Nearly 9 in 10 small and medium sized enterprises (SMEs) expect to be selling online by the end of 2018, compared to 64% of SMEs who say they sell online today, according to the Q4 2017 SME Growth Tracker, a report by Capital Economics commissioned by Amazon UK and Enterprise Nation.
The report, now in its second year and informed by a YouGov survey of over 1,000 SMEs, provides an assessment of the confidence and health of British SMEs and monitors key financial and economic trends of businesses that account for 60% of UK private sector employment.
The significant increase in the number of SMEs planning to use e-commerce in the coming year is primarily driven by a surge in business owners planning to sell via their own company website (rising from 50% to 68%) and their own mobile apps (increasing from 13% to 24%). More businesses also expect to sell via third party online retailers (rising from 21% to 27%).
SMEs who use e-commerce anticipate significantly faster revenue and jobs growth next year. Compared to SMEs that don’t use e-commerce, those who do are expecting more than triple the revenue growth (+1.9% compared to +0.6%) and double the jobs growth (+0.8% compared to +0.4%).
Amazon UK country manager Doug Gurr commented: “The contrast in performance between businesses who use e-commerce and those that don’t is significant, so it’s reassuring for the UK economy to see small businesses investing in digital.
“The impact digital tools and services have on a small business cannot be underestimated. They can improve productivity, boost revenue growth and provide real export power for SMEs. That’s why next year we’ll re-double our efforts to help businesses of all sizes embrace the digital economy, with programmes like the Amazon Academy, to ensure the UK remains globally competitive long term.”
The Q4 SME Growth Tracker also found that almost a third (32%) of small business owners who use e-commerce believe digital tools and services will increase their sales this Christmas, with online sales up 0.4%, compared to SMEs that don’t use e-commerce forecasting a -0.4% decline in Christmas revenues.
Enterprise Nation founder Emma Jones MBE said: “Greater digital adoption brings greater Christmas cheer for Britain’s small businesses which is good news for all. With the uncertainty of Brexit and the turbulence of the global economy, small business owners understand the need to adapt and innovate to stay ahead of the curve, and digital adoption is a key enabler of this.”
SME confidence in the broader UK economy has slightly deteriorated this quarter with the SME Growth Tracker Economy Confidence Index score edging down to -24 compared to -22 in the third quarter and -15 in the fourth quarter of last year. This year, confidence in the economy was lowest in the second quarter soon after the general election, when the Economy Confidence Index score fell to -27.
Capital Economics chief project economist Mark Pragnell noted: “Our thermometer of SME confidence remains below zero, with few owners and managers still seeing a lot of headwinds in the economy. But while the figures show confidence remains low among SMEs as a whole, e-commerce users are less pessimistic about business conditions over the next twelve months. This is perhaps due to their expected increase in revenue over the festive period from online sales. Given these results, it is no wonder that more SMEs expect to start using digital tools to sell goods and services in 2018.”