SMEs prove e-business can pay

For every high-profile story about another e-business venture being abandoned because of escalating IT costs or integration...

For every high-profile story about another e-business venture being abandoned because of escalating IT costs or integration problems there are other, less-publicised stories about SMEs successfully managing to Web-enable their businesses.

As early as April 2000 - a month before clothes retailer Boo became the highest profile European dotcom failure - Internet consultancy E-sight was predicting that UK retailers' e-commerce initiatives would result in losses of £100m over the year. The catastrophe would occur chiefly because too much was being spent on complex technology platforms, inefficient order-fulfilment methods, unfocused marketing spend and insufficient gross profit margins.

But one SME that has managed to defy this Armageddon scenario is Hill Billy, a company selling powered golf trolleys. It spent less than £3,000 building a Web site that displayed golfing products and allowed customers to shop online. Consequently, it had to send out fewer product brochures and, because less time was spent dealing with product queries, the company was able to work more efficiently.

Hill Billy also found that by including a simple questionnaire on its site it was able to ascertain that 54% of the site's visitors were Daily Mail readers. By using this information the company could plan its advertising campaigns more effectively.

Alan Ainscow, operations manager at Hill Billy, said: "In terms of knowing where to advertise, that is very helpful. We have found our site to be a good way of getting feedback."

Ainscow added: "The main impact [of having a Web site] is the decrease in telephone calls. Telephone calls can be quite lengthy, especially if it's a query relating to a product the customer cannot see or doesn't know about. Each order taken over the telephone in this way can take between five and ten minutes."

Industry analysts believe that most organisations investing in e-business technology have seen no increase in revenues, let alone any return on their investments.

Nevertheless, it is possible to generate revenue from e-business as Henry Hardoon, chairman and managing director of the Web Group, a company selling pure oxygen mini canisters, has demonstrated.

Hardoon spent £2,500 on an e-commerce initiative and was able to boost his revenue ten times, from £300 to £3,000 per month. By buying-up domain names based on the searches potential customers were using to find products, Hardoon was able to harness the power of the Internet to increase his company's income.

"We tried traditional forms of advertising, using the national press," said Hardoon. "That generated a lot of orders at first but we found that we didn't get repeat orders. However, we discovered that the people reached via the Web tended to come back for more orders. We bought 70 domain names. By buying more domain names and therefore consolidating our position, we have seen a big increase in orders and have crowded out the competition."

For other SMEs, the Internet has proved a cost-effective tool for generating new revenues in overseas markets. Mike Jarman, the managing director of Whitby-based E. Botham & Sons, a family-run bakery with 80 employees, was looking for a way to generate new business when he stumbled upon the Internet.

Before E. Botham & Sons made its first foray online in 1995, the company tended to be busy in summer but quiet in winter. The business would often receive orders via fax from expatriates as far away as Australia, asking for cakes to be sent to relatives in England.

To avoid costly fax-backs, Jarman created a Web site including payment facilities. The orders came in thick and fast, helping to compensate for the highs and low of the business. The Internet has allowed the firm to win major contracts and they are now busy all year round.

"Because we kept the details of everyone who bought online from us, we had a fantastic mailing list," said Jarman. "It is a fantastic additional marketing tool to bolt onto all the traditional types of marketing that we do. The Web site is there for brand-building. I am using it just as well as the big boys. I am reaching a market that before 1995 would have been impossible for me."

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