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Key Small Business Statistics - July 2006
How many small businesses use e-business?
Engaging in electronic business (e-business) is defined as leveraging "the Internet for providing or sharing information, or for delivering services, and/or realizing some or all of its revenues from Internetbased transactions and/or the manufacture and sale of Internet-related products or services."Footnote 19 In addition to online purchases and transactions (referred to as e-commerce), e-business includes portfolio management, business planning, and Internet- or intranet-based communication between a business and its clients, suppliers and other partners.
Embracing e-business can offer many benefits to a firm, regardless of its size. Using the Internet as a business tool can improve coordination within the production process, improve communication with suppliers and customers, optimize supply sources and increase a firm's presence in the marketplace. However, the extent to which firms use e-business, and for what purposes, varies considerably depending on a firm's size.
Data on e-business are available from a variety of sources, which often do not agree. The reason for the discrepancies is that e-business survey results are very sensitive to sample selection and timing. The most reliable source of data on e-business is Statistics Canada's Survey of Electronic Commerce and Technology (SECT),Footnote 20 which covers more than 21 000 firms. It defines small firms as having fewer than 20 employees, medium-sized firms as having between 20 and 99 employees (499 for manufacturing) and large firms as having 100 employees or more (500 or more for manufacturing). Table 15 is based on this survey.
Having an Internet connection does not necessarily mean a business is embracing e-business, although being connected may serve as an indicator for the use of e-business because it is a minimum requirement for participation in almost any form of e-business. While the rate of small firms connecting to the Internet is increasing, they continue to lag behind medium-sized and large firms in terms of both connection rates and the ways in which the Internet is put to use in the business. The overall rate of firms connected to the Internet was 82 percent in 2004, but small firms, at 79 percent, lagged well behind the 96 percent and 99 percent of medium-sized and large firms connected to the Internet respectively. However, small firms have been closing the gap in connection rates between themselves and medium-sized and large firms in recent years.
Website ownership rates also increase with firm size. More than twice as many medium-sized (69 percent) and large (79 percent) firms owned websites compared with small firms (32 percent) in 2004. Over the past four years, the proportion of firms that own a website has increased across all sizes of firms.
As firm size increases, there is clearly a higher percentage of firms that buy and sell online. Furthermore, the number of firms that buy online has been increasing in recent years and is now roughly five times the number of firms that sell online, and this holds true for all sizes of firms. Although the proportion of firms selling online has changed very little since 2001, the number of small and medium-sized firms that purchase online has doubled. For instance, in 2004, only 7 percent of small firms sold online, while 40 percent purchased online; for medium-sized firms, 12 percent sold and 59 percent purchased online; and for large firms, 13 percent sold and 62 percent purchased online. This likely reflects higher costs associated with setting up operations to sell online compared with the low costs of purchasing online.
Small firms that operate in service industries generally have more e-commerce activity than those operating in goods-producing industries. However, small firms have less activity related to e-commerce than medium-sized and large firms across all industries.
Footnote 19. Fast Forward — Accelerating Canada's Leadership in the Internet Economy. Report of the Canadian E-Business Opportunities Roundtable, January 2000, p.11.
Footnote 20. The minimum level of revenue required to be included in Statistics Canada's Survey of Electronic Commerce and Technology (SECT) varies depending on the industry but ranges from $150 000 to $250 000 per year. Businesses with no full-time employees but that meet the minimum revenue criterion were included in the survey. Those without full-time employees included self-employed persons without paid help, seasonal businesses and virtual firms.
