The Web was supposed to be the great equalizer. Anyone can be big in cyberspace, right? Well, a new study suggests that the Web won't help one category of small business -- local retailers -- transcend the limitations of size.

On the contrary: In cyberspace, small local retailers lose the big advantages they have on their home turf -- local recognition and walk-in traffic. A June Forrester Research Inc. study of 50 national and local retailers notes they don't have the resources to develop sexy Web-commerce sites or get high billing on search engines or pay for ad campaigns. And the numbers show it. Local retailers capture about 50% of retail sales today offline (total retail sales amounted to about $1.2 trillion in 1998), according to Forrester -- but online they captured less than 9% of the $7.8 billion total for 1998. Local retailers' online market share is expected to shrink to about 6% of an estimated $108 billion in sales for 2003, though the dollar amounts will grow sharply.

Charlene Li, senior analyst for Forrester, which is based in Cambridge, Mass., says local retailers shouldn't waste their resources competing with national retailers online. Instead, they should use the Web to drive business to their real-world stores via incentives, such as coupons or sales. "They need to focus on using the Web to drive traffic to their offline stores and maximize the promotional capabilities of this medium," adds Li.

By Jeremy Quittner in New York
jeremy_quittner@businessweek.com