Going digital may imply a very broad sense in terms of business application. It can cover the entire chain of a business organisation, from internal functions, frontline customer service to marketing activities. In simple terms, going digital refers to the implementation of advanced technology into business with the aim of enhancing interaction with customers for improved business performance. The coverage can be wide and too comprehensive to be discussed in one article.
Therefore, this article will focus merely on digitisation of business activities in garnering more sales for the SMEs. In short, how SMEs can capitalise on digitisation to expand their market for products and services.
Why go Digital?
Like it or not, the world is going digital—surely and rapidly. The connectivity through advanced technology makes the world “smaller”. Communication between places across the globe has become much more efficient, cheaper and faster. And the technology is improving rapidly with new innovation, bringing new opportunities for business growth, or rather challenges—if businesses fail or not ready to progress and adapt to the vast and rapid technological changes.
The internet penetration rate for most countries across the world has escalated significantly over the last decade. As most of the developed countries have experienced high penetration rates, it is the increased use of internet in Asia, particularly China that has shaken the world.
At a mere penetration rate of 52.2% in 2016, according to internetlivestats.com, the number of internet users in China was amazingly high at over 720 million, which represented 21% of total global internet users. China is by and large the country with the largest number of internet users today. Practically, the total number of internet users in China is higher than the entire population of ASEAN.
India, which is the country with the second highest number of internet users in the world, is growing fast with total internet users close to 462 million, and reflecting an internet penetration rate of 34.8%. Thus, China and India collectively house one-third of world internet users.
In total, there are approximately 3.4 billion internet users globally. About 40% of these internet users, or about 1.3 billion people, have bought products or goods online. At an estimated internet penetration rate of merely 46% globally, this indicates a great potential for online business, currently and in the future.
Understanding New Buying Behaviour
Over the past decade, consumers’ buying behaviour has been greatly influenced and transformed due to the emergence of online shopping. It is important that SMEs understand the new buying behaviour of these buyers. Questions such as: how the online consumers shop for their products, what influences their buying decision, what do they look at when they shop online, ought to be answered.
Below are four main reasons for people to buy products or services online, namely:
Online shopping can be carried out any time of the day, from anywhere, solely at the convenience of shoppers. Payments can be made online with internet or mobile banking.
- Competitive Pricing
Prices can be competitive for products that are sold by different merchants. At times, discounts are given for returning customers or during festive seasons.
- Wide Choices
There are plenty of products for review and consideration. Consumers can easily review and shop for products online.
- Easy Comparison
As product features, prices and other details are openly displayed, it would be easy for consumers to compare the specifications and validity of each product before making buying decisions.
SMEs aim to go online shall ensure their online platform offers the above factors, which encourage the consumers to frequent their online stores.
Buyer’s Concern on e-Commerce
Despite the fact that online shopping is growing, there is still reluctance among some consumers to buy online. The key concerns are illustrated below:
- Security on Payment
Some consumers do not feel secure to pay using their credit cards for online purchases. They are concern that their credit card details may be hacked by third parties for unwarranted transactions.
- Inferior Quality
The product quality may not be up to the consumer’s requirements and expectations. Some products were received in bad condition. When this happens, little can be done but to put the product aside, resulting in waste in spending.
- Different from Display
The products are not the same as the pictures displayed in the online mall. The colour, and perhaps, the product specifications may not be up to the consumer’s requirements.
- Difficult to Install
This is especially true for bulky products like furniture, racking system, etc. Some consumers find it difficult to install these products into good use. At times, the products ended up in the store uninstalled.
Opportunities for SMEs
As highlighted earlier, the market potential is huge for online business. The buying behaviour of consumers is changing fast towards online transactions. In Malaysia, there were 21 million internet users in 2016, representing a penetration rate of 69%. This was a significant growth of almost 56% from 13.5 million internet users 10 years ago in 2006.
The internet penetration back in 2006 was merely 51.6%. The number of users and penetration is expected to increase steadily in the coming future.
Besides huge market potential, online shopping provides SMEs a new and additional avenue to reach their customers. Instead of setting up branches the traditional way, SMEs can now distribute their products and services online.
Technology advancement has offered SMEs alternative ways of encroaching into e-commerce. In the past, SMEs had to invest substantially in their own online system in order to market their products or services online. Having set up the system, they must also hire a team of experts to manage the online division. The cost could be unbearable for small businesses.
Today, there are various e-mall where SMEs can place their products and services. Instead of investing in their own online platform, SMEs can make full use of the e-mall by paying a certain fee to the e-malls. The fees vary, depending on the level of engagement the e-mall is expected to take on.
Are you already embarked on an online business? If not, why not? If yes, how have you been doing? As a practical guide, SMEs that are planning to go digital should work on the following checklist:
- Work on a strategic framework in capitalising the business opportunity from an online platform.
- Decide on the approach or intermediary to branch out your online ventures
- Review the design, presentation and features of your products and services in attracting buyers
- Collaborate with the right logistic firm for a prompt and effective delivery process
SMEs must accept the rapid changes in technology and start embracing digital advancement into their business activities. The digitisation trend is sure to accelerate in the future. Hence businesses that fail to move forward fast enough may find it tough to even sustain and remain in business. The future is about technological advances and businesses that can outperform in the future would be those that leverage well on technology.
Author: Eddie Hu
The writer is a former senior banker with over 26 years of direct dealings with the SME sector. He currently provides advisory and consultancy services to the SMEs in elevating their business performance to the next level. He is also a member of SME Expert Advisory Panel (SEAP) under the purview of SME Corp Malaysia. He has authored a book entitled “SME Challenges and Solutions.” The author can be contacted at [email protected]