E-Commerce for SMEs

8/12/2019 E-Commerce for SMEs

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E-commerce for Small and

Medium Enterprises (SMEs)


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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, non-

availability 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 ofawareness of e-commerce applications,

shortage of technologies tailored to the

SMEs 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-commercewas 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): Te Effect of Priorities Introduced During Computer Acquisi-tion on with I 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 additionalrevenue 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:

4 Poon and Swatman (1997) 5 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 relatedi. 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. What are the key performance metrics to be measured?

vii. 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 beassessed?

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 relatedi. 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 werecommend 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, Amazons website

is able to monitor a customers searches and suggest similar items, thus improving cross-

selling 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 andbehavioral 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 woulddo 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 takingon 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.

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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. Unilogs comprehensive, end-to-end data management

services cater to the requirements of leading brands across industry verticals including Retail, Telecom, IT, Manufactur-

ing, MRO and Electrical & Electronics among others.

For more information, visit us at www.unilogcorp.com

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E-Commerce for SMEs