Indian small and medium enterprises ignore e-commerce at your own peril, with many developed countries in addition to Chinese small and medium enterprises (SMEs) showing an unprecedented growth in the last few years in the global e-commerce market.
In China SMEs have grown from one million in 1990s to 400 million in 2012, according to National Bureau of Statistics of China. Out of the 400 million five million were exporters.
In 2015 SMEs account for 90% of all firms in China and contribute 60% to the Gross Domestic Product (GDP), 75% to urban employment and 75% to the industrial value addition of the country.
Indian government has identified 12 major product groups largely manufactured by MSMEs in India whose imports from China grew at a higher rate than their respective imports from all countries combined during 2011-12 to 2014-15. As these 12 product groups accounted for 74% of India’s total imports from China in 2014-15, a significant proportion of Indian MSMEs are seem to be adversely affecting from Chinese imports.
These product groups pertain to electrical and electronics, mechanical and metallurgical products on the one hand and chemical, glass and ceramics based products on the others, according to the Union minister for micro, small and medium enterprises, Kalraj Mishra in a written reply to a question in Lok Sabha on August 10, 2015.
A comparison of Indian SMEs with those in emerging countries such as Brazil and Indonesia, shows that on an average 100% SMEs have a website, use the internet for online advertising and transact using e-commerce. This trend is visible in UK and US, according to an analyst report released by leading analysts firm KPMG and e-commerce player snapdeal on Tuesday.
The report warns, for their survival Indian SMEs need to get out of their comfort zones and should adopt international practices. SMEs in India were found to be low-web users, only 5% of total SMEs have a website.
“E-commerce offers huge benefits. It not only increases participation in international value chains but also provides, increased market access and improved efficiency, as well as low transaction costs...,” says Rajesh Chaharia, director general, Internet and Mobile Association of India (IAMAI).
But Indian SMEs will need to act fast to get on the e-commerce bandwagon. E-commerce is no longer a passing trend but a business reality that can no longer be ignored or contained.
“SMEs would need to quickly make significant changes to their business models to suitably take advantage of the opportunities presented by e-commerce,” says Anand Ramanathan, director BPS S&O-Strategy, KPMG India.
An important factor for low web use by India SMEs that the report found was--lack of a concerted effort nationwide SME engagement programme which spells out the meaning and relevance of e-commerce along with its benefits and impact stories.