Challenges Faced by Indian SMEs on E-commerce Platforms

E-commerce-for-SMEs

Today we are in an era of “electronic phenomenon”. Our day to day activity is dependent on digitalization which involves e-learning, e-banking, e-government, e-customer relationship management and e-procurement. E-Commerce comprises of various business activities related to products or services and electronic interactions. SMEs contribute immensely to the economy of the country. They can be termed as the backbone of the economy. Their contribution to the service sector is also significant around 40% of the country’s workforce.

In less than a decade, ecommerce has established itself as a household name. Increasing telecom penetration in the form of high-speed internet and smart mobile phones, financial instruments for online payment, along with conventional growth indicators, such as rise in disposable incomes and education, have all contributed to the scale and rapid growth of ecommerce. With the emergence of a global economy, e-commerce is becoming a strong catalyst to expand business activities and build an active customer base. It is not very surprising to see the revolutionary way in which e-commerce has helped the business industry.

SMEs in India have been generally operating in a traditional manner and have been dependent on domestic trading activities. They are generally located in rural areas or far flung old industrial estates. The basic infrastructural requirements such as roads, water or power are inadequate in proportion to SMEs’ needs. Also, market infrastructure, technological support, access to e-commerce and infrastructure in the form of R&D labs etc. are also inadequate. All  this act as a hindrance for SMEs to compete globally. Hence, there is a need for upgradation of basic and supporting infrastructure.

But, with growing rate of internet penetration, SMEs are also gradually changing their operations to avail the opportunities to trade through E-commerce. A large number of SMEs is now involved in online transactions. These SMEs look towards an enhanced customer base and increased profits by using E-commerce technology. SMEs believe that use of E-commerce will boost their business growth.

The customers’ perspective is well known – convenience and cost are the key drivers of ecommerce adoption. The seller’s perspective, however, is quite different. Ecommerce companies have been fairly vocal about their positive impact on SMEs and their contribution towards their growth and expansion, including promotional campaigns highlighting the same. These are well placed, and ecommerce has indeed given most SMEs an additional channel for customer acquisition and sales.

Key Benefits of  E-commerce Platform to SMEs

  • An SME may not be in a position to accept some modes of payment (credit card, wallet, bank transfers, etc.), but the ecommerce company ensures that this is not a bottleneck for any sale.
  • Improved operations Digital SMBs grow revenues/profits up to twice as fast as offline counterparts.
  • Enabling knowledge sharing amongst MSMEs using cloud technology, ensuring their competitive development
  • Using sensors to physically track stores, stock, staff and managing the overall premises remotely.
  • The increasing mobile and internet penetration, m-commerce sales, advanced shipping and payment options, exciting discounts, and the push into new international markets by e-businesses are the major drivers of this unprecedented growth.
  • Another benefit of e-commerce is that there is a prompt feedback channel through which any complaint or mistake can be made good immediately. The referral system on the internet also helps the business to tap into more potential customers.

Barriers to Adopting E-business in SMEs in India

  • Entrepreneurs consider that employee’s reluctance to use new systems is also one of the main barriers. It shows that customers are not using E-business at a high rate that’s why entrepreneurs are finding it difficult to implement it.
  • While our country has abundant cheap labour, there still remains the issue of developing IT literacy and education to ensure the quality and size of the IT workforce.
  • It has been found that insufficient education/ information about benefits and uncertainty on how to implement e-business are the main barriers in the adoption of e-business.
  • Common barriers for SMEs include lack of skilled personnel, security concerns and reliability of E-commerce system and legal framework
  • Lack of information and education, low use by customers in rural areas.
  • Among the most pressing primary cultural barriers are level of trust in institutions, shopping as a social place, limitation on personal contact and language/content.
  • A lot of users are not willing to provide sensitive financial information over the Web. The reluctance to entrust sensitive personal information like credit card numbers to businesses operating on the Web remains strong in our country.

Shopping is seen as a Social Place

The success of doing business in India depends heavily on the quality and sometimes the quantity of personal relationships. A strong individual relationship and long term association between the parties provide a sense of community and enhances social bonding. Most of the business is conducted through small enterprises and it is local. A typical company is a socio-economic entity and not just a pure economic one.

Limitation on Personal Contact

The adoption of e-commerce depends on the cultural and social environment. The idea of buying goods that one cannot see and touch and from sellers thousands of miles away may take some “getting used to” for those who are used to face-to-face transactions, familiarity with the other party, (strong individual relationship and long term association between the parties), and getting satisfaction from winning business negotiations (they are willing to employ a variety of tactics to get the best deal). Cultural traits are undermined by and are contrary to the depersonalization associated with ecommerce and business systems designed to sell products online. The limitation on personal contact as a barrier to ecommerce adoption is a reflection of people in our country that prefer more direct and individual contact with their merchants.

Despite the limitations with the existing infrastructure and other issues related to the economical and socio-cultural conditions. There should be facility of providing E-awareness and the provision of training and skill to SMEs. Managers also need to be trained on IT skills through workshops and seminars to develop their technical abilities. E-business technologies are closely linked to the ability of firms to innovate, i.e., introduce new products, services, business processes and applications. To strengthen innovation, SMEs need to frame business policy that gives priority to fundamental research and promotes the flow of knowledge.

However, e-commerce growth has led to an increase in marketable transactions a multiple times as compared to the pre-commerce period in the India. The gap of communication between client/ customer and firm has reduced so much due to the availability of advanced communication technologies and products. Moreover, the high growth in Ecommerce continues unabated, with the sector expecting to witness a steep increase in revenues in the coming years.

Sumita Dass,
Social Entrepreneur & Educationist,
Life of Vision Foundation

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