E-commerce: Pushing Boundaries for Small Businesses in India Date:   Friday , June 01, 2012 With more than 121 million internet users as reported by IAMAI, the internet economy in India is on a steady growth trajectory. Small businesses in India have begun to harness the opportunities available through e-commerce in overseas markets. The exporting community is gradually realizing the potential of e-commerce as a strong tool to cut through to international markets. According to a recent FIEO report, exports through the e-commerce route in the last three years have grown by over 400 percent to $1.4 billion. Even the recent budget announcement made by the Finance Minister emphasized reaching out to unconventional and untapped markets which will enable us to deal in global trade. During my time as Manager, Sales and Customer Support at Alibaba.com, I have met several exporters who have adopted e-commerce to establish their global footprint through e-commerce in a simple and effective manner. The journey to export has not been an easy one for Snehal Creation, though. Before discovering e-commerce, as a family business with more than 30 years of experience in the market, Mahesh Agarwal, CEO, felt that his business of manufacturing, wholesaling and exporting ethnic Indian wear for women and children was slowly coming to a standstill, in spite of supplying to local exporters and a few overseas buyers. To take the business to the next level, he joined Alibaba.com and leveraged e-commerce to grow the business. The results of which were extremely encouraging as they received a lot of inquires from various international markets. With the help of e-commerce, Mahesh receives numerous global enquiries, with 40 percent of these enquiries being driven from Alibaba.com alone. Mahesh is able to convert approximately 60 percent of his enquiries into real orders. Mahesh’s sales have been proportionately rising along with his orders and the revenue he makes. Snehal Creation exports to countries across the globe, but majorly to countries like U.S., Canada, UK, Australia and Western European countries. Mahesh told us that when his business was going through a rough phase, help came from the most unexpected source - the Internet. Alibaba.com has proved to be a life-saver for his business. The success of Snehal Creation exhibits that while customer acquisition costs for small businesses in the country have realized that being cost effective is essential to staying competitive in global markets. One of the biggest advantages of e-commerce for an SME is that it provides access to buyers across the world at a limited cost. SMEs were skeptical to target new export markets where traditional costs of entering are higher when compared to acquiring new clients domestically - long distance phone calls, printing and shipping catalogues, traveling to foreign countries and other allied expenses. We are seeing an optimistic trend of SMEs willing to cross borders and make a mark for themselves in international markets. With the changing environment, SMEs will find it far easier to introduce cost effective mediums, like e-commerce, to their business. While interacting with SMEs around the country, I also learned how SMEs are re-visiting their marketing strategies. Traditionally they spent a large chuck of the marketing pie in traditional channels of promotion like participation in trade shows and exhibitions, weighing heavily on their pockets. Not only were these events costly, but are also highly time consuming. We see this trend changing as adoption of e-commerce grows, Indian small business are beginning to focus on the bottom lines to stay competitive in global trade. One of our members, Lowell Designer Craft, Delhi-based trader in the handicrafts business shared his experiences with us. He started his business in 2005, retailing locally in markets in and around Delhi. To expand the reach of his business he used to participate in several trade shows and exhibitions. However, he soon realized that as a small organization, there are several constraints like time and cost investment in trade fairs which did not match the returns. After he came across Alibaba.com four years ago, he realized that his brand was exposed to several international buyers around U.S., Brazil, U.K., Singapore and the Middle East with a drastic reduction in time spent identifying prospective customers along with the cost. His ROI was very much in line with his business plans. India has a thriving SME sector – with over 26 million units that have a latent export potential which, if harnessed, can contribute significantly to boosting the nation’s GDP. These small and medium enterprises currently contribute to 40 percent of the total exports of the country as per the Ministry of Micro, Small and Medium enterprises. There is immense scope of Indian SMEs to tap e-commerce segment as global buyers are looking at e-commerce to their solutions. The lack of experience in positioning and marketing their products for international markets often result in Indian SMEs losing out on potential export opportunities. International buyers, however, are increasingly using the internet as a powerful and cost-effective medium to source from countries like India – and I continually stress to Alibaba.com members that they will continue to miss out on these opportunities if they fail to adapt their business