However, the number of small businesses conducting e-commerce is growing. Sanjeev Aggarwal, senior analyst at Boston-based research firm The Yankee Group, said the number of small businesses that do e-commerce on their Web sites grew by 5% from 2004 to 2005.
And as that number grows, experts say businesses should look for vendors that can manage their entire online strategy and leverage the Web's full potential.
Small businesses should look for vendors that can offer more than Web design and Web hosting services, Aggarwal said. They should find vendors that can also offer expertise in search engine optimization, online marketing, e-commerce hosting and Web analytics.
The typical small business has limited IT resources that prevent it from developing an effective Web site, Aggarwal said. Vendors that have traditionally built and hosted Web sites for SMBs will have to expand the services they offer in order to meet the growing demands of the market.
According to a report by Aggarwal on the Web hosting and services market, small and midsized businesses (SMBs) will increase their spending on online advertising by 40% to 45% annually through 2010.
Reaching customers online is becoming more complicated than ever, with sponsored searches, local searches, mobile searches and organic searches all critical to a small business' success.
"When they look at a vendor they need to look at what the vendor offers in solutions, not just who has the highest storage capacity or the highest bandwidth," Aggarwal said. "They need to look at what the company is offering in search optimization, helping them with sponsored search activities, Web analytics."
"So these Web hosting companies almost become an outsourced marketing department," Aggarwal said. "[SMBs] could hire their own marketing person to specialize [in online marketing] at a cost of $50,000 or $60,000. Or they could work with a hosting company and spend $2,000 or $3,000 a month to do that."
Aggarwal said small businesses can't afford to maintain the expertise needed to stay on top of the complexities of online marketing, especially optimizing a Web site so it scores well in organic and local search engine results.
"The whole concept of an organic search: They need the right words on their site to get to the top of the page. Keeping track of all those words, what words are landing where and how you make slight changes in words to go from page 15 [of a search] to page one," Aggarwal said.
SMBs should also look for vendors that can help them blend data from e-commerce transactions seamlessly into back-office systems such as accounting and inventory management and customer relationship management. By integrating a Web site with these systems, a small business can offer a personalized experience to the site visitor.
"Once you have that data captured, you can rely on an Amazon.com-type experience. When a person comes to your site, you know what they bought before. They can use that in a strategic way," Aggarwal said.
Todd Myers, president and co-founder of Modern Retail, a Chicago-based Web hosting and services company, said he offers many of the services Aggarwal describes.
Myers' company specializes in creating Web sites for specialty retailers, companies with one to 20 stores. Myers said about 70% of his clients had never been on the Web before coming to his company. He said his company's goal is to make its clients' Web sites look and function like major market competitors
"Mostly specialty retailers don't have huge IT departments," Myers said. "They usually have a couple people who are generally tasked with running their POS [point of sale] system, the computers within the stores. Their [the IT staff's] involvement with us tends not to be at a programming level, but how we can work together to make the site more successful."
Aggarwal said few vendors actually offer the full array of services he advocates, but as more small businesses seek to more fully leverage the Web, more vendors will add these services to meet the demand.
Aggarwal said small businesses should seek out vendors that can execute their whole Web strategy. SMBs should avoid using multiple vendors to cobble together a site, he said.
"One mistake is going to five different vendors, each offering different type of things," he said. "The amount of time you have to spend with each vendor explaining your business -- it's a lot. And those vendors don't interact with other vendors."
Aggarwal said SMBs should also look for references from vendors that are offering these expanded services. "I would look at other SMBs they've worked with," he said. "Did they just help develop a Web site, or did they help improve the business?"
Let us know what you think about the story; e-mail: Shamus McGillicuddy, News Writer