Most small businesses use digital tools — but 83% are still at the basics

80% of small businesses use digital or AI technology

Only 3.2% have joined government support programs

76.2% unaware programs exist; outreach, cost support needed

Eight in 10 small businesses in South Korea use digital or AI technology, but most rely on little more than online food delivery apps, point-of-sale systems and kiosks, a new survey shows. With only 3.2 percent of respondents having participated in government digital transformation programs, calls are growing for policies that better reach businesses on the ground.

The Korea Federation of Small and Medium-sized Enterprises released the results Tuesday of a survey on digital transformation and AI adoption among small businesses, polling 500 operators across five sectors: 200 in food service, 150 in retail, 50 in accommodation, 50 in personal services and 50 in education and leisure.

Eighty percent of respondents said they use digital or AI technology, while 19.6 percent said they do not and 0.4 percent said they had stopped. However, the figures include everyday tools such as word-processing software, kiosks and online food delivery apps.

Business management was the most common area of digital use, cited by 54.5 percent of respondents, followed by customer service at 31.8 percent, sales and retail at 22.3 percent, and marketing and promotion at 21.3 percent. Within each category, digital POS systems led in business management at 68.3 percent; AI call assistants and chatbots topped customer service at 66.9 percent; online shopping mall operations led sales and retail at 51.1 percent; and social media channel management led marketing at 52.9 percent.

The more telling finding was the depth of use. When asked about their level of digital proficiency, 30.5 percent of respondents described themselves as beginners and 52.8 percent as novices — together accounting for 83.3 percent. The results suggest that while small businesses are using digital tools, most have yet to harness them in ways that meaningfully improve store operations or drive sales growth.

Many operators reported tangible benefits. Among those who had adopted digital technology, 69.8 percent said they experienced time savings and greater efficiency. Some 25.5 percent cited higher sales from improved marketing reach, 11.0 percent reported cost reductions and 8.5 percent said customer satisfaction had improved.

Subscriptions to software or programs on existing devices were the most common form of digital adoption at 45.0 percent, followed by device rentals at 31.8 percent and outright device purchases at 24.8 percent. For those who bought devices, 14.1 percent spent 2 million won ($1,290) or more. Among those renting, 40.9 percent paid less than 50,000 won ($32) per month. Monthly software subscription costs were most commonly in the 10,000–30,000 won ($6–$19) and 30,000–50,000 won ($19–$32) ranges, each cited by 14.4 percent of respondents.

A notable share of respondents had little idea what they were spending. Some 64.6 percent said they did not know how much they had paid for devices they purchased, while 37.8 percent were unsure of their rental costs and 37.2 percent did not know their monthly software subscription fees. The figures suggest many small business operators are using digital services without a clear grasp of the costs involved.

The survey also exposed a wide gap between government support programs and the businesses they are meant to serve. Only 3.2 percent of respondents said they had participated in a government digital technology or AI support program in the past three years. Among those who had, AI education programs were the most common at 50.0 percent, followed by smart store technology distribution at 31.3 percent, online sales channel support at 12.5 percent and AI voucher support at 6.3 percent.

Satisfaction among participants was high: 87.5 percent said the programs were helpful, with 43.8 percent saying "very helpful" and another 43.8 percent saying "somewhat helpful." Among those who had not participated, however, 76.2 percent said the main reason was simply that they had not known the programs existed.

The awareness gap was sharpest among the smallest operators — those with lower monthly sales and fewer employees were least likely to know about available support. Among small businesses that do not use digital technology or AI at all, the most common reason given was that the devices or services they actually needed were not covered by support programs, cited by 33.7 percent.

The support policy small businesses said they needed most was help with operating costs, cited by 59.0 percent of respondents. Initial cost support followed at 35.8 percent, tailored education at 16.6 percent and consulting support at 14.0 percent. The most anticipated digital support initiative this year was AI education and support for developing AI-based products and introducing AI services, ranked first by 46.4 percent of respondents.

Kim Hee-joong, head of the economic policy division at the Korea Federation of Small and Medium-sized Enterprises, said the high adoption rate masks a more sobering reality. "The proportion of small businesses using digital tools is high, but the reality is that most are still at a basic level," he said. "Strengthening digital capabilities so that they can provide real, practical help in running a store is urgent."

Kim added that cost remains a persistent barrier. "Many small business operators still feel burdened by the operating and adoption costs involved in digital transformation," he said. "We hope that well-targeted policy support will be closely linked to where it is needed most, to address the unmet needs on the ground."

hong@heraldcorp.com