Key Small Business Statistics - January 2009

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 Internet-based transactions and/or the manufacture and sale of Internet-related products or services."^{Footnote 16} 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 17} 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 16 is based on this survey.

Table 16: Internet Access and Use by Firm Size (Percent), 2001–2007

		2001	2002	2003	2004	2005	2006	2007
		(Percent)
[Description of Table 16] Source: Statistics Canada, Survey of Electronic Commerce and Technology (SECT), 2008. Note: Statistics Canada's Survey of Electronic Commerce and Technology (SECT), on which these data are based, defines small firms as having fewer than 20 employees, medium-sized firms as having between 20 and 99 employees, and large firms as having 100 employees or more for all industries except manufacturing. The upper limit for the medium-sized category in the manufacturing industry is 499 employees, whereas firms with 500 employees or more are defined as large.
Internet Access	Small	68	73	76	79	79	81	85
	Medium	91	92	94	96	96	96	95
	Large	94	99	97	99	98	99	99
	All Firms	71	76	78	82	82	83	87
Own Website	Small	24	27	29	32	33	35	36
	Medium	57	62	66	69	70	71	74
	Large	74	77	77	79	82	89	90
	All Firms	29	32	34	37	38	40	41
Sell Online	Small	6	7	6	7	6	7	7
	Medium	12	13	14	12	10	12	13
	Large	15	16	16	13	16	21	22
	All Firms	7	8	7	7	7	8	8
Purchase Online	Small	20	29	35	40	40	42	45
	Medium	30	47	50	59	63	64	69
	Large	52	57	61	62	68	71	74
	All Firms	22	32	37	43	43	45	48

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. Although the rate of small firms connected 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 87 percent in 2007, but small firms (85 percent) lagged well behind medium-sized and large firms (95 percent and 99 percent respectively). However, small firms have been closing the gap in connection rates between themselves and medium-sized and large firms in this respect in recent years.

Website ownership rates also increase with firm size. More than twice as many medium-sized (74 percent) and large (90 percent) firms owned websites compared with small firms (36 percent) in 2007. Over the past seven 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. Although the proportion of firms selling online has changed very little since 2001, the proportion of small and medium-sized firms that purchase online has doubled. For instance, in 2007, only 7 percent of small firms sold online, whereas 45 percent purchased online; for medium-sized firms, 13 percent sold and 69 percent purchased online; and for large firms, 22 percent sold and 74 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 16. Fast Forward — Accelerating Canada's Leadership in the Internet Economy. Report of the Canadian E-Business Opportunities Roundtable, January 2000, p.11 .

Footnote 17. 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.