Internet changing the landscape for UK businesses

The Internet has changed substantially the way that UK businesses operate, altering people’s working habits, the way they buy goods and services and how these are marketed and sold, according to a new survey of business and consumer Internet behaviour published by the CBI and Google.

The new survey found that over half (56%) of companies consider the Internet has had a ‘substantial’ or ‘revolutionary’ impact on their industry.

60% of consumers, meanwhile, say the Internet has given them more power and 43% believe that companies are becoming more accountable as a result of the new technology. Over 70% say they look at other consumers’ comments about products before making a purchase.

Embracing the impact of the Internet

Half of businesses recognise that adapting to these changes in consumer behaviour is crucial to their future success, with most companies making their online presence more central to their overall business (75%) and more customer focused (61%), and 58% planning to increase their investment in online marketing.

However, over two-thirds (70%) said their company still had a lot to learn about how to reach customers online and only a quarter (23%) feel they make better use of the Internet than their competitors.

Richard Lambert, Director-General of the CBI said, "Six years after the dot.com bubble burst, the Internet is driving really substantial change among businesses. Firms are learning more about harnessing the Internet to benefit their staff, their customers and their future prospects.

“But too many still feel their online activities don’t live up to the competition and firms are upfront about still having much to learn about how best to reach customers via the web. Businesses need to grasp the opportunities with both hands and make the Internet as central to their business as HR or finance - or they risk being left standing.”

Nikesh Arora, VP of European Operations, Google added, "The Internet offers business a huge opportunity. Technology and social change give business the chance to reach customers on a previously unimaginable global scale. Consumers are active online, want to find out more information about products and to buy online.

“This survey suggests that businesses recognise this and are preparing to invest to make the most of it. Even if they don't see immediately how to reach their customers online, they know they have to invest to do so. I think this is a positive sign that business here is increasingly engaged online and is prepared to put the Internet at the centre of their business strategy."

Increasing investment in online marketing

Firms also plan to up their investment in online marketing, with 58% predicting an increase. Companies’ spending on Internet advertising online is set to increase by a half over the next three years, with overall UK investment in Internet marketing rising to £3.3 billion.

Firms say the most commonly used method for online marketing is currently e-mail (45%). But this was rated poorly by consumers, the majority of whom (76%) say emailed ads go straight into their ‘spam box’. Seventy-eight per cent say the only advertisements they are interested in are those that are directly relevant to what they are searching for or doing online. Least rated are pop-ups, which annoy and are ignored by the vast majority (90%).

The biggest factor stopping companies advertising more online is the feeling they have ‘limited understanding of the online environment’ (31%) and uncertainty over how Internet marketing fits in with the overall marketing mix (29%).

Companies surveyed are also, on average, investing just under £300,000 a year each on Internet-based technology, which equates to approximately £10 billion invested a year by UK businesses.

The extent of change due to the Internet has been greatest in certain sectors. For over a third of travel agents, tour operators and hotels (34%) the Internet has had a ‘revolutionary’ impact, as it has for a third of media and telecoms (34%) and a quarter of financial services companies (24%). Firms based in the South East (17%) and London (15%) are also more likely to consider the Internet’s impact as revolutionary than those in other areas.

Internet-driven sales have increased and expected to grow further

Businesses’ sales on the Internet have trebled in three years and they expect another doubling over the next three years to 13% of their overall sales. Asked about the impact their online presence has had on their offline sales, almost a third (29%) said it had actually helped boost their traditional point of sale rather than decrease it and only 4 per cent said that it had suffered.

When asked to cite brands they trust the most online, financial services providers (37%), supermarkets (30%) and book retailers (28%) came top. Timely delivery, clear and upfront prices and good, visible security were all seen as the most effective ways companies can use to win trust.

The Internet has also had a substantial impact on working practices. Almost three-quarters (72%) of firms now have technology to enable their staff to work from home using the Internet. Most firms (84%) said these new technologies improved internal communications, three-quarters (75%) productivity and over half (56%) staff morale.