Internet

Only 5 percent of SMEs in India have a website, reveals Google-FICCI report

InformationWeek, July 26, 2013

The report, compiled and presented by Nathan Associates, showed that SMEs, who use the web, fare much better than those that do not

FICCI, in partnership with Google recently released new research that showed the web makes a big impact on small to medium enterprises (SMEs) in India. The report, compiled and presented by Nathan Associates, showed that SMEs, who use the web, fare much better than those that do not. On an average, web-enabled SMEs boasted revenues 51 percent higher, 49 percent more profit, and customer bases 7 percent broader than their offline-only counterparts.

The study revealed significant opportunities both for India’s booming SME sector, where fewer than 5 percent of all businesses even maintain a web presence, and for India’s economy: small medium enterprises are critical to the economic growth in India, where 47 million SMEs employ about 100 million people and contribute more than 8 percent of India’s GDP. According to the report, only 51 percent of online SMBs use the web to advertise a mere 27 percent use it for e-commerce. But with 95 percent of businesses yet to even establish a website; India is poised for big gains as more small enterprises come online.

Speaking about the key findings from the report, Sanjay Bhatia, Chairman, FICCI MSME Committee and Chairman and Managing Director, Hindustan Tin Works Limited said, “The Internet will play a vital role in narrowing the gap between Indian SMEs’ potential and their aspirations. India has all that it takes to compete with other developing and fast growing economies. With the success of e-commerce companies like Makemytrip and Flipkart in India, we believe that more Indian SMEs can benefit from the Internet and eCommerce. While the government has introduced policies that stress upon the development of SMEs, with this report we would like to highlight how Internet can play an instrumental role in driving growth of the SMEs in the country.”

The study showed that Internet use was the highest among SMEs in the IT & ITES, tourism/transportation, chemical products (96 percent) and pharmaceuticals (95 percent). Only 49 percent of Internet using SMEs surveyed had websites; IT & ITES and hospitality had the highest numbers. SMEs in the B2B space had the lowest number of websites.

At a press conference to release the findings, Google India also teamed up with FICCI to celebrate small enterprises who’ve already gone big online in India, recognizing winners of the first-ever India SME Heroes Challenge, an award that celebrates SMEs who have used to Internet to grow and expand their businesses in innovative ways. An independent jury selected three winners from a list of 10 finalists with the help of distinguished judges Amarendra Sinha, Addl. Secretary & Development Commissioner, Ministry of Micro, Small, and Medium Enterprises Government of India, A. K. Kapur, Head – International Cooperation, Small Industries Development Bank of India (SIDBI) Michel Botzung, Global Business Lead- SMEs, International Finance Corporation (World Bank Group), Manoj Kumar, Joint Secretary, Ministry of Corporate Affairs and Padmaja Ruparel, President, Indian Angel Network.

The winner of Google FICCI SME Heroes is: Crimson Interactive Pvt. Ltd.

1st Runner-up: Expert Rating

2nd Runner-up: Fabulloso

Congratulating the winners of India SME Heroes Challenge, Rajan Anandan, Vice President & Managing Director of Google India, said, “No developing country with fast growing economy can rely only on its big companies to achieve sustainable growth, and these businesses are leading the way for small Indian business looking to go big online. In the last five years, Internet has had a direct impact on how both consumers and businesses engage with each other. India’s huge and diverse base of SMEs can benefit from the Internet and we must work hard to ensure SMEs in India better understand the power of the internet to win in this digital age. I would like to congratulate the winners of India’s SME heroes challenge and hope that more businesses will take inspiration from them.”

“Only 5 percent of SMEs in India have a website. I sincerely hope that the government will join with industry to help India realize the value of the web and put India back on a trajectory of economic growth,” he added.

Internet’s Role in the Performance of - India’s Small and Medium Enterprises - Nathan Consulting & FICCI: Report snapshot

● The Internet can be a great equalizer for SMEs, providing them with access to new markets, more customers and visibility so as to unleash their potential. The survey of 951 small and medium enterprises in various industrial and geographical clusters across India shows that SMEs that use the Internet, 69 percent experienced an increase in customers, and 63 percent an increase in geographic reach and 44 percent saw an increase in firm employment.

● Controlling for factors such as an SME’s investment in plant and machinery, the age, sex and education of personnel, and ownership type, the study found that using the Internet for business operations increased the SME’s revenue by 51 percent and profits by 49 percent.

● On an average, an SME adopting the Internet is able to grow its customer base by 7 percent and employment growth by 4 percent.

● The perceived benefits of using the Internet are significant: 64 percent of respondents reported an increase in sales due to Internet use, 65 percent an increase in profits, 69 percent an increase in customers, 63 percent in geographic reach and, 44 percent in employment.

● While email was used by almost all the Internet using SMEs (95 percent), only 49 percent of Internet using SMEs had websites; IT & ITES and hospitality had the highest numbers, and the chemical products and foundry sub sectors had the lowest. SMEs having websites perform better than the ones not having them.

● Doubling of Internet use in SMEs can generate 43 percent higher profits for SMEs

● Despite perceived and actual benefits, certain problems and concerns hinder Internet adoption and prevent SMEs that have adopted it from realizing its full potential. Sixty-one percent of Internet-using SMEs are very concerned about the security of online financial and personal transactions (e.g., hacking of email accounts).

● Only 23 percent of surveyed SMEs engage in e-commerce; on average they have more revenue, employees, and customers than those that do not.

Methodology:

Nathan Consulting commissioned Nielsen to survey 951 SMEs from 14 industrial clusters in 19 geographical clusters spread across 11 states of India. In selecting clusters, the goal was to represent India’s varying levels of development and the impact of Internet use on SMEs in manufacturing, services, and agriculture sectors. Geographic clusters were selected on the basis of inputs from the Ministry of MSMEs and the United Nations Industrial Development Organization (UNIDO). Within the manufacturing, services, and agriculture sectors, we concentrated on sub sectors that contribute to foreign trade and which are expected to use the Internet in conducting business.
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