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Discover(R) Small Business Watch(SM): Economic Confidence Of Small Business Owners Continues Downward Trend

November 26, 2007

Index Drops for Fourth Straight Month, Improved Cash Flow Not
Offsetting Pessimism over National Economic Picture

POLL: Businesses with Web Sites More Likely to Convert Prospects,
Security Not Much of an Issue for Online Purchasers

RIVERWOODS, Ill.--(BUSINESS WIRE)--Nov. 26, 2007--Economic confidence among small business owners declined for the fourth straight month in November, as increased pessimism over the U.S. economy dragged down indicators of relative stability at the small business level, according to the Discover Small Business Watch. At 93.2, the confidence measure is down from 96.8 in October and from 114.6 at this time last year.

"Challenges in the national economy over the past few months are no doubt influencing the perceptions of small business owners, but there still is stability back on Main Street," said Sastry Rachakonda, director of Discover's business credit card. "Cash flow has improved for the past two months, and the dip we've seen in their confidence in their own business prospects is far below the drop in confidence they expressed in the health of the overall economy."

November Key Findings:

  • 68 percent of owners feel that economic conditions in the U.S. are getting worse, a jump from 59 percent in October and 20 points above November 2006. Twenty percent said national conditions are getting better, while 10 percent said economic conditions are staying the same.


  • 38 percent said they had experienced cash flow issues over the last 90 days, a decrease from 42 percent in October and 46 percent in September.


  • 31 percent of small business owners feel that economic conditions for their businesses are getting better, a decrease from 35 percent in October.


  • Plans for spending on business development are slowing, with 29 percent planning to increase spending on activities such as advertising and inventory, compared with 33 percent in October. Forty-two percent plan to decrease spending, compared to 36 percent in October.

Poll: Consumers More Likely to Use Businesses with Web Sites

"A lot of small businesses still are not taking advantage of the added value of having a Web site," Rachakonda said. "Our findings show that consumers are more likely to purchase something from a company with a site."

The November Watch poll found that two-thirds of American small businesses do not have Web sites, according to the Discover Small Business Watch monthly poll of 1,000 business owners with five or fewer employees. At the same time, 51 percent of 4,000 consumers polled said they go online to research products, businesses and services prior to making a purchase. And 49 percent of consumers said they were more likely to use a business or service if it has a Web site.

"Security seems to be less of a concern among online shoppers," Rachakonda said. "The cost of shipping would seem to be more of an issue than security."

More Poll Results:

  • 95 percent of consumers who make online purchases at least once a month feel very or somewhat secure with their transactions.


  • 75 percent of regular online shoppers said the cost of shipping has stopped them from making a purchase online.


  • 50 percent of owners said their Web sites generate direct sales leads for their businesses.


  • 49 percent of business owners regularly communicate with customers via e-mail.

Holiday Spending

There is no indication consumers will increase or decrease Internet purchasing this holiday season. The poll found that 49 percent of buyers plan to do most of their shopping at chain or department stores, 13 percent at a small retail or specialty shop, 11 percent online, 5 percent via catalogs, and 22 percent hadn't made up their minds yet. These percentages are nearly identical to what the Watch found last year.

The views and opinions expressed by small business owners and consumers who participate in the Small Business Watch survey are their own and do not necessarily reflect those of Discover Financial Services or its affiliates.

About the Small Business Watch

The Discover Small Business Watch is a monthly index measuring the relative economic confidence of U.S. small business owners who employ less than five employees, a segment that consists of 22 million businesses producing more than a trillion dollars in annual receipts. The Watch is based on a national random survey of 1,000 small business owners. It is commissioned by the Discover Business Card, which strives to offer the best business credit card for American small businesses, and is conducted by Rasmussen Reports, LLC (www.rasmussenreports.com), an independent survey research firm. The numeric index is calculated by assigning values to responses to a set of six consistent questions. The base value of the Watch was established at 100.0 based on surveys conducted in August of 2006. In addition to generating the index, the Small Business Watch surveys small business viewpoints on key business drivers, and also surveys 4,000 consumers to gauge purchasing behavior and attitudes towards small businesses. For past results and small business survey data, visit www.discoverbiz.com/watch. For information on Discover Business Card, visit www.discoverbiz.com.

About Discover Financial Services

Discover Financial Services (NYSE: DFS) is a leading credit card issuer and electronic payment services company with one of the most recognized brands in U.S. financial services. The company operates the Discover Card, America's cash rewards pioneer, with more than 50 million cardmembers. Since its inception in 1986, the company has become one of the largest card issuers in the U.S. Its Third-Party Payments business consists of the Discover Network, with millions of merchant and cash access locations, and PULSE, one of the nation's leading ATM/debit networks. Discover also operates the Goldfish credit card business in the United Kingdom. For more information, visit www.discoverfinancial.com.

CONTACT: Discover Financial Services
Jon Drummond
224-405-1888
jondrummond@discover.com
or
Robinson Lerer & Montgomery
Daniel Delson
646-805-2036
dmd@rlmnet.com

SOURCE: Discover Financial Services