Center Releases Study of WWW Business in Kentucky

CONTACT: Peter Schirmer

FRANKFORT, KY (February 20, 1998) — Few Kentucky businesses have a site on the World Wide Web, but those that do overwhelmingly believe it’s worth the money. Kentucky’s Web businesses say having a Web site allows them to share information with customers, improves their market image, and, most important, increases sales.

These are among the findings from a survey of businesses in Kentucky that have sites on the World Wide Web. The survey, conducted by the Kentucky Long-Term Policy Research Center, is thought to be the first of its kind in Kentucky.

Only a tiny percentage of Kentucky’s businesses have hung a shingle in cyberspace so far. The Center estimates that of the state’s approximately 193,000 businesses, at best 1 percent have a Web site. Kentucky’s Web businesses are also disproportionately located in metropolitan areas, especially Louisville, Lexington, and Northern Kentucky. The central counties in those three areas are home to nearly two thirds of Kentucky’s businesses on the Web. A handful of rural counties also have a relatively high number of Web businesses. Web businesses are sparse in eastern and south central Kentucky, suggesting that rural enterprises are missing some big opportunities as the Web can alleviate distance barriers.

The largest percentage of Kentucky’s Web businesses are computer-related; other goods and services commonly sold on the Web include tourism, books and magazines, arts and crafts, and financial services. Kentucky’s Web businesses sell countless other products as well, from Civil War relics to aquarium maintenance.

The biggest obstacle to electronic commerce today is the perceived lack of security. About 15 percent of Kentucky’s Web businesses have encryption software that allows customers to submit credit card numbers and other personal information. However, many consumers do not even trust secure Web sites. Still, one out of ten Web businesses says that Web sales account for at least 40 percent of total revenue, and one out of four says that Web sales will account for at least 40 percent of total revenue within the next 10 years. Businesses that have secure sites are far more likely to agree with the statement, “Having a Web site has helped our business increase sales.” Tourism businesses, in particular, strongly believe their Web sites have increased sales.

About 40 percent of Kentucky’s Web businesses created their sites entirely by themselves, while half relied entirely on another business or individual, and the remaining 10 percent combined internal efforts with outside help. The fees businesses paid for help in developing a Web site ranged from $10 to $40,000. The median fee was $600.

Once the Web site is created, it must be stored on a Web server somewhere. About 20 percent of the businesses rent or own a Web server. The median price for those computers is $3,800. The rest of the Web businesses pay another company to host their sites. The median monthly “rent” for a Web site is $50 and the average is $78.

These costs, the Center notes, are not trivial and should be considered in any decisision to put a site on the Web. Businesses should also consider whether their product is appropriate for the Web at this time. Businesses that provide only local services, such as plumbers or day care centers, should decide whether the benefits of having a Web site are worth the costs. Still, most of the businesses surveyed by the Center were very enthusiastic about the World Wide Web and its potential to improve commerce.

The survey was mailed to 719 Web businesses and had a response rate of 57 percent. The confidence interval is approximately 4.9 percent.

More information is available from the Center in an excerpt from its forthcoming report on entrepreneurship.

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