43 291 to 4 years 9 2
20 55 155 to 9 years 26 4 13 39 1810 years or more 20 6 20 44
10
Respondent Age18 to 29 25 4 21 35 1630 to 39 23 7 22 39 940 to
49 18 6 17 44 1450 to 59 13 3 15 59 1160 plus 26 4 11 56 4
Respondent GenderFemale 16 6 12 51 16Male 25 5 26 37 8
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TABLE 5 OUTSIDE CONSULTANT USE
Has your business ever hired or considered hiring an outside
consulting firm to help do business on theInternet?
Hired afirm
Hasconsidered No Unsure
% % % %
All Respondents 21 9 66 4
RegionWest 22 8 66 4Ontario 13 7 73 7Quebec 31 12 57 1Atlantic
14 10 66 10
Internet UseUser 26 9 62 4Non-user 6 9 79 6
Number of Employees4 or less 12 10 72 65 to 9 15 7 73 510 to 24
24 8 66 225 to 49 34 11 49 6
Years in BusinessLess than 1 year 0 14 86 01 to 4 years 13 7 73
75 to 9 years 18 11 65 710 years or more 23 8 65 4
Respondent Age18 to 29 22 6 62 1030 to 39 25 12 61 340 to 49 20
6 72 250 to 59 17 12 69 260 plus 37 7 56 0
Respondent GenderFemale 14 7 74 6Male 30 11 57 3
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TABLE 6 CURRENT INTERNET USE
Does your business currently use the Internet?
Yes No% %
All Respondents 77 24
RegionWest 82 18Ontario 75 25Quebec 73 27Atlantic 76 24
Internet UseUser 100 0Non-user 0 100
Number of Employees4 or less 59 415 to 9 77 2310 to 24 80 2025
to 49 88 12
Years in BusinessLess than 1 year 43 571 to 4 years 56 445 to 9
years 77 2310 years or more 79 22
Respondent Age18 to 29 85 1530 to 39 84 1640 to 49 77 2450 to 59
61 3960 plus 70 30
Respondent GenderFemale 78 22Male 75 25
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TABLE 7 INTERNET AND BUSINESS SURVIVAL
Now Im going to read you some brief statements about the
Internet and your business and Id like you to tellme whether you
strongly agree, agree, disagree or strongly disagree.
Statement: The Internet is critical to the survival of our
business.
Stronglyagree Agree Disagree
Stronglydisagree Unsure
% % % % %
All Respondents 5 30 47 16 2
RegionWest 6 23 55 16 1Ontario 3 34 47 12 4Quebec 7 32 38 21
2Atlantic 2 36 48 12 2
Internet UseUser 7 34 45 13 1Non-user 1 19 51 25 5
Number ofEmployees
4 or less 5 21 56 14 55 to 9 4 33 44 19 010 to 24 5 32 45 16 325
to 49 8 34 43 13 3
Years in BusinessLess than 1 year 0 29 29 43 01 to 4 years 6 26
55 9 65 to 9 years 5 35 46 12 310 years or more 6 30 46 17 2
Respondent Age18 to 29 8 34 47 9 230 to 39 5 32 48 15 140 to 49
4 28 46 17 350 to 59 5 26 49 15 560 plus 4 41 37 19 0
Respondent GenderFemale 4 32 47 16 2Male 7 29 46 15 3
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TABLE 8 INTERNET AND NEW BUSINESS OPPORTUNITIES
Now Im going to read you some brief statements about the
Internet and your business and Id like you to tellme whether you
strongly agree, agree, disagree or strongly disagree.
Statement: The Internet opens new business opportunities for
us.
Stronglyagree Agree Disagree
Stronglydisagree Unsure
% % % % %
All Respondents 20 611 13 2 4
RegionWest 17 63 15 1 4Ontario 11 68 15 1 5Quebec 33 51 9 4
2Atlantic 12 60 16 6 6
Internet UseUser 24 63 10 2 2Non-user 7 55 24 4 10
Number of Employees4 or less 9 60 20 5 75 to 9 21 59 14 3 410 to
24 22 63 12 2 325 to 49 26 62 9 1 2
Years in BusinessLess than 1 year 0 71 14 14 01 to 4 years 9 56
24 2 95 to 9 years 18 67 12 2 210 years or more 22 59 13 2 4
Respondent Age18 to 29 24 62 9 2 330 to 39 20 66 12 1 140 to 49
18 63 13 3 350 to 59 16 52 18 3 1060 plus 30 48 11 0 11
Respondent GenderFemale 16 61 17 2 5Male 24 61 10 3 3
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TABLE 9 INTERNET AND PROFITABILITY THREAT
Now Im going to read you some brief statements about the
Internet and your business and Id like you to tellme whether you
strongly agree, agree, disagree or strongly disagree.
Statement: The Internet will threaten our profitability.
Stronglyagree Agree Disagree
Stronglydisagree Unsure
% % % % %
All Respondents 1 12 62 21 4
RegionWest 1 13 66 19 2Ontario 1 17 64 11 6Quebec 2 5 54 36
2Atlantic 2 12 80 6 0
Internet UseUser 2 12 63 22 2Non-user 0 12 60 19 10
Number of Employees4 or less 2 13 64 13 75 to 9 0 13 65 17 410
to 24 2 12 61 23 225 to 49 1 10 58 30 2
Years in BusinessLess than 1 year 0 0 71 29 01 to 4 years 2 16
66 9 75 to 9 years 2 13 61 19 510 years or more 1 12 62 22 3
Respondent Age18 to 29 2 18 60 19 230 to 39 1 12 65 20 240 to 49
1 12 60 22 450 to 59 1 7 64 21 860 plus 0 7 59 26 7
Respondent GenderFemale 1 10 66 19 4Male 2 14 58 23 3
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7.0 INTERNET & E-COMMERCE ACTIVITIES
TABLE 10 E-MAILNow Im going to read you a list of Internet
services an