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

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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

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.

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