to the online world. In my experience, Indian SMEs are able to meet the exacting standards of global big buyers with competitive pricing; but by overcoming some hurdles in ensuring Indian SMEs emerge as savvy exporters. Also, customer acquisition costs for a new export market is higher when compared to acquiring new clients domestically - long distance phone calls, printing and shipping catalogues, traveling to foreign countries and other allied expenses become unmanageable for a small business. Many SMEs succumb to domestic trade alone and refrain from engaging beyond their borders despite their export potential. While the government and central bank of the country are making several efforts in this area, by pushing banks to have a portfolio dedicated to SME banking and increase advances to smaller units, gaps still remain. Another challenge that comes in the way for a small business to venture into the overseas markets is the lack of know-how of international markets. While domestic trade poses far lesser challenges as currency, language, cultural barriers are fewer, global trade is a different ball-game altogether. Small businesses are skeptical about testing waters in international markets as there is a common misconception that international trade is meant only for multinational companies who are equipped with multiple resources to tackle these changes. Another member of Alibaba.com, Unitron Energy Systems, a small and medium enterprise manufacturing power equipment along with production of renewable energy systems (Small Wind Energy Systems). With a manpower of 20 people have managed to stretch the global footprint to Australia, New Zealand, Sri Lanka and Western Europe thanks to e-commerce. Ravindranath – Head, Product Engineering, Unitron Energy Systems, found Alibaba.com when he was looking for a source to start exporting his products to foreign markets. Today, almost 80 percent of their business comes from Alibaba.com. Along with about 200?300 inquiries that Unitron Energy Systems gets on Alibaba.com every month, they also receive invaluable information about new markets, sourcing trends and trade alerts. Alibaba.com keeps Ravindranath updated about various trends and simultaneously helps him build and maintain relationships with his buyers. While export trade is often a long drawn out process from the time businesses acquire a trade lead to receiving payment, sourcing cycles are long. This discourages small businesses to take up international assignments as they prefer sticking to domestic trade, where sourcing cycles may be easier to negotiate. However, if small business owners in India want the size of their business to increase, expanding to foreign shores is inevitable. With the internet offering ready information on products and suppliers from across the globe, Indian SMEs can greatly reduce the time required to find a potential partner. While gauging customer feedback on one of our workshops in Chennai, I was impressed with a group of college students who had set up a business to export Indian hair. They had not started with a physical store or manufacturing unit, but instead started their business online through the portal. They come from a generation who are just passionate about e-commerce, and easily set up their online storefront. While studying they can easy facilitate orders online through their PCs or smart phones worth INR 25 lakhs a year thanks to e-commerce. It is indeed inspiring how the youth of the country is increasingly getting tech –savvy and contributing to the economy at an early age. I recently met Meeran Refai, a student based in Tamil Nadu who runs a flower business. I noticed that he had convinced his father to subscribe to the online marketplace to leverage the demand for flowers globally prior to Valentine’s Day. He facilitated more than 50 transactions amounting to trade of INR 75 lakhs from November 2011- January 2012 for fresh cut flowers prior to Valentine’s Day via the e-commerce platform. It is heartening to know that India is emerging as a manufacturing hub through the help of e-commerce. As global buyers look to India to fulfill their sourcing needs, I am happy to know Indian SMEs can have a share of this global pie! Indian SMEs compete with Chinese SMBs in the international marketplace and must learn to be globally competitive is by optimizing existing resources. With the rise of India’s e-commerce ecosystem, SMEs can reduce large costs on labour, phone calls and travel as all the information they need to build their customer base can be handled from anywhere. With information available at their fingertips, business owners do not even need to leave the comfort of their offices or homes to conduct their business. E-commerce also provides the edge for SMEs around the world to be accessible 24 hours a day, seven days a week, and 365 days a year. Another advantage to e-commerce for SMEs is the cutting of mark-up costs of middle-men that plague India’s marketplace by promoting products directly to potential buyers By speaking with entrepreneurs around the country, it is clear that creating an ecosystem online to support your company’s presence, will help you differentiate you products online. E-commerce, through sites like Alibaba.com, can help your company and products gain exposure in global markets, and it is only a matter of time before enquiries start pouring in!