Legislation and lawlessness cause concern
SIDN Panel looks ahead to 2025
In October, we once again asked the SIDN Panel about the prospects for e-commerce in the year ahead, and the consequent demand for websites and domain names. From the 104 responses we received, the standout finding is that online businesses appear to be less optimistic about e-commerce itself than in previous years. Increasingly, e-commerce growth is being driven by cutbacks to offline activities. Businesses are rationalising their online activities as well, focusing on a central website and a single online promotion medium. Partly on the back of that trend, the number of businesses reporting plans to drop unused domain names is slightly up.
External factors are changing quickly
Every year since 2021, we've asked SIDN Panel members what they see as the main threats and opportunities in the year ahead. The responses have differed considerably from year to year. This year, the main worry for businesses trading online is developments within the e-commerce sector itself. These are the top external threats identified since our surveys began:
2021: (End of) coronavirus restrictions
2022: High energy prices
2023: Inflation and staff shortages
2024: Legislation and lawlessness
Small online traders stuck between a rock and a stone
Although legislation and lawlessness weren't explicitly mentioned in our survey, they are the underlying factors linking the issues that respondents reported concerns about. Most of the respondents are small to medium-sized businesses that feel caught between a rock and a stone. They believe that little is being done to curb the activities of Chinese websites, drop-shippers and 'cowboys', which are undermining trust in e-commerce. Meanwhile, their own regulatory burden is increasing, hampering their ability to compete with the big players and platforms. Here are a few of the things they said:
"Drop-shipping and promising the earth. Telling customers exactly what they want to hear, when you can't actually do what you say. It also seems that influencers and young entrepreneurs follow their own rules and pay no attention to the law. And the authorities do nothing to enforce the rules."
"It's all getting too complicated. It's going to be harder and harder for small businesses to survive, as the big platforms like Amazon and social media grab all the trade."
Growth driven mainly by migration to e-commerce
Nevertheless, SIDN Panel members are a little more optimistic regarding online turnover growth than in the last 2 two years, albeit less so than in the pandemic period. Of the respondents, 40 per cent expect more growth in e-commerce income.
However, when we probe a little further, an important qualification emerges: the anticipated growth in e-commerce turnover is mainly at the expense to offline activities scaled back for reasons of cost. In other words, internet commerce appears to be increasing as a result of offline trading becoming less attractive. As one respondent said:
"We need to cut costs and therefore can't afford to spend as much. So we're moving more of our business online."
AI and Google: threats or opportunities?
Our survey flagged up 2 influential macro-factors as well: Google and AI. However, unlike legislation and lawlessness, Google and AI were mentioned as opportunities as often as they were mentioned as threats. SEO and search engines were also the main online promotion vehicles that respondents envisaged investing in. What the panellists worried about most was Google being supplanted by ChatGPT:
"AI: when people use AI to search for information, the results may overlook small businesses. Search engines are going to disappear, and that's likely to mean completely rethinking the strategy."
On the other hand, many respondents believe that AI offers opportunities, which they are planning to seize. As one said:
"The biggest opportunity is the potential for getting AI and humans working well together to increase speed and efficiency."
Google anti-trust case is creating uncertainty
Respondents' answers often referred to Google as a positive factor, with many businesses intending to invest more in SEO. However, a striking number of open replies also cited concerns arising from the US anti-trust case against Google. Panel members are worried about the potential fallout and the uncertainty created by the legal case. Although Google's dominance makes many uneasy, it's also feared that the company's forcible breakup could prevent businesses reaping the rewards of investing in SEO over the last few years.
Stable registration rates, disposal of unused domain names
How are the trends outlined above expected to affect demand for domain names? Comparing this year's responses with last year's, the main change concerns cancellations: the proportion of businesses intending to shed domain names went from 10 per cent to nearly 19 per cent. The reasons most often given were website closure and deliberate centralisation, where all activities are moved to a single website. The expected upturn in cancellations is therefore closely linked to unused and disused websites.
The overall conclusion of our survey is that a lot a developments in the dynamic e-commerce sector warrant attention. Whereas the growth of online activities could previously be taken for granted, an increasing number of negative or ambiguous factors are starting to influence (smaller) businesses' plans. How that situation will affect our industry in 2025 remains to be seen. For registrars, the key thing to watch is the consolidation trend: businesses are increasingly looking to invest more in a single website and reduce fragmentation.
