Essay: How SMEs can benefit from improving their web operations

Abstract
This paper explores how small and medium size enterprises (SMEs) can benefit from improving their web operations. It encourages SMEs to adopt e-commerce enabled websites and utilize different web design elements. It explains the importance of SMEs to the Canadian economy and the implication of not improving their web operations. It outlines how consumer behaviour has changed and how online shopping preferences have grown in Canada. This information is used to explain how the growth of e-commerce and merchants such as Amazon have disrupted the retail industry and pose a threat to SMEs. This paper then identifies how SMEs can mitigate this threat by adopting a customer first strategy that fulfills customer needs. This may require SMEs to adopt solutions and web design elements that deliver a superior web or customer experience. The objective of this research paper is to help SMEs improve their web operations. The first section will explain the importance of web design in e-commerce.
The second section will outline a simple set of recommendations that be can be adopted by SMEs with and without a website. If SMEs can improve their web design to meet the evolving needs of consumers, SMEs can mitigate the digital disruption of retail and contribute further to the Canadian economy.
Keywords: SMEs, e-commerce, web design, web experience, customer experience
Introduction
Untitled Paper
In Canada, retail e-commerce sales continues to grow year over year (Statistics Canada, 2018). This growth is largely driven by an increase in consumer spending (Forrester Research, 2018) and a shift consumer behaviour (Canada Post, 2016). The growth of e- commerce presents a unique opportunity for SMEs. It may allow them to reach new consumers online and in new markets (Gessner & Snodgrass, 2015). However very few SMEs have taken advantage of this opportunity to date (Gessner & Snodgrass, 2015). Surprisingly very few SMEs have an interest in adopting e-commerce capabilities or creating a website (PayPal, 2017). These findings are troubling for a few reasons. The failure of SMEs to adopt websites and e-commerce capabilities can impact their growth and have economic implications. Most importantly SMEs may be left behind as consumer shopping behaviour shifts online in favour of e-commerce merchants. The disruption of the retail landscape by e-commerce merchants such as Amazon has been well documented (D’Agostino, 2018). It is important for SMEs to digitize their operations. SME should adopt websites with e-commerce capabilities and utilizing web design best practices to improve the web experience or they risk being left behind. Definitions
The term SMEs is an acronym that refers to small and medium size enterprises. Statistics Canada (2019) defines SMEs as businesses with less than 500 employees. Their most report estimates that medium size enterprises only represent 2.1% of businesses in Canada (Statistics Canada, 2019). Small size enterprises are frequently considered the economic engine of Canada as they represent 97.9% of all businesses in Canada (Statistics Canada, 2019). These enterprises have fewer than 100 employees and employ approximately 69.7% of private sector employees (Statistics Canada, 2019). This paper will focus on both small and medium size enterprises. However due to the economic importance of small size enterprises in Canada, this paper will give more consideration to small enterprises in the analysis section of the paper.
The term web experience refers to the overall experience a user has on a website. In the context of e-commerce it refers to the experience consumers have when shopping for a product on a website (Sicilia, Ruiz, & Munuera, 2005). These activities may include searching for products or product information, interacting with the merchant or products and making purchases online (Sicilia, Ruiz, & Munuera, 2005). In the context of Marketing, the corporate website has long been considered the primary medium for delivering a web experience to retail consumers (Constantinides, 2002). Research in the field of Marketing has traditionally looked at web experience as a complex mix of web design elements on websites with the persuasive power to influence consumer behaviour (Kotler, 2003). These web design elements may be related to the functionality, structural layout, visual styling, or the contents of the website (Constantinides, 2004).
There is a large body of research that shows web design elements can be an enabler of e-commerce transactions. Recent studies have shown that these elements can influence attitudes (Hassan, 2016), perceptions (Cyr et al., 2018), purchase decisions (Shaouf, Lü, & Li, 2016), and purchase intention (Pee, Jiang & Klein, 2018). A poorly designed website can frustrate users, and can result in a high bounce rate as consumer abandon the website upon entry (Garett et al., 2016). A poor website experience can also negatively influence perceptions contributing to consumers switching brands when making purchases online and in-store (Constantinides, 2004). Therefore it is important for SMEs to have an understanding of web design best practices in order to build a successful e-commerce website.
