According to a study by Zinnov, there are over 50 million such small and medium business (SMB) units in India, with only 10 million of them being technology ready. In order to sustain their business in the increasingly competitive market, it is now becoming extremely critical for these SMBs to move out of their comfort zone and reach out to a wider audience of consumers. Some of their biggest challenges in doing so include a lack of proper logistics and retail infrastructure, limited computer expertise (only about four million SMBs are using PCs), inadequate working capital, low marketing expertise, and geographic bottlenecks.
This is where an online marketplace comes in.
Factors like rising internet and mobile penetration, a younger population with increasing disposable incomes looking for ways to improve their lifestyles and an increase in the demand for comfort and convenience whilst shopping have all fuelled the growth of digital commerce in India.
With 1% of consumers buying online, digital commerce is still at a nascent stage in India and an online marketplace model is perhaps the most suited for India as it brings the vibrancy of the bazaars to the internet by offering a selection of millions of products in one destination for consumers. By a PwC report, only 5% of the $500 billion Indian retail industry is organisedthe unorganised and fragmented nature of this industry lends itself to unique issues such as reach and marketing for businesses that want to sell their products nationally.
Digital commerce through an online marketplace provides a way out in a very simple manner. While businesses from across the country list their products online for free, the online marketplace connects them directly to consumers across the country. There are no fixed costs. By providing an additional sales channel, online marketplaces in India can help a multitude of Indian businesses that do not have the resources or the know-how to effectively market their products and services nationally.
Logistics, product merchandising, customer communication and after sales service are some key factors which need to be considered by any business while selling online. When selling through an online marketplace, all these aspects are handled by the platform. This in turn means that a small business can now focus more on the core activities that directly impact its revenue generation, such as enhancing the product portfolio, while saving on the fixed costs of servicing consumers.
Online marketplace platforms offer specialised marketing support to the sellers. From helping businesses to list their product photographs and description to marketing them to customers through email marketing and promotional campaigns are offerings that an online marketplace specialises in. Businesses are now able to build a national brand for their products purely through an online marketing channel without spending on mass media advertising or opening stores in expensive retail locations.
For businesses looking at rapidly, and cost effectively, expanding their reach to millions of consumers in India, online marketplaces serve a critical objective. Rising costs, which are outpacing growth, are at the forefront of SMB worries. Online marketplaces have proven that they have the potential to create a life changing impact on businesses that most need it.
Bijoy Roy started selling his leather products through an online marketplace six months ago. He had to make no significant investment or pay any listing fees for his products. Already, half of his companys sales are through the online channel.
The author is founder and CEO, Snapdeal.com