E-Commerce: to enhance SMEs’ Performance

E-commerce is a process of doing just about every aspect of business over the internet, which uses diverse technologies and embraces a wide range of financial forms such as electronic banking, electronic trading, electronic data interchange (EDI), electronic mail (E-mail) and all forms of messaging between Enterprises. E-commerce is a modern business methodology that addresses the needs of organisations, merchants, and consumers to cut costs while improving the quality of goods and services. This is also an unavoidable reality as the prime promoter of commerce and trade around the world.

 E-commerce offers unprecedented opportunities to both consumer and supplier. From the supplier prospective Companies are not limited to physical locations or their own organizational boundaries for providing products and services. E-commerce allows trade to become simpler and more streamlined, thus increasing the value and speed of transactions. Any company can enter global markets where size and location have become rather irrelevant. From the consumer prospect the number one advantage of e-commerce is convenience of use. The user can browse online stores; compare prices and order products and services sitting at home on his/her PC. This provides considerable advantages over traditional commerce such as no dealing with traffic on the road or rude salesmen and access to a large market and wide range to explore before buying or selling without getting out of their comfortable chair. Apart from these obvious advantages, e-commerce also provides some other specific features, which gives it an edge over traditional commerce. One such feature is online customer service. According to Forrester Research, 37 percent of online consumers use customer service more from Web retailers than traditional retailers because of its potential for ease of use and quick response times.

Small and Medium Enterprises (SMEs) are important in a developing country like Nepal. It has a significant contribution to the nations’ Gross Domestic Product (GDP). According to the Federation of Nepal Cottage and Small Industries (FNCSI), the SMEs contribute 90 per cent to the industrial GDP of Nepal, and this sector engages 87 per cent of the labour force and employment. The Department of Cottage and Small Industries (DoCSI) statistics show that there are a total of around 170,000 cottage and small industries (CSIs) registered in the country, and they provide employment to about 1.6 million people. Small and Medium Enterprises (SMEs) have been playing a crucial role in the economic development of Nepal. They have been generating employment, leading to increased participation of indigenous people, use of local resources, generation of technological innovations and provision of skills and training at a low cost to the people. The major exportable items like woollen carpet, pashmina products and handicraft goods produced by SMEs have been major sources of earning foreign currency. SMEs are more suitable for Nepal because they generate employment since they use relatively less imported material and equipment while the large business sector is very dependent on such imports.

 The growth, integration, convergence and sophistication of information and communications technologies (ICT) are changing society and economy. The basic structures and trend of marketing also have changed. One can see visible changes in international marketing strategies. Many companies have started to use the Internet to increase their marketing access and have improved their profitability by doing so. A profound change is likely to result, as consumers can now directly order manufacturers. It threatens to displace market intermediaries, such as insurance agents, travel agents, stockbrokers, bookstores, and consumer product retailers. These middlemen will be disintermediated and virtually replaced by infomediaries or modern internet technologies and also help consumers to become more empowered with product information. This process will make consumer more demanding, they know what is possible and unwilling to accept anything less than the best.

 Although Small and Medium Enterprises (SMEs) play a crucial role in the country’s economy, and can play vital roles in creating dynamic and market-oriented economic growth, employment for the growing work force especially in the rural areas and for reducing poverty in Nepal. They could not face the challenges of changing European and American markets using information technology of the 21st century. In this context, electronic-commerce can be a good medium for today’s competition and modernisation, to recognise the modern multilateral trading system and to participate in the international trade. For LCD countries like Nepal technology plays important role to boost nation’s overall production capacity and efficiency. E-commerce accelerates the process of economic growth by speeding up the diffusion of new technologies. Potential benefits of e-commerce for Nepalese SMEs are immense. Any company can enter global markets where size and location have become rather irrelevant.  Success in e-commerce will have an immediate impact not only on productivity and profits, but also generate new jobs employment and livelihood.

 Since, developing a basic e-commerce site doesn’t require heavy investment, using an e-commerce site need not necessarily incurs additional expenses. Having an e-commerce site is possibly one of the best ways to make money from internet. It is just like to set up an additional virtual store in a minimal cost. This can be a second branch office for your business where customers from around the globe can explore products and services and place orders on their convenient time. As e-commerce isn’t dictated by any geographic barrier, SMEs, by using the online business model, can potentially market their products and services in a global market. A recent research shows that the number of online shoppers worldwide is increasing each day, and it’s obvious that online shopping will dominate the retail market in coming days. As we know that because of the internet technologies consumers are being more empowered with product information. This could be an opportunity for Nepalese business firm because Nepalese products will be less expensive than the western ones. But we must pay attention for the quality of the products. To trap this opportunity Nepalese Small and Medium Enterprises (SMEs) should take further steps towards international marketing and promotion of their products and services through e-commerce.

 Apart from isolated effort undertaken by few business firms there is still lot to do in the field of e-commerce in Nepal. Some Nepalese business entrepreneurs use internet but they use it only for research and email purpose. There are very few business firms which are utilizing e-commerce as their marketing tools such as Muncha.com, which is a good example in this category. www.muncha.com  is an online extension of Muncha House, one of the oldest departmental stores in Kathmandu. This is the pioneer internet venture to offer Daal, Chaamal on the internet. The handicraft Association of Nepal has started a vertical portal at www.nepalhandicraft.com.np which has links to its member home pages and other information to promote their interest internationally. www.b2b.com.np is the National Business to Business (B2B) e-Commerce Market Place as a single electronic gateway to promote the market linkages within the country and with the international markets. Some other business firms such as netfornepal.com, shopnbds.com, thamel.com, nepala.com and so on are also utilizing e-commerce as their marketing tools. Other business firms who have not yet actively participated in this race should learn from those who already have established their presence in the new economy to trap the opportunities provided by modern technologies

 After accession of WTO, We have tremendous opportunities for exporting our products in the international market. But to substantially benefit from international trade, we must need to strengthen our capacity by increasing our competitiveness through enhancement of technological capability to   increase efficiencies in the productions, distribution and sale of goods and services. There is an urgent need for Nepali entrepreneurs, involved with SMEs, to market their product to outer world; otherwise they will be left behind. There is lack of awareness among the Nepalese entrepreneur about the benefits of e-commerce and also majority of Nepalese businessmen those who are involved with SMEs don’t have the basic knowledge about how a basic e-commerce website works. They give least important to sales and promotion activities because they are regarded as a higher cost seeking component; it is just a perception, through the internet they can promote their products and services worldwide at nominal cost.

 Nepal’s Government and other stake holders should create an image of e-commerce awareness and leadership and demonstrate to the business community the importance of e-commerce. Government should consider e-commerce issues at the highest level. Government should also identify e-commerce as a critical element of international competetitiveness. And also Nepalese entrepreneur should realize that there is urgent need for SMEs to follow e-commerce to cope with the fast changing global business environment.

 About me
Tika R. Kandel
Graduated From,  Swinburne University of Technology, Australia
Currently working in the field of e-commerce in Nepal
 Email: kandeltika@gmail.com