Web design can also play a crucial role in the customer experience. The term customer experience refers to the internal or subjective response a customer has when interacting with a company website (Meyer & Schwager, 2017). Web design plays an important role in developing a satisfying customer experience online (Szymanski & Hise, 2000). A positive customer experience can influence the perceptions and expectations customers have of e-commerce merchants (Pappas et al., 2014). It is important to note that “consumers are increasingly sensitive to the subjective and symbolic nature of commercial sites” (Micu et al., 2019, 2).
In the context of e-commerce, web designers are encouraged to develop unique and immersive experiences that contribute to the customer’s shopping goals. Micu et al. (2019), explains that customers now “seek to immerse themselves in experiential contexts rather than just buying products or services” (2). Therefore it is important for SMEs to have an understanding of how web design can contribute to an effective customer experience.
Background
In 2017, retail e-commerce sales in Canada reached new record setting heights. eMarketer (2018) estimates that this record setting sales total of $45.1 billion CAD recorded in 2017 will be eclipsed in years to come. The report by eMarketer (2018) predicts that retail e- commerce sales are expected to grow by up to 9-13% annually from 2018 to 2021. While traditional retail or in-store sales in Canada has failed to keep up with the pace. A bulletin by Statistics Canada (2018) found that traditional retail sales in 2017 only increased by 6.4% due to rising prices. This increase was the highest annual growth rate recorded in 10 years by Statistics Canada. The dramatic growth of retail e-commerce sales will be driven by increased consumer spending and an increase in the total number of e-commerce users in Canada. Reports by Canada Post (2016) indicates that more Canadians will begin to shop online in the future. A 2018 report by Forrester Research indicates that Canadians spending per year is expected to increase by 54% in 2019. These statistics point to a strong trend of growth in e- commerce and a healthy Canadian retail sector.
Opportunity
Researchers point to the rapid growth of retail e-commerce sales in Canada as a great opportunity for SMEs to find consumers particularly in new markets. Gessner and Snodgrass (2015) explain that increased cross-border trade are one of the many benefits for Canadian SMEs that adopt e-commerce capabilities. Citing research by O’Brien (2015) the authors suggest that Canadian SMEs should look no further than the US for inspiration. O’Brien (2015) explains merchants in the U.S. have benefited from Canada’s appetite for products from the U.S.. A report by Microsoft (2015) on cross-border shopping estimates that two-thirds of Canada’s online shoppers have made purchases from U.S. merchants. This report by Microsoft (2015) adds further support to the position held by Gessner and Snodgrass (2015). It found that Canadian SMEs could see a 25% increase in revenues if they sold both online and cross- border (Microsoft, 2015). While a large sales opportunity exists for Canadian SMEs in the U.S., Gessner and Snodgrass (2015) explain that relative few SMEs have taken advantage of e- commerce and cross-border opportunities.
Reports by Sweet (2012) and PayPal (2017) help explain why SMEs have failed to adopt e-commerce capabilities. In a Report of the Standing Committee on Industry, Science and Technology, MP David Sweet (2012) attributed the disinterest of SMEs in adopting e-commerce capabilities was primarily due to their high costs. Sweet (2012) concludes that SMEs simply do not believe the costs justify the investment. Five years later the negative sentiment among SMEs has not changed. A study by PayPal (2017) on the Canadian Small Business Landscape found that only 7% of Canadian SMEs had an e-commerce enabled website. While 71% of SMEs indicated they would never consider selling online, and 34% of SMEs did not plan to build a website in the future (PayPal, 2017). The study found concerns related to levels of service, online fraud, order fulfillment and a limited understanding of technology as the main barriers to adoption. The lack of e-commerce capabilities and negative sentiments among SMEs towards websites have a few troubling implications.
Problem I
The first implication is related to e-commerce growth as an industry in Canada. A website, is essential for allowing SMEs to participate in e-commerce. Mohammad (2018) and Burnett (2017) have linked the slow growth of e-commerce in Canada on the reluctance of SMEs to adopt new technologies such as websites. It is important to note that Canada is considered a laggard in e-commerce when compared to other markets. Canada trails the USA in total retail e-commerce sales by a large margin. In 2018, Statistica reported that retail e- commerce in the USA sales grew by 13% to $504 million. This sales figure is approximately 10 times larger than the total recorded by Statistica for Canada in 2018.
