The growing Internet base in the country, with more than 121 million Internet users is highly encouraging. This trend has a direct correlation in the growth of e-commerce in the country. India’s Internet economy has been growing at 23% Y-O-Y as per the recent report by BCG.As small businesses around the world are increasingly leveraging e-commerce, Indian SMEs too are diving into exploit opportunities available through the Internet.
We are witnessing a new trend withmany entrepreneurs taking the e-commerce route to establish themselves in international markets. At Alibaba.com we have coined the term, ‘netrepreneur’ for this new class of emerging online entrepreneurs. As Manager, Sales and Customer Support for Alibaba.com India, I often travel across the country and have seen a progressive change in the mindset of Indian SME business owners towards the adoption of the Internet to expand the reach of their business.
While I was in Ludhiana three years back for one of our training workshops, I came across Mr. SanjeevKatoch, who told me his story about an accident that paralyzed him from the waist-down. This accident ended his career in a leading airline company. His persistence in finding an alternate career, however, led him to discover the power of the Internet. He created an account on Alibaba.com to kick-start the online operations of Indian RemiHair Extensions and today owns a booming enterprise, exporting Indian human hair to international markets such as Spain, U.S., U.K., Germany and Nigeria. By taking advantage of the Internet, which allowed him to work online from anywhere, he created a business with a turnover of over USD 1.5 million.
One of my key learnings on this trip was how entrepreneurs in the country have started setting up their shops online even before a physical set up. Mr.Katoch used e-commerce not only as a marketing tool, but also as a tool to enable him to understand a unique product in high demand in international markets. This explains how Indian SMEs are looking at e-commerce as an innovative tool to build fresh business models.
India has a thriving SME sector – with over 26 million units – with immense export potential which, if harnessed, can contribute significantly to boosting the nation’s GDP. These small and medium enterprises currently contribute 40% of the total exports of the country as per the Ministry of Micro, Small and Medium Enterprises. While cross-border trade has a significant scope for growth, there are several challenges faced by Indian SMEs that they have successfully overcome by gradually establishing their presence online.
For instance, I can vividly recollect, one of our most successful members- DVN Traders. They started off humbly as a small store doing retail business of jewelry with just four members including two brothers. Today, they have expanded their business with a workforce of more than 785 employees and turnover of more than INR 20 croreby leveraging e-commerce. They have been our members for seven plus years now and are one of the early entrants amongst small businesses in India. Today their brand is well known across the U.S, U.K, Canada, Spain and several other markets. They derive more than 95% of their business via e-commerce.
The success of DVN Traders in the e-commerce space demonstrates that Indian SMEs are looking beyond conventional markets.A challenge that SMEs traditionally face is lack of experience in positioning and marketing their products for international markets which often results in Indian SMEs losing out on potential export opportunities. However, they are gradually realizing, through the help of our efforts, that international buyers are increasingly using the Internet as a powerful and cost-effective medium to source from countries like India. We at Alibaba.com believe that this is just the beginning of the Internet revolution in India. There are several opportunities that lie ahead for Indian SMEs via e-commerce, and we are working today to help prepare them for it.
Another example that comes to my mind is that of a Mumbai-based entrepreneur- PBS Exim. He decided to learn e-commerce from scratch in order to expand his business overseas. PBS Exim started his business with a textile shop retailing sarees locally, but later expanded the scope of his business, and today exports traditional Indian hand embroideries globally. Before adopting e-commerce, his annual expenditure on customer acquisition which included travel and allied expenses was close to INR 10-15 lakhs. The magic that e-commerce brought to his business was that this same expenditure was reduced to 80%. This resulted in significant cost cutting, helped improve his margins and made him even more competitive for global trade.
The success of PBS Exim exhibits that 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 as compared to acquiring new clients in the domestic market- long distance phone calls, printing and shipping catalogues, travelling to foreign countries and other allied expenses. We are experiencing 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, such as 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 such asparticipation in trade shows and exhibitions etc. Not only were these events costly, but are also highly time consuming. With the adoption of e-commerce, these costs have been brought down and Indian SME’s are becoming globally competitive.
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 including time and cost investments 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 spentidentifying prospective customers along with the cost. His ROI was very much in line with his business plans.
Traditional Indian handicrafts and jewelry maker, Mayank Goyal from Masterpiece Jewelry, taught me the importance of rising internet penetration in smaller towns and cities. He was based in –Aligarh, and broke through the belief that e-commerce was only for big businesses. He was convinced that his products had a strong demand in international markets, but was timid when he first started out to expand his business outside the country. He did not know which countries to target, what products would appeal most to international buyers or how to acquire trade leads in unfamiliar territories. As part of his strategy to grow the global business, however, he decided to explore online marketplaces, and created a digital storefront for his products. Within a couple of weeks he received an order from the United States for USD 2, 00000. Mr.Goyal continued to learn about international trade through trial and error, but e-commerce today is a crucial part of his business model and acts as a differentiator among his competitors. SMEs across the country are reacting to this dynamic new environment and embracing e-commerce to sustain themselves in international markets.
These business owners reflect that e-commerce is a tangible solution to several challenges faced by Indian SMEs. They are willing to take the plunge into the e-commerce world to gain the benefits from the power of the Internet. When you do the right things, the right way, managing your e‐commerce business becomes not only simpler, but can also be more effective than managing a physical business. Cleverly deploying and mixing elements to best suit your business needs will help build and sustain a valuable network of business partners.
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 your products online. E-commerce, through sites such as Alibaba.com, can help your company and products gain exposure in global markets, and it is only a matter of time before inquiries start pouring in.
*Nayan Thakkar is currently the Manager, sales & service operation (India) at Alibaba.com.