E-commerce for Small and Medium Enterprises (SMEs)

E-commerce for Small and
Medium Enterprises (SMEs)

e- commerce for SMEs
Small and Medium Enterprises (SMEs) play a vital role in the economy of the United States,
accounting for over 99% of all business establishments. They are the incubators for innovation
and employment growth, producing 16.5 times more patents per employee than large patenting
firms, and accounting for 65% (or 9.8 million) of the 15 million net new jobs created between
1993 and 2009. This story is true in many other countries around the world, both in the emerging
markets and in the developed world.
In spite of their immense contribution to the global economy, SMEs worldwide face many
challenges: limited capital and lack of access to adequate and timely banking finance, nonavailability
of suitable technology, small production capacity, non-availability of skilled labor at
affordable cost, and inability to compete with larger organizations’ marketing muscle.
Small and medium-sized enterprises (SMEs) are some of the biggest beneficiaries of e-commerce,
as they now have the opportunity to overcome logistical and geographic challenges in terms of
access to markets. SMEs can reap the efficiency gains associated with the use of e- commerce,
arising from reductions in business costs by eliminating middlemen and a rationalization of
business processes. In addition to these static gains, SMEs can also use e-commerce to create added
value by producing new products, adopting completely new business practices, or changing the
ways in which they interact in the marketplace.
Drivers for e-commerce adoption
As with many previous technologies, the SME
sector has been slow to adopt e-commerce,
due to several reasons, such as lack of
awareness of e-commerce applications,
shortage of technologies tailored to the
SME’s needs and financial abilities, lack
of capital and/or skilled personnel, the
significant cost of e-commerce solutions
and so on.
An early study showed that the main driving
force for many SMEs to adopt e-commerce
was pressure from larger trading partners
or suppliers to do so. The increasing levels
of competition had also driven several SMEs
to seek competitive advantage through
innovative technology. Thus, in the early days, reluctant ‘adopters’ were pushed into e-commerce
though external pressures from suppliers, business partners, customers and competitors.
1 http://www.rsmi.com/en/global-challenges/smes-in-the-global-economy---gc.aspx
2 http://www.sbecouncil.org/about-us/facts-and-data/
3 MacGregor, R.C. & Bunker, D.J. (1996): The Effect of Priorities Introduced During Computer Acquisition
on with IT in Small Business Environments.
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Today however, there has been a growth in adoption, reflecting an increase in SME confidence with
regards to e-commerce benefits. Drivers for e-commerce adoption include new modes of direct
or indirect marketing, strengthening of relationships with business partners, the ability to reach
new customers, improvement in customer services and the reduction of costs in communication.
Other minor drivers are the reduction in communication costs, improvement in lead time and
improvement in sales. Lastly, we find that globalization has begun to affect SMEs as well — a
recent research report states that ‘the potential to grow international transactions as an additional
revenue stream is driving SMEs to extend or upgrade their e-commerce services to enable easier
cross-border transactions.’
Readiness for e-commerce
Before embarking on an e-commerce initiative, we recommend that an SME take a strong look at
both its internal and external environment and establishing its readiness on several parameters as
given in the figure 1 below:
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Poon and Swatman (1997)
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http://www.worldpay.com/media/index.php?page=archive&sub=ecom-expo-research&c=
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In addition, under the internal environment, the SME should consider the following
aspects:
a) Organization related
i. Should a new business model be considered and consequently a new business strategy be
developed?
ii. What is the impact on the operations if e-commerce is adopted?
iii. How will the e-commerce channel be integrated with the enterprise systems?
iv. What are the attendant systems to be developed?
v. What will be the role of management in this initiative?
vi.
vii.
What are the key performance metrics to be measured?
What kind of change management initiative needs to be planned to ensure acceptability
organization-wide?
b) Technology related
i. What are the solutions available in the market and on what parameters are they to be
assessed?
ii. How will the new application integrate with the existing systems?
iii. How will the application be evaluated and selected?
iv. What is the procedure for handling payments: credit cards, COD, PayPal etc
v. What privacy and security features are needed?
c) Legal related
i. What contracts (new or revised) will have to be drawn up with various parties in the
ecosystem?
ii. What rules and regulations should be considered?
Once the SME has decided to embark on the e-commerce path, the next major step is to identify
the right solution for its needs.
Choosing the right e-commerce solution
Based on the readiness analysis delineated above, the SME can choose to either utilize a readymade
B2C platform or develop its own eCommerce website. While most solutions offer the standard
features of shopping cart, and payment processor, there are several other considerations we
recommend the SME look into before choosing a particular solution:
1. Sophistication of solution: The solution should be able to monitor customer activity on
the site, and take action based on the identified behavior. For example, Amazon’s website
is able to monitor a customer’s searches and suggest similar items, thus improving crossselling
and up-selling opportunities.
2. Business user friendly features: The e-commerce solution should be technically and
architecturally sound with proven capabilities and with tools that business managers
can use themselves, such as categorization of products, development of promotions and
campaigns, targeted email campaigns etc.
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3. Scalability & flexibility: It is important that the business plans for future products and
services; the product catalog should not be rigid and uncompromising, but should be able
to handle different types of products – physical, services, virtual/downloadable etc. The
solution should also be able to handle the peaks and troughs in demand.
4. Integration with other enterprise systems: The solution should not be a standalone siloed
system, but should integrate seamlessly with other enterprise systems in order to deliver a
feature-rich buying experience.
5. Reporting and analytics: The site should be able to capture both historical data and
behavioral data and analyze the same to provide rich insights into the running of the
business.
6. Search capabilities: The solution should support a compelling and personal search
experience, with a pre-integrated and catalog-aware search engine.
There are many e-commerce applications available in the market that offer a similar set of functions
and features. It is therefore important to determine the key imperatives for the organization and
criteria to consider before investing in an e-commerce platform that is best suited to the business.
Since most SMEs do not have the in-house expertise to initiate an e-commerce project, they would
do well to look for a trusted partner who can expertly guide the SME through the key questions to
ask and criteria to consider. The partner should also be able to provide an all-in-one e-commerce
solution, with intuitive back-office integration capabilities, advanced catalog functions and other
features that can deliver personalized and user-friendly shopping experiences.
Conclusion
More and more SMEs are adopting the e-commerce initiative due to several benefits such as the
ability to tap into new markets, leveling of the playing field and blurring of geographical boundaries
etc. An SME must carefully evaluate its readiness for e-commerce on various aspects before taking
on an e-commerce project. Considering that many SMEs do not have the in-house expertise to
ensure the success of an e-commerce initiative, we also recommend the use of a trusted partner
who can expertly guide the SME in this endeavor. This will help the SME gain all the benefits of
e-commerce while sidestepping the minefields that have brought down several ecommerce
initiatives in this regard.
About Unilog
Unilog is a global technology and services company that specializes in Big Data Analytics and Product Data Management
for e-commerce. Headquartered in Bangalore, Unilog is an ISO 9001:2008 and ISO 8000 certified company that employs
over 300 people in its local offices at Mysore and Philadelphia. Unilog’s comprehensive, end-to-end data management
services cater to the requirements of leading brands across industry verticals including Retail, Telecom, IT, Manufacturing,
MRO and Electrical & Electronics among others.
For more information, visit us at www.unilogcorp.com
Contact us
Corporate Office
Unilog Content Solutions Pvt. Ltd.,
#11, 15th Cross, 20th Main,
J P Nagar 5th Phase,
Bangalore – 560 078.
Tel: +91 80 2659 0721 – 22
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Tel: +91-821-309 2500
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Tel: +1 484 580 8933
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