While SMEs may not be entirely at fault they play a vital role in the economy and therefore are believed to contributes to the problem. Statistics Canada (2019) explain that SMEs account for 54.2% of the economic output of the business sector. The largest number of SMEs can be found in the retail and wholesale trade sectors. Therefore it can be argued that the failure of SMEs to adopt websites and new technologies can threaten e-commerce growth and even the economic growth of Canada. As it can result in missed opportunities that could contribute to the growth of e-commerce sales and success of Canadians businesses.
These missed opportunities are another major implication. SMEs could be left behind in favour of other businesses that have websites. Websites are not only an important e-commerce tool, but it can be a useful source of information for consumers. Therefore SMEs that choose to not create a website could find it difficult to compete or differentiate themselves in a market where their competitors have websites. Research by the Canadian Internet Registration Authority (CIRCA) found that consumers tend to view SMEs without websites less favourably.
A CIRCA (2016) Internet Tracking Study found that Canadian consumers are less likely to trust businesses without a website. The study also found that consumers thought SMEs without a website looked less credible (CIRA, 2016).
By not having a website, most SMEs in Canada are missing a large opportunity for e- commerce sales in the B2B sector. Laudon and Traver (2017) explains that business to business (B2B) sales is the largest form of e-commerce in the U.S. with over $6.7 trillion USD in transactions in 2016. In Canada, e-commerce has become an important part of the B2B retail landscape. A study by Forrester Consulting commissioned by Purolator (2016) found “B2B online selling is already a major part of doing business in Canada” today. Of the 400 retailers surveyed by Forrester Consulting, half of B2B sellers indicated that over 25% of their sales took place online. Purolator (2016) warned that “firms that avoid online selling risk falling behind” in favour of other sellers that embrace e-commerce and changing consumer behaviour (1).
The third implication of these findings is related to the risk of falling behind. Canada
Post (2016) estimates that e-commerce sales in Canada will continue to grow by double digits annually. In 2019 retail e-commerce sales in Canada are expected to increase to $49.67 million CAD up 13% from 2018 (Canada Post, 2016). Similarly, in 2020 retail e-commerce sales in Canada are expected to increase by 12.3% to $55.78 million CAD (Canada Post, 2016). This increases in retail e-commerce sales will be primarily driven by a channel shift which describes a shift in purchase preferences among consumers (Canada Post, 2016).
This channel shift will see consumers begin to purchase products online they once purchased offline leading to a shift in sales between offline to online channels. Given this shift in consumer purchase preferences the future looks bright for e-commerce merchants in Canada. However the same cannot be said for SMEs in the retail and wholesale sectors that fail to adopt e-commerce capabilities. These SMEs may be at risk of being displaced as consumer preferences shift to digital channels. However, it’s important to note that Canada Post (2016) estimates retail e-commerce sales will represent less than 10% of total retail sales by 2020. Therefore it is understandable why SMEs may not be in a rush to adopt e-commerce capabilities. Yet, the threat of displacement will linger for SMEs as consumer preferences evolves.
Problem II
The biggest threat to Canadian SMEs may be Amazon. The e-commerce giant entered Canada in 2002 with the launch of amazon.ca. Over the past seventeen years it has grown from a bookstore to become the largest e-commerce retailer in Canada. The Bank of Montreal (2016) estimates that amazon.ca and amazon.com earned over $3.5 Billion CAD in e- commerce sales in 2016. That sales figure is approximately twice as larger as the second largest retailer Apple which only grossed $1.6 billion CAD (BMO, 2016). Statistica (2017) estimates that Amazon’s two largest properties amazon.com and amazon.ca represent approximately 11% of all retail e-commerce spending in Canada. In the U.S., Amazon is a not just a dominant e-commerce retailer it is arguably the new face of retail. A 2017 eMarketer report explained that “nearly half (46.7%) of US internet users started product searches on Amazon compared with 34.6% who went to Google first” (More Product Searches, 2017, p 1). Amazon has become the go-to destination for people looking for products and product information rivalling Google.
What may be more impressive is how it found success in the US and Canada. Lisa Wright (2018) explains that Amazon’s “secret sauce” to success is simply its obsession with the customer experience (Wright, 2018, 1). Customer Obsession is one of fourteen leadership principles listed on Amazon’s website. This principle requires leaders to “start with the customer and work backwards” to “earn and keep customer trust” (Amazon, n.d.). Wright (2018) explains that Amazon uses this perspective to create great experiences for their customers (p 4). Making use of insights is key to this approach and so is optimizing their operations for added convenience (Wright, 2018). These customer centric lessons are essential for SMEs seeking to modernize their operations. If not, these SMEs are at risk of being displaced by a larger e-commerce merchant in-tune with consumer needs.
This displacement of SMEs by Amazon is a real threat that should not be taken lightly. This threat has been coined as the “Amazon Effect,” and it refers to Amazon’s impact on the retail landscape (D’Agostino, 2018, 2). Amazon’s success has often come at the expense of competitors both online and offline. D’Agostino (2018) highlights how Amazon’s business model and operational efficiency has led to the disruption of markets and contributed to the downfall of retailers across the retail industry in the US. This effect can be observed in foreign markets as well. Research by Yang (2018) highlights how Amazon’s operations has enabled them to overcome barriers in the Australian market disrupting the electronics market.
eMarketer (2017) explains in their annual report on e-commerce in Canada that the digital disruption of retail is well underway. The report by eMarketer (2017) suggests that retailers are already feeling the pressures of the amazon effect. It cites the rise of hybrid fulfillment models (such as buying online and collecting in-store) and increased investment in the web experiences of digital properties as evidence of the digital disruption spurred by Amazon (eMarketer, 2017). These initiatives by larger retailers should give pause to SMEs that choose not to adapt their operations. No one is immune to digital disruption, a point made by numerous pundits citing the closures of Blockbuster, Sears and Toys ‘R’ Us as reminders of that lesson.
It is important to remember that behind the well oiled operations of Amazon globally is a commitment to the customer. This commitment has endeared them to Canadians making them the most trusted e-commerce retailer in Canada. In 2018, BrandSpark a market research firm announced that Amazon was ranked first by Canadians in thirteen retail categories. Robert Levy, President of BrandSpark explains that these results are an indicator of which retailers deliver “the most value and best experience to consumers” (Newswire, 2018, p 2). To succeed in categories dominated by Amazon, SMEs will need to embrace this commitment to the customer. Levy explains that retailers “need to stay top-of-mind as their customers move online, and deliver the online browsing experience, selection, value, and service required to be shoppers’ go-to destination in the category” (Newswire, 2018, p 6). The silver lining to Amazon’s success has been that it has left a simple example for SMEs to follow. SMEs should digitize their business operations and focus on the changing needs of customer.
Solution
The digitization of business operations for SMEs should begin with launching a website for their business. A website will enable SMEs to shift their products and services to a new channel to meet the needs of consumers. For SMEs with a website the adoption of e- commerce capabilities is key. This will enable SMEs to appeal to shoppers in Canada and in new markets that prefer to shop online. Of equal importance is the web design of existing websites. A continued commitment to improving the designs and e-commerce capabilities of websites will allow SMEs to mitigate future disruptions that stem from the growth of e- commerce and changing consumer behaviours.
Outline
The objective of this research paper is to help SMEs improve their web operations. The paper will be split into two sections; the first will provide a review of existing literature and the second section will build on this literature to provide recommendations. The first section will explain in further detail the importance of web design in e-commerce. The focus of the literature review will be the discussion of key themes researchers have identified as enablers of e-commerce transactions. These themes include trust, privacy, usability, security and convenience. Other themes related to web design such as heuristics, interactivity and website quality will be explored.
Each theme from the literature review will then be tied to content in the second section of the paper. This section referred to as the analysis will address the needs of SMEs with and without a website. It will provide a simple set of recommendations that be can be adopted by SMEs. This paper proposes the use of content management systems for SMEs without a website. Alternative the paper proposes the use of e-commerce plugins and different web design elements as solutions for SMEs with a website. It will explain the importance of each proposed solution and how it can be used to improve the web design to build a successful e- commerce website.