India's SMEs: missing an online trick | beyondbrics

The internet allows businesses to reach consumers way beyond their physical presence, as well as wider sourcing of materials and lots of other things.

But of the 40m small- and medium-sized businesses in India, only 500,000 are present on the web, according to Karim Temsamani, president of Google Asia Pacific.

Small and medium sized enterprises contributed 25 per cent of India?s GDP in the 2009-11 period. They were responsible for 40 per cent of the country?s exports and 75 per cent of total employment, according to McKinsey.

But only 81 per cent of India?s SMEs have access to high speed internet ? compared with 86 per cent in Malaysia and 96 per cent in China, and behind Vietnam and Taiwan. Just 36 per cent of SMEs in India have what McKinsey calls ?online enterprise solutions?, such as online customer relationship and supply chain management.

However, McKinsey calculate that 43 per cent of SMEs have online sales ? higher than Google?s number as it includes companies that sell some of their products through online marketplaces, whereas Google count companies that have their own website or other listing.

These companies are missing a big opportunity. Take Bharat Plaza, a Jodphur-based apparel producer with a staff of 80. The company first used the internet to find local artists whose designs they could add to their line. To reach Indians abroad Bharat Plaza began marketing online, spending Rs150 ($2.77) per day on AdWorks, Google?s pay-per-click advertising product. In the last year, online ad spending has grown six-fold and the company now sees 25 per cent of sales come from the US, with 14 per cent from both the UK and Australia.

On average Indian companies say using the internet raised revenues by 9.1 per cent, reduced the cost of goods sold by 6.3 per cent, and cut the cost of operations and administration by 8.4 per cent.

The hope is that the introduction of faster 4G services will increase internet adoption by reducing the cost of access and increasing speed. Airtel is piloting 4G services in four cities and Reliance has spent a lot of money acquiring licences to launch 4G in some 40 cities.

Until then, Google is trying to drive Indian companies to set up websites or get a listing online.

?This figure needs to rise if these companies want to reach their consumers at lowest cost and raise their profits,? Temsamani said at a press conference in Singapore on the proportion of India?s SMEs with an online presence. ?We need all the businesses to help drive the ecosystem and we can also do all the work ourselves. It is good that Microsoft, Facebook and other companies are participating in developing the ecosystem, and I can only see this as a benefit.?

Google sees SMEs as the future growth engine for the internet. ?India get your business online?, an initiative by Google, has developed websites for 200,000 businesses ? and hopes to hit the 500,000 mark by the end of 2015. In just 15 minutes and at no cost at all, it lets you create a website with a ?.in? domain name using a professional template.

The internet may be a standard part of life in many parts of the world. But these numbers show just how far the web in India still has to go.

Related reading:
India, elections and Facebook kids, beyondbrics
Africa?s digital divide: still gaping, beyondbrics

Source: http://blogs.ft.com/beyond-brics/2013/04/24/indias-smes-missing-an-online-trick/

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