SMEs and e-commerce portals

By Beni Sindhunata

JAKARTA (JP): More foreign companies that have allied themselves with local firms in the service industry are setting up e-commerce portals.

At last count, there were 24 trade sites, ranging from those established by private ventures such as www.meetdagang2000.com and www.globalsources.com to the U.S. Trade Office's www.buyusa.com, whose targeted market is small and medium enterprises (SMEs).

The focus of the targeted market of the sites vary, from SMEs to exporting companies, to specialists in certain products or sectors that offer a range of services and incentives at various fees.

This is of course a positive trend, and benefits both the portal owners and the business circle, especially SMEs whose access to foreign markets is usually limited.

This is a fact, not a "virtual" benefit, though of course the practice has its limitations and is still going through adjustment here and there. Certainly it would be unfair to compare SMEs with large national companies or subsidiaries of conglomerates that have a long record in the global market.

The result of a survey titled Prospects of Small and Medium Enterprises in Indonesia, which was carried out between February and April 2001 on the potentials of SMEs, reflects the optimism in current trends.

Conducted by the Business Intelligence Report (Biro) in cooperation with Indosatcom, the survey involved 421 companies across Indonesia.

The survey covered aspects such as the companies' finance, products, export, human resources and IT application as well as basic e-commerce.

A total of 127 of the SMEs (30 percent) had launched and made use of websites, mainly to promote their products. Out of that figure, as many as 105 have their own websites while the other 22 are members of e-commerce portals.

Out of the 127 companies, 87 are located in Greater Jakarta while the remaining 40 are located in Yogyakarta, Central Java, West Java, and East Java.

As many as 253 companies, or 60 percent of the total respondents, have access and have made use of the Internet; this group consisted of 165 companies in Greater Jakarta and 88 in other regions. What is interesting is that all of the respondents stated a readiness to conduct online transactions.

Of the 421 surveyed, 208 (49 percent) companies are located in Greater Jakarta while the remaining 213 companies (51 percent) are located in other regions, such as Yogyakarta, West Java, Central Java and East Java.

The readiness of SMEs, especially those in the outer regions, to make use of the Internet for promotional and marketing activities is indeed important for their entrance into global trade.

This is because the Internet can prove to be the most effective, unlimited means of promotion and communication.

Today is indeed the right time for companies to develop online business promotion and marketing in order to net buyers and prepare themselves for the international free market.

Certainly there is no longer any need to debate the importance of the international export market for, especially SMEs, the remaining question would be how to partake and equip oneself with the right weapons, and IT technology is one of those weapons.

The majority (409 companies or 97 percent) are already exporting while the remaining 12 companies have yet to export their products but have started preparations to do so. From the group of exporting companies, as many as 320 have done so on their own, while the remaining 89 export their products through trading companies.

As many as 99 exporting SMEs surveyed were actually newcomers as they were established between 1997 and 2001 -- this is despite the fact that many subsidiaries of large conglomerates collapsed over the