Starting an Online Business in a Down Economy

By Melissa Campanelli of Entrepreneur.com.

We all know we're in less-than-stellar economic times. While there's no official "recession," every person you know is probably watching his daily spending and cutting back wherever possible.

Since money is tight, is it really a good time to start an online business? You bet.

To begin with, Internet start-ups have low overhead and start-up costs -- as low as $3,000, thanks in part to inexpensive, yet robust e-commerce software and services on the market. What's more, the business can be set up in a home office and attended to at nights and on weekends, allowing new entrepreneurs to keep their day jobs. In addition, many budding entrepreneurs can set up their online businesses in less than one week.

Another reason an Internet start-up could be lucrative even in a down economy is that online shopping is growing. In the first quarter of 2008, revenue generated by online-based businesses (and the online aspects of traditional retail businesses) were $32.4 billion, according to the U.S. Census Bureau. That tally is up 13.4% from results for the third quarter of 2007.

In general, e-commerce is the bright spot in the retail world today.

"Online retail continues to grow at a pretty nice clip," says Jeffrey Grau, retail e-commerce senior analyst with eMarketer. "If you look at total retail sales, annual growth is in the low single digits. However, the online channel has been growing in recent years in the low to mid-20 percentile."

While Grau warns that the economic downturn is slowing e-commerce sales, online sales are still growing at triple the rate of store sales.

"It's still a very desirable marketplace," he says.

And more and more online shoppers are turning to the Web instead of paying for gas to go to the mall.

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