SME Web takes a look at the online transaction industry and asks whether it is woth investing in.

 Is it a good idea for SME's to diversify and go into e-commerce? Is it a good time to start up your online business? The latest evidence and analysis provided to SME Web would suggest that it is a good time to go into this sector, especially if you are based in the UK.

Pago has recently released its report on the trends in e-commerce and online purchasing. The report is the result of the analysis of online payment systems which form the basis of e-commerce.  

The 2008 reports main finding is that overall the e-commerce industry has matured.  

The Pago report suggested that a strong contributing factor to increased popularity towards online shopping and commerce is the penetration of PC and broadband use globally. While the UK has been well advanced in home broadband and PC use, other areas, especially the developing world have been playing catch up.

No one can doubt the economic clout of the developing world which offer huge markets to UK produced goods. This bodes well for us as the most fundamental part of the report lies in the fact that the UK is a massively popular online destination for shoppers - the majority of the UK's e-commerce business is now in fact coming from outside our borders.

In terms of gender it has always been females who have lagged behind in online purchase activity. However the gap between the two genders is closing as females gain confidence in online shopping systems, payment methods and security. Now every third payment is triggered by a woman, this rises to 45% in retailing.

Cash flow is the corner stone of all small business. Being able to see your cash flow in advance can allow the company to grow and develop safely and effectively as budgets can be planned and adhered to. The advantage e-commerce seams to be increasingly offering is a stable sales cycle.

When are consumers shopping online?

The Pago report shows that there is in fact no clear seasonality in shopping trends. Traditional sales have often tended to be cyclical with retail especially showing massive peaks in christmas. This is not the case with online sales, except in Germany where the online sales cycle follows a very traditional spike over the christmas period.

Consumer activity has leveled off equally across the week with more and more consumers spending money online over the weekend. Previous analysis had revealed a relative slowdown in activity over the weekend when consumers had the time to head out to do shopping the traditional way. While the UK bucks this trend it must be remembered that a great segment of UK online stores and businesses get custom from outside our borders.

The time of day people choose to do their shopping is also interesting and seams to indicate a regional cultural trending. UK consumers hit the internet mostly between 2pm and 4pm to make their purchases. our European counterparts however do everything 2 hours later between 4pm and 6pm. The Germans are however an exception as they choose to do most of their online shopping between 8pm and 10pm - the traditional television prime time.

Cards

The credit card continues to dominate payment behaviour in European e-commerce, Visa’s and MasterCard’s market shares have remained largely unchanged with Visa holding a majority 69% of the transaction market.

The Pago report also points to the strong fall in the direct debit in Europe overall from 21.84% down to 8.23%. This paymentmethod is only of importance in parts of Europe. This fall underlines that this payment method is hardly known in the Rest of Europe where e-commerce is making the strongest gains overall thereby reducing the direct debit’s relative standing overall.

In the future it is believed that Maestro will become a more significant feature online as payment across borders in Europe has become significantly more simplified.

Our advice to startups and SME's

This is an industry that is doing well, we expect more and more people to turn online - the first half of the year has been the busiest for e-commerce in Europe despite the economic slowdown. Keep in mind the international market and how you can appeal to them as this is where there is the most opportunity for growth with the least amount of existing competition.

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