New 'Merchant Confidence Index' Shows Economic Sentiment is Low Among Small Businesses, but Glimmers of Hope Emerging

More than 12,000 Merchants Respond to First Quarterly Survey: Low Expectations for Holiday Sales, High Expectations for Business Survival, Some Plan to Start Hiring

Nov 16, 2009, 12:00 ET from MerchantCircle

LOS ALTOS, Calif., Nov. 16 /PRNewswire/ -- MerchantCircle, the nation's largest social network of local business owners, today announced the results of its first "Merchant Confidence Index", a quarterly survey designed to gauge small business confidence in the current U.S. economy. More than 12,000 of MerchantCircle's nearly 1 million merchant members participated in the online survey and revealed the following trends.

Economic and Business Outlook

Only 23 percent of merchants believe that the worst of the recession is behind us, yet only 5.7 percent expect their businesses to fail.

  • 47.3 percent of merchants disagree or strongly disagree with the statement "The worst effects of the recession are behind us." 23.2 percent of merchants believe that the worst of the recession's effects are behind us and 29.6 percent neither agree nor disagree.
  • 73.9 percent of merchants believe that their business will survive the recession. 5.7 percent of merchants indicate they do not expect their business to survive and 20.4 neither agreed nor disagreed with the statement "My business will survive the recession."
  • 42.1 percent of merchants said they would not start their business again in today's economic climate. When responses from retailers are isolated, the figure increased by 9.2 percent, with 51.3 percent of retailers saying they would not start their business again.

"Although recent events on Wall Street have taken an economic toll on Main Street, small business owners are a resilient group," said Darren Waddell, VP of MerchantCircle. "Let's not forget that small businesses and entrepreneurs create two thirds of all new jobs in the U.S., and though our first merchant confidence index reveals merchants expect to be challenged during the 2009 holiday season, they are largely optimistic that their businesses will survive."

Holiday Outlook

General outlook is grim for the 2009 holiday season, with six in ten merchants saying they do not expect an uptick in sales revenues over the next 90 days (November through January) over the past 90 days (August through October). Nearly seven in ten merchants expect 2009 to rival 2008 in terms of poor sales.

  • 60.1 percent of small business owners expect sales revenues to decline or remain relatively the same over the next three months versus the last three months.
  • 68.3 percent of respondents expect holiday sales to decline or remain relatively the same in 2009 versus 2008 - one of the grimmest holiday shopping seasons ever.

"I expect the 2009 holiday season to be better than 2008 due to some creative inventory management I learned through the downturn," said survey respondent and MerchantCircle user Ginger MacCutcheon, owner of The Ginger Pet House boutique in Independence, Ohio. "In March, I began making adjustments to my product mix to meet the hardships of the upcoming holiday season. I took advantage of buyer's market prices and stocked up for the holidays. I'm glad I did, because I can offer gift items at very low prices, and I plan to make up the difference with a greater volume of sales."

Employee Headcount

The majority of merchants expect employee headcount to remain flat or decline, but nearly 15 percent of small businesses expect to ramp up hiring over the next three months - a glimmer of hope for jobseekers.

  • 12.6 percent expect to increase their headcount "somewhat" and 2.1 expect to increase headcount significantly over the next three months. 85.4 percent of merchants expect employee headcount to remain the same or decline over the next three months.
  • 47.7 percent of merchants expect their marketing expenditures to remain stable over the next three months, while 26.6 percent expect to increase marketing spend and 25.7 percent expect to cut marketing expenditures.

"It is not surprising to see the apprehension of small businesses on the recovery given the breadth and magnitude of the downturn in the past year," said Dr. Mark Fratrik, Vice President at BIA Kelsey. "Nearly half of the respondents indicated that they do not think the worst effects of the recession is behind us. Only when the unemployment rate decreases and consumers start spending will these small businesses start to become optimistic. As a result of this apprehension, these companies are generally not expecting to hire many more people in the near future, nor are they expecting to spend more in marketing/advertising."

Current U.S. Administration and Healthcare Reform

The vast majority of merchants feel under-served by the current U.S. administration - nearly 75 percent think more could be done to help small businesses. More than half are in favor of healthcare reform, and the majority of those respondents support a public healthcare option.

  • When asked if the current U.S. Administration is doing enough to help small businesses, nearly three quarters of merchants responded negatively. Only 10.1 percent think the current administration is doing enough.
  • 53.9 percent of merchants believe that the current U.S. Administration should reform healthcare while 31.6 percent do not think it should be reformed. 43.3 percent support a public healthcare option, while 38.9 percent are opposed to it.
  • 67 percent of merchants do not provide healthcare for their employees, while 21 percent do provide healthcare.

About the Merchant Confidence Index

The Merchant Confidence Index is a quarterly survey conducted by MerchantCircle, the largest social network of local business owners in the U.S. with nearly 1 million merchant members. The Index is designed to track trends in small business sentiment over time.

The first Merchant Confidence Index survey was fielded online, between October 29th and November 4th, 2009, and sent to MerchantCircle's member base of local business owners. There were 12,190 total responses from local business owners across the United States. Just over ten percent of responding businesses classified themselves as retailers, while 90 percent fell into other categories, such as professional services, legal and financial services, automotive, health and beauty, entertainment, travel and more. No incentive was offered to complete the survey. To read the full survey and its results, please visit www.MerchantCircle.com/corporate/blog/.

About MerchantCircle

Founded in 2005, MerchantCircle is the largest social network of local business owners in the nation, combining social networking features with a customizable web listing that allows local merchants to attract new customers. More than 15 million MerchantCircle business listings across the country are easily accessed on major search engines. Currently, more than 945,000 merchants on the MerchantCircle network upload pictures, blog, create coupons and newsletters, and connect with other merchants. In addition to its free services, MerchantCircle offers a portfolio of online advertising services.

MerchantCircle is located on Main St. in downtown Los Altos, Calif., and is funded by Rustic Canyon Partners, Scale Venture Partners, Disney's Steamboat Ventures, and IAC. Learn more at www.MerchantCircle.com.

SOURCE MerchantCircle



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