Deep-pocket e-tailers like Amazon, Flipkart and Snapdeal are turning to the country’s 47 million small and medium enterprises (SMEs) to host a unique assortment of products on their online stores.
By Sayan Chakraborty
They are providing specialised training, logistics, infrastructure and technology support to these SMEs to enrich their product selection in categories like apparel, jewellery, handicrafts, fashion accessories and leather goods. Flipkart plans to on-board 50,000 SMEs in the next two years while Snapdeal is inching close to the 100,000-seller mark, a majority of them SMEs. Amazon already has 10,000 sellers on its platform, many of whom are small units.
In turn, such tie-ups are helping SMEs gain access to an otherwise elusive market and an association with the likes of Amazon, Flipkart and Snapdeal leading to prominence and confidence among their consumers. An exposure to the online channel also helps SMEs cut through intermediaries like wholesalers and retailers, thus streamlining payment processes.
Snapdeal co-founder Rohit Bansal told FE his firm has introduced services like Payship and Snapdeal Plus to boost logistics capabilities of SMEs, besides an exclusive mobile app. The e-tailer will also help them secure loans from banks and NBFCs. “We see ourselves as an enabling company for the over 1,000 businesses built on Snapdeal who do more than R1 crore in annual sales. Before we came in, small businesses saw the internet as a threat but that’s changed,” Bansal said, adding that it has already tied up with the Karnataka government to help the state’s SMEs sell online.
Amazon India country head Amit Agarwal says Amazon offers services like Fulfillment and Easy Ship to enhance a seller’s logistics capabilities. “We do all the heavy lifting on behalf of the sellers so that they can focus on pricing and selection,” Agarwal said. The global major has also tied up with the Federation of Indian Export Organisation, Manufacturers Association of Information Technology, Trade India, and Export Promotion Council of Handicrafts to identify SME clusters and to popularise the benefits of selling online.
Flipkart, on its part, has tied up with the Federation of Micro, Small and Medium Enterprises (FISME) and the National Centre for Design and Product Development to help small manufacturers and artisans. The online marketplace is also working with the Centre to train people in semi-urban and rural areas to prepare them for employment at Flipkart or its business partners. On Monday, the homegrown e-tailer inked a pact with the textile ministry to provide an online marketing platform to handloom weavers across the country.
SMEs have limited muscle when it comes to reaching out to an audience and building a brand. Another problem with them is managing finances. “When SMEs work with online marketplaces, they are assured of payment within a specific period of time, which is otherwise not the case and has a bearing on their finances,” said Anil Bhardwaj, secretary general, FISME. According to data available with the ministry of micro, small and medium enterprises, India had 46.7 million MSMEs by the end of FY13, employing 106.1 million people. The sector has been battling a fund crunch and lack of infrastructure. According to a November 2012 report by the International Finance Corporation, the MSME sector required funds of $650 billion.
An online presence can, however, iron out a number of these creases. A July 2013 report by Federation of Indian Chambers of Commerce and Industry (FICCI) said internet use among the SMEs can lead to 32% higher revenues, 43% higher profit and a 32% increase in number of customers. “Another advantage of going online is you can display thousands of products, which would not have been possible in the case of a physical store. Association with online marketplaces take care of issues like absence of back-end technology, packaging and logistics infrastructure, dearth of finances,” Bhardwaj added.
A Delhi-based garment supplier who works with e-commerce companies said on condition of anonymity that business through online channels has grown by 60% in the last one year. However, deep discounts offered by e-tailers have been a cause of concern for him.
“I have been supplying this e-tailer for the last 18 months and business has grown over 60% in one year. But I am not sure how long the association will continue as the products bought from me at Rs 500 are sold online for Rs 300. My offline business can take a hit with this pricing,” he said. Given the huge business opportunity in on-boarding the SMEs, the e-commerce companies have no qualms in pumping money to train them in online business models and provide necessary infrastructure support. “For e-commerce companies, it is important to have unique products and services on offer.
For those unique offerings, they have to go to the SMEs, who are small but unique. It helps e-commerce companies by letting them offer a large selection of products and the SMEs by giving them customer reach,” said Ashish Jhalani, founder of eTailing India, a consultancy.