SMEs Using Internet for Business Have 51 percent Higher Revenues: Snapdeal/KPMG Study

The market is observing a fresh trend where numerous SMEs are following the direction of E-commerce in order to build their business in the Indian market. They are utilizing the Internet not only as a marketing tool, but also to observe the demand for their products in the market. They are seeing e-commerce as a new-fangled tool to craft fresh models of business. Therefore, e-commerce organizations must ensure that they work in partnership and lessen the barriers to doing business for these SMEs so as to facilitate espousal of e-commerce.

Snapdeal, the popular e-commerce platform recently, along with KPMG conducted a comprehensive study to examine the macro-impact of e-commerce sector on growth of SMEs in India and identify remaining gaps in the eco system needed to be plugged to facilitate adoption of e-commerce by SMEs. Here are the key findings of the survey.

SME Scenario in India

• 85 percent of the SMEs who adopted e-commerce believe that it is a cost effective medium to grow sales

• SMEs using internet for business saw 51 percent higher revenues and 49 percent more profit

• 73 percent of SMEs felt that ecommerce enables them to understand their markets better

• 46 percent SMEs reported increase in business through listings on online marketplaces

• E-commerce enabled SMEs reported 60 percent to 80 percent reduction in distribution; marketing and sales spend to get incremental business

E-Commerce in India is on the Rise

Based on the growing number of Internet users and augmented by the adoption of smartphones and increased market awareness levels, it has been forecasted that the e-commerce market in India is likely to reach USD 80 Billion by 2020. By 2016, our country is expected to have the second largest set of internet users, leaving behind even the United States. There are about 173 million mobile internet users in India and this number is expected to escalate by more than 2.5 times to touch 457 million by 2019.

No doubt that the Indian e-commerce market is flourishing massively. However, its also facing huge hurdles like patchy Internet connectivity due to underdeveloped infrastructures, lack of awareness regarding positive aspects of e-commerce and more importantly, lack of trust among organizations to go online.

SME businesses have commenced operations as online sellers who have access to shoppers and customers throughout India. Internationally, cross-border e-commerce is a chief proceeds/revenue prospect, which most (Specific Number is not mentioned) SMEs are fervent to explore.

Indian Government is also undertaking several financial measurements to augment competitiveness of SMEs in the international market.

Key e-Commerce Trends in India

• USD 80 billion is the projected e-commerce market size by 2020

• SMBs are expected to contribute approximately 22 percent to the nation’s GDP

• With an investment of around INR 3000, SMEs can enter into the e-commerce space

• SMEs using e-commerce record 60-80 percent reduction in marketing and distribution costs

Indian SMEs still sluggish in adopting E-Commerce

In other countries, namely China, Brazil, and Indonesia, on an average 100 percent of the high-web SMEs have a website and use the Internet for online advertising and transact using e-commerce. Indian SMEs however, are considered to be Low-web and only 5 percent have a website of their own, whilst approximately 50 percent in the similar type possess a website in the developed economies of the U.S. (46 percent) and UK (53 percent). High-web SMEs implies that these organizations are utilizing high speed internet and are well-developed in terms of IT, while low-web SMEs utilize internet to a very minimal level.

Another notable point is that while 100 percent of India’s high-web SMEs have e-commerce presence, 75 percent of low-web SMEs have also adopted e-commerce. This clearly implies even those SMEs that have inadequate online access in developing markets are recognizing the prospect of embracing E-commerce or online presence. As the e-commerce ecosystem develops and cross-border trade improves, the online export market shall also expand for SMEs that leverage internet technology for growth and sustenance.

98 percent of technology enabled SMEs in our country participate in the country’s share of export revenues, while only 11 percent of the traditional SMEs export goods and services. Adoption of E-commerce helps Indian SMEs provide a better customer experience, improved geographic reach and accessibility, which helps escalate revenues and profit margins.

Overview of SME sector in India

• The Indian SME sector accounted for over 17 percent of the country’s GDP in 2014, 45 percent of the industrial output and 40 percent of the total exports

• Indian SMEs add over 1.3 million jobs per year

• SMEs that use the internet extensively tend to export approximately twice as much by export value when compared to SMEs using the internet sparingly

• 43 percent of SMEs in India participate in online sales

• 27 percent of SMEs using the internet in India are engaged in e-commerce

• 69 percent of SMEs report an increase in customers due to the internet

Wrapping Up

From the past few years, the Indian economy showcases an imperative panorama for SMBs to gain double digit growth of business in the coming years. A lot of initiatives like ‘Make in India’, policy reforms, higher FDI numbers will proffer growth opportunities for SMEs in India. In order to attain these opportunities, SMEs have to alter and espouse the upcoming drifts in technology. SMB promoters have to carefully understand what these technology drifts are methods of adding value to their business model, operations, and to all the stakeholders of the business.