Small-Business Owners, E-Commerce and Technology

WASHINGTON, D.C. -- The majority of U.S. small-business owners say the increasing shift in the business marketplace from brick-and-mortar stores to online commerce is not negatively affecting them. Just over two-thirds of owners interviewed as part of the Wells Fargo/Gallup Small Business Index say the trend toward online business is not having an influence on their business either way. Among those who say it is having an effect, about as many owners (15%) say it is helping their business as say it is hurting their business (16%).

	Helping your business	Hurting your business	Not having much impact on your business
	%	%	%
	15	16	68
Wells Fargo/Gallup Small Business Index, July 11-18, 2018

These results are from the latest Wells Fargo/Gallup Small Business Index, conducted July 11-18, based on a random sample of 604 small-business owners from all 50 states. The owners' businesses cover a wide variety of sectors, including services, retail, construction and manufacturing, many of which would not be as directly susceptible to online competition as others.

About six in 10 small-business owners say that at least a small percentage of their business is conducted online, while only two in 10 perceive themselves as actually competing -- at least at this point -- with large e-commerce companies and retailers.

The finding that 15% of owners say e-commerce is helping their business shows that some have been able to take advantage of the trend, perhaps by finding new customers not available to them previously.

Owners do anticipate that more of their business will be conducted online in the future. Twenty-two percent of owners say more than a quarter of their business is currently transacted online, but 32% expect that to be the case within the next five years. Still, even with a five-year time horizon in mind, the majority of owners project that a quarter or less of their business will be online, including about a third who say none of it will be.

	Now	Over the next 5 years
	%	%
None	40	31
1% to 10%	26	19
11% to 25%	11	16
26% to 49%	5	6
50% or more	17	26
Wells Fargo/Gallup Small Business Index, July 11-18, 2018

Owners Positive About Impact of Technology

Small-business owners are generally positive about the impact of changing technology on their businesses. Half say that the "continuing need to have up-to-date technology and upgraded digital platforms" is an overall plus for their business, while just 6% consider it a negative. The remaining 43% say it doesn't affect them either way. Apparently, rather than looking at the need to upgrade technology as a negative cost, owners view the resulting operational benefits as a plus or as not having an impact either way.

One reason so few business owners express concern about the impact of technology could be that most owners, 63%, say their company already has the technology needed to be competitive in its industry.

Would you say that (the) continuing need to have up-to-date technology and upgraded digital platforms
	Is an overall plus for your small business	Is an overall negative for your business	Does not affect your business either way
	%	%	%
	50	6	43
Do you feel that your company currently has the technology needed to be competitive in your industry, or do you feel that your company would be more competitive with improved technology?
	Has the technology needed to be competitive	Needs improved technology to be competitive
	%	%
	63	33
Wells Fargo/Gallup Small Business Index, July 11-18, 2018

Is there an inordinate financial cost to keeping up with technological changes? For over a third of owners (36%) the answer is "yes" -- doing this causes them at least some financial strain. On the plus side of this equation, however, that leaves over six in 10 who say their "need to keep up with and invest in new technology for your business" causes them little or no financial difficulty.

Other Potentially Disruptive Changes Are Looming

Owners were also asked to predict how four other changes in the way business is being conducted today -- changes relating to the "gig" economy and technological advances -- may affect them in five years.

A majority of owners believe none of the four changes tested will affect their business positively or negatively. There are differences in the perceived impact among those who expect some kind of effect.

• Owners are most positive about "the need to find and retain employees who are able to deal with the latest digital or technological ways your business operates"; 35% said this would have a positive effect on their business and only 6% a negative effect. Owners may view this situation not as burdening them with finding such employees (elsewhere in the survey, owners did report that finding qualified employees is currently a major challenge) but as producing positive outcomes when such employees are found.

• The "shift from owning computer hardware or physical equipment to paying for solutions and platforms online" was also seen as a net positive (24% positive versus 13% negative), although most, 62%, don't think this will affect them either way.

• The pending ability to automate owners' existing work, enabling them to get by with fewer employees, engendered a mixed reaction, 22% positive to 18% negative.

• The only scenario generating more negative than positive responses is the move to a gig economy, in which full-time employees are replaced by workers hired for short periods of time on an as-needed basis. Twenty-five percent view this as a negative, compared with 19% who consider it positive.

A separate question asked last year found small-business owners somewhat more positive about how "the trend toward more on-demand labor will benefit your business in the long run." This question did not mention replacing full-time workers; the current survey did, and that may account for the more negative responses to the "gig economy" question.

Those who have a positive view of the "gig" trend presumably believe this type of "just in time" staffing will reduce their costs, but the one-quarter who say it would have a negative impact may place greater emphasis on the value of full-time employees -- who in many instances provide consistency and a more thorough knowledge of the business.

	Positive impact on business	Negative impact on business	Won't affect business
	%	%	%
The move to a gig economy, replacing full-time employees with hiring employees for short periods of time only when needed	19	25	54
The ability to automate your existing work and get by with fewer employees	22	18	59
The need to find and retain employees who are able to deal with the latest digital or technological ways your business operates	35	6	58
The shift from owning computer hardware or physical equipment to paying for solutions and platforms online	24	13	62
Wells Fargo/Gallup Small Business Index, July 11-18, 2018

Bottom Line

The results of this latest Wells Fargo/Gallup Small Business Index survey reveal that the nation's small-business owners have a generally positive mindset. They tend to view technological changes as a plus rather than a minus and, perhaps reflecting the widely varied nature of the small-business universe in the U.S. today, the majority do not express worry the impact of e-commerce on their businesses.

Editor's Note: The text of this article was updated in several places on August 15, 2018.