Doughnuts deliver e-commerce lessons

Its adoption is widespread, its benefits can be vast in efficiency and competitive edge, but it is disruptive because of the changes it demands of staff and customers. Is Australian small businesses frightened of the changes electronic commerce brings?

A wise man once said ‘You can look at a doughnut and see something good to eat, or you can look at the hole and see nothing good at all’.

The importance of the small to medium enterprise (SME) sector as the cornerstone of Australian economic prosperity is widely recognised. Yet, despite its importance, the contribution by SMEs to the Australian economy fell from 32 percent of GDP to 29 percent between 1994 and 1998. While the reasons for the decrease are diverse, recent government initiatives have attempted to ‘push’ the SME sector towards more global markets through the use of e-commerce. Studies, however, have shown that despite the exponential growth of e-commerce, it is the larger businesses that have reaped the benefits, rather than the SME sector. A study by the authors (CW, March 1, pp 28) reported that only 15.6 percent of 164 Australian SMEs surveyed said that they had adopted e-commerce, indicating that Australian SMEs lagged even further behind in e-commerce adoption compared to similarly developed countries, including New Zealand, US, Japan, Canada and Singapore.

There have been a number of studies carried out examining the reason why SMEs are reluctant to adopt e-commerce in their day-to-day business activities. A recent joint study involving researchers from Karlstad University (Sweden) and the University of Wollongong (Australia) examined the reasons for non-adoption of e-commerce in SMEs. Aside from the ‘normal university links’, the two locations were chosen because they were of comparable size and population. Both locations had a large number of SMEs in close proximity, they had a similar government and university infrastructure and each town centred on a major industry – steel in Wollongong, timber in Karlstadt. Previous studies were examined and a list of barriers to e-commerce adoption was produced (see Table 1 below). SMEs who had not adopted e-commerce were asked to rate each of the barriers from 1 to 5 (with 1 being an unimportant barrier, and 5 a very important barrier):

E-commerce adoption barriers, E-commerce doesn’t fit with our products/services, E-commerce doesn’t fit the way our company works, E-commerce doesn’t fit the way our customers work, We don’t see any advantages in using e-commerce, We don’t understand e-commerce,The technique seems too complicated, Security is a concern with e-commerce, E-commerce costs too much, We haven’t had time, It is hard to know what to choose.

A comparison of the two groups showed that there was a statistically significant difference in the rating of all but two barriers between the Swedish and Australian SMEs: “We don’t understand e-commerce”; and “It is hard to know what to choose”. In all cases, the Australian SMEs felt that these were greater barriers to e-commerce adoption than their Swedish counterparts.

Of particular interest was the fact that the greatest differences were found in those barriers that had to do with the potential changes to working conditions of the SMEs or the SMEs’ customers. Australian SMEs reported these barriers as being more important than then the Swedish businesses. This has significant implications for the way in which Australian SMEs perceive e-commerce.

Much has been written concerning e-commerce, its adoption, its use and its many benefits. Studies around the world have shown that SMEs that have adopted e-commerce report a number of benefits, including a reduction in administrative costs, and improvements in internal efficiency, marketing and competitiveness. Yet, despite these benefits, Australian SMEs appear to be shying away from e-commerce.

It is a given that e-commerce is a disruptive technology. Any organisation that is adopting and using this technology will need to alter the way it does business and this in turn will have an impact on the way its customers do business. However, the benefits of using e-commerce outweigh the changes required for its initial implementation. E-commerce has the potential to become a source of competitive advantage to the SME sector because it is a cost-effective way of accessing customers globally and competing on a par with large businesses. If, as previous studies suggest, Australian SMEs are falling behind other countries in their adoption and use of e-commerce, they are failing to capitalize on a technology that enables them to compete effectively in the global arena simply because they fear the changes that e-commerce brings.

To expand their business and increase their customer base, Australian SMEs need to re-think their attitude to e-commerce and consider the benefits that the technology provides. They need to refocus on the doughnut so that instead of just seeing a hole, they see something that’s worth biting into.

Rob MacGregor and Lejla Vrazalic are with the Department of IS, University of Wollongong

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