SOURCE: MerchantCircle

MerchantCircle

July 15, 2010 09:15 ET

U.S. Merchant Confidence Remains Flat Despite $30 Billion Stimulus Plan

Merchant Confidence Index Stands at 60.65 According to Survey of Nearly 10,000 Small Businesses; Gulf States More Pessimistic Than National Average; Social Networking Becomes Leading Marketing Method Among Small Business Owners

MOUNTAIN VIEW, CA--(Marketwire - July 15, 2010) -   MerchantCircle, the social network for local business owners, today issued the results of its quarterly "Merchant Confidence Index," the most expansive national survey of its kind with nearly 10,000 local merchants sharing their confidence levels in the current economy. Q2 2010 results indicate economic sentiment among merchants has generally remained flat over the last two quarters despite government stimulus efforts to support small businesses. Additional takeaways show a majority of merchants have seen a decrease in credit availability over the previous quarter and many are more prominently leveraging social media and networking for free online marketing tools to increase their customer base and revenue.

"Our recent survey reflects continued uncertainty among merchants. Economic outlook has decreased to roughly the same level as November 2009, with most business owners continuing to think the worst is yet to come," said Darren Waddell, vice president of marketing for MerchantCircle. "However, we were pleased to see that most aren't planning for layoffs or pay cuts for employees. Small business owners are continuing to become web savvy in their marketing by increasingly augmenting traditional advertising with free methods like social networking to generate additional business."

Gulf Coast Area Businesses Grow More Pessimistic; But Merchants Plan to Hold Headcount and Pay Scale Steady

  • In light of the recent oil spill in the Gulf of Mexico, 35 percent more merchants in Gulf Coast states (LA, AL, FL, MS) rated the economy as "much weaker" as compared to the national average (23 percent vs. 17 percent).

  • Overall, 47 percent of Gulf state merchants said the economy was "somewhat" or "much" weaker while 30 percent said it was "about the same." Twenty three percent said the economy was "somewhat improved" today with one percent reporting it was "significantly improved."

  • When asked to rate the statement "The worst effects of the recession are behind us," sentiment among Gulf area merchants was slightly more pessimistic than in Q1 2010. Fifty four percent indicated that they think the worst is yet to come (vs. 51 percent in Q1 2010), and nearly 16 percent think the worst is behind us (vs. 21 percent in Q1).

  • The majority of Gulf area merchants (71 percent) do expect to hold headcount steady in the coming quarter. Currently, 15 percent of small businesses expect to increase headcount over the next three months, compared to 14 percent in Q1 2010. Fourteen percent expect to reduce headcount over the next three months (vs. 13 percent in Q1).

  • Nine percent of Gulf area merchants with employees plan to increase compensation over the next year, while 72 percent will hold compensation steady. Only six percent plan to reduce compensation in the coming 12 months.

Awareness and Usage of Social Media and Marketing Tools Growing; Traditional Marketing Methods Continue to Slide

  • For the first time since the inception of the Merchant Confidence Index, social networking has eclipsed all other marketing channels to become the most popular among surveyed merchants. More than 50 percent of respondents plan to create or maintain a social networking presence for their business (other than MerchantCircle) in the next three months, as compared to 41 percent in Q1 2010. Previously, email marketing to customers had been the most popular planned marketing technique.

  • In just three months, awareness of location-based services, such as Foursquare, has grown rapidly among merchants. Today, 16 percent of merchants are familiar with Foursquare, compared to eight percent in Q1 2010. Adoption of these services for business has also increased; 32 percent of merchants that are aware of Foursquare are using the service to promote their business, compared to 25 percent in Q1 2010.

  • Twitter has become a household name among the local business community. Ninety two percent of merchants report they are familiar with the micro-blogging service and eight percent more merchants are using the site to promote their businesses, as compared to March 2010. 

  • Small business owners are choosing online video. Seventeen percent of merchants expect to use online video to promote their business over the next three months, while only five percent will use television as a marketing tool.

Merchants Pessimistic about Obama's Stimulus Package As Credit Lines Become Even Less Accessible; Nearly Four in 10 Dipped Into Personal Credit to Keep A Business Afloat

  • President Obama's February $30 billion stimulus plan has not won merchant trust; 74 percent believe it is not sufficiently addressing the needs of American small businesses.

  • Nearly 35 percent of merchants have used home equity loans, personal credit cards, or loans against retirement to fund their businesses in the last 12 months.

  • Fifty six percent of local merchants said credit availability had "worsened" or "significantly worsened" over the last three months and 39 percent said access to credit remained the same (vs. 59 percent and 37 percent, respectively, in Q1 2010). 5.2 percent of merchants said credit availability had "improved" or "significantly improved," compared to 4.6 percent in Q1 2010.

Small Businesses Becoming More Green

  • More than half (51 percent) of merchants have taken steps to "green" their business or products in the last 12 months, and an additional seven percent plan do to so in the next 12 months.

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 more than 1.3 million members. The Index is designed to track trends in small business sentiment over time and is derived from four key questions designed to synopsize the prevailing trends among local business owners. The overall index score is based upon a standardized five-level Likert scale.

This third Merchant Confidence Index survey was fielded online, between June 28 and July 5, 2010, and sent to a random sample of MerchantCircle's member base of over one million local business owners. There were 9,874 total responses from local business owners across the United States. Just over 11 percent of responding businesses classified themselves as professional services, while just under 90 percent fell into other categories, such as retailers, legal and financial services, automotive, health and beauty, entertainment, travel and more. The survey data can be broken out by state, business type or business size (by headcount) upon request. 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 variety of free marketing tools that enable local merchants to maximize their online exposure. Currently, over 1.3 million merchants use the MerchantCircle network to upload pictures, blog, create coupons and newsletters and connect with other merchants. More than 20 million MerchantCircle business listings across the U.S., Canada, United Kingdom and Australia are accessed through major search engines. In addition to free services, MerchantCircle offers a portfolio of premium online advertising solutions including search engine marketing and instant website development.

Recognized by JMP Securities as one of the "100 Best Privately Held Internet Companies," MerchantCircle is based in Mountain View, Calif., and funded by Rustic Canyon Partners, Scale Venture Partners, Steamboat Ventures and IAC. Learn more at www.merchantcircle.com

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