eBay’s Summer edition of the Online Business Index which was published today reveals that, despite the ongoing economic gloom, the outlook for online businesses is brightening.
Over the last three months confidence is up, pressure on profit margins and prices has eased and more businesses expect stronger sales in the next quarter.
At the same time as releasing the Online Business Index, eBay and Total Politics co-hosted a breakfast seminar today, with Mark Prisk (shadow minister for business and enterprise), Ed Vaizey (shadow arts minister) and John McFall (chairman of the treasury committee) and other government ministers attending. The aim of the meeting was to help raise awareness of this group of online entrepreneurs and to explore ways that government agencies and legislation can assist sellers in growing their businesses further.
The meeting looked several issues, the first being “A 21st Century Economy”. Key here was the message that small to medium sized online businesses have bucked the trend seen on the high street – a new breed of businesses have emerged which differ markedly to traditional bricks and mortar based companies and are performing well. The 123,000 online businesses registered on eBay make a significant contribution to the UK economy, including £57m worth of export sales generated by UK-based eBay sellers in January 2009 alone.
The discussion looked at ways that online businesses could be assisted and covered topics ranging from reducing business taxation and VAT burdens, to how best support small businesses and make them aware of assistance available.
Finance was also discussed, with the Business Index revealing interest rate cuts aren’t passed on to small businesses, overdrafts have been reduced and 1 in 12 small businesses have to put their homes at risk to secure funding.
“Online businesses want the Government to force banks to loosen the purse strings and stop giving lip service to the extent to which they’re helping small businesses. And they want to see the Government doing likewise by cutting business rates, corporation tax and VAT.”
– Mark Lewis, eBay UK Managing Director
Many small businesses (especially eBay businesses) often start out as part time home based businesses. They grow with advice often being sought on message boards from online colleagues, rather than agencies such as Business Link, the FSB or professional advisers such as accountants and banks. One of the challenges for the government is how to support online businesses, although it could be said many are doing just fine through their own hard work, commitment, ingenuity and determination.
Tactics by manufacturers to restrict trade in their products was highlighted. The Online Business Index highlights the 45% of sellers prevented from discounting goods, and 49% of suppliers who banned merchants from selling their products online. Because many of the restrictions are verbal with the unspoken threat of cutting off supply, this is the first time statistics on restrictive trade activities have been collated (and is why quotes from sellers in the Business Index are anonymous).
In summary the report concluded that small to medium sized online businesses are helping to pull the country out of recession with 41% looking to hire one or more additional employees.
The most important message was summed up succinctly by Ed Vaizey, who concluded stability is vital to enable online merchants to plan and grow. Shot gun tactics by the government (such as last years temporary cut in VAT rates, which did little to help the one sector of the economy that’s booming) simply disrupt online businesses and potentially hinder their growth.
Stability is something the eBay have already recognised is key, major eBay site changes are now restricted to twice a year with sellers being informed well in advance. If the government can adopt similar tactics online sellers can get on with the business of selling.
6 Responses
Interesting Post. I am aware that the vat cut to 15% was frowned upon by many, but myself being a small business wlecomed the vat cut with open arms. Specialising in home entertainment products, mainly DVD, I’ve benefitted by 5-10p per transaction due to the vat cut. This may not sound much but it definately adds up during a months worth of sales, especially in a market which has such tight margins already.
I’m just not looking forward to it going back to 17.5% on Jan 1st. Indeed it will mean more time making changes, but knowing it will cost me 5-10p per transaction will hurt more 🙁
I thought the idea of the VAT cut was to pass it on to the customer !
#2 the problem was their wasn’t any thought behind it, pointless policy change.
Totally agree, they are switching back to 17.5% on December 31st, so those that have reduced their prices will have a tedious start to the year
VAT switch to 15% made no difference to sellers, as it became an administrative burden, compounded by the fact that we could not change all listings (ebay tool issue). I still see listings with 17.5% on them, even now on ebay uk!
I have to say that Ed Vaizey spoke alot of sense. Looking at his blog, he seems a very switched on guy, well educated and has business experience.
Hitch, almost no one reduced their prices, it’s all a big con.
I went into Next in Reading several times an monitored their strategy. First was big signs saying VAT would be adjusted at the checkout. Then even bigger signs saying that all prices were now adjusted for VAT. A week later the sales started and all sales prices were £9.99, £14.99, £19.99…… just the same as they were the year before.
Check out any high street retailer now and you’ll find prices are typically the same as they were last year. Now the public have forgotten about the VAT changes the consumer is getting no benefit whatsoever.
Total waste of time and effort.