How online retail boosts Australian small and medium businesses
31.10.2024 - 12:50
Small and medium businesses (SMBs) power Australia's economy, but they haven't reached their full potential. These businesses - defined as having fewer than 200 employees - employ 66 per cent of our workforce and generate 56 per cent of GDP. However, the productivity rate of SMBs, defined as revenue per worker, is 33 per cent lower than large businesses. Mandala research shows that SMBs that adopt online retail channels earn 2.2 times more revenue and are 45 per cent more productive than their offline peers. Nonetheless, only 12 per cent of all SMBs currently use online retail channels. Because SMBs represent such a large share of the economy, even a small increase in productivity would have big impacts. For example, if SMBs were to increase their adoption rate of online retail channels from 12 per cent to 15 per cent, Australia’s GDP would increase by $1.6B, equivalent to $154 per household each year.
37% of SMBs that use online retail channels sell to overseas customers, expanding their customer reach
Online retail channels support the export efforts of SMBs by: (1) making SMBs discoverable across search, comparison and recommendation sites, (2) simplifying the logistics of selling overseas, (3) managing cross-border payments and taxation and (4) assisting with marketing across different countries.
SMBs using online retail channels are 45% more productive than non-adopters, generating an additional $86,000 in revenue per worker
This productivity boost due to online retail channels stems from several factors. For example, real-time inventory systems reduce order errors, streamline stock management and automate processes, saving both time and resources. Additionally, greater customer reach through online retail channels increases sales potential, enabling businesses to serve more customers and, if needed, expand their workforce.
SMBs using online retail channels generate more than double the revenue of non-adopters
On average, SMBs without online retail channels generate $1.7 million in revenue, while those with online retail earn 2.2 times more, at $3.6 million. This gap highlights the significant advantage that online retail channels provide SMBs. By reaching more customers and boosting productivity, online retail channels help SMBs compete more effectively with larger businesses, creating a more level playing field.
Only 12% of SMBs use online retail channels. Raising the rate to 15% could add $1.6 billion to GDP
Many SMBs unaware of how to use these technologies and the benefits they could get from using them. These barriers stop them from capturing the full benefits of online retail channels, limiting their economic contribution.
Solving these challenges matters for Australia’s prosperity. We modelled the GDP impact of increasing the SMB adoption rate under two scenarios. First, increasing the adoption rate from 12 to 15 per cent could add $1.6 billion to GDP, equivalent to $154 per household each year. In the second scenario, increasing the adoption rate to 18 per cent could contribute $3 billion to GDP, or $309 per household each year.
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