Main Street Confronts Impact Of Internet; Travel Agents, Auto Dealers' Response To E-Commerce Competitive Pressure Differs Widely

3/7/2002

From: John McDowell of the U.S. Small Business Administration (SBA), 202-205-6941; john.mcdowell@sba.gov; http://www.sba.gov/advo/

WASHINGTON, March 7 -- Consumers buy airline tickets online, but still visit local auto dealers to buy new cars. This disparity in the use of e-commerce by Main Street can be explained in large part by the way in which different industries respond to competitive pressures, according to two recent studies commissioned by the Office of Advocacy of the U.S. Small Business Administration (SBA).

The reports, Impact of E-Commerce on Auto Dealers and E-Commerce's Impact on the Travel Agent Industry, focus on the affects of e-commerce on small business in the respective industries.

"E-commerce is putting tremendous competitive pressure on small business," said Tom Sullivan, chief counsel for advocacy. "We find industries as diverse as travel agents and auto dealers having to react to the new competitive environment. How they react, and how they survive, is directly affected by the structure of their industries. Few large providers dominate the travel industry, while retail auto sales rely on a network of franchised dealers regulated by state laws. The research released today shows that the effects of e-commerce on Main Street businesses plays out differently in each case," he concluded.

According to Heartland Information Research, author of the travel agent study, successful small travel agencies are responding to the rise of e-commerce, driven by large travel providers, by refocusing on higher commission cruise and tour packages, as well as reducing overhead by moving into home offices.

Heartland also found that successful small agencies are taking advantage of "off the shelf" software to match their new, large provider-dominated online competition. Consequently, total online travel sales will reach more that 20 percent in just three years.

In contrast, according to Jack Faucett Associates, author of the auto dealer report, e-commerce sales reached .02 percent of total auto retail sales in 1999. However, e-commerce is still re-shaping the industry as the authors found that new car dealers often use their online presence as an electronic brochure, with 83 percent of their Web sites picturing new car inventory, 70 percent providing links to manufacturers, and 56 percent offering Manufacturers Suggested Retail Price (MSRP).

The full research reports can be found on the Office of Advocacy Web site, at http://www.sba.gov/advo/research/rs212tot.pdf, and http://www.sba.gov/advo/research/rs210tot.pdf. Technical questions may be addressed to the Office of Advocacy, U.S. Small Business Administration, 409 Third Street, S.W., Washington, D.C. 20416.

------ Created by Congress in 1976, The Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal government. The chief counsel for advocacy, who is appointed by the President and confirmed by the U.S. Senate, directs the office. The chief counsel advances the views, concerns, and interests of small business before Congress, the White House, federal agencies, federal courts, and state policy makers. Issues are identified through economic research, policy analyses, and small business outreach. The chief counsel's efforts are supported by offices in Washington, D.C., and by regional advocates. For more information on the Office of Advocacy, visit http://www.sba.gov/advo/ or call 202-205-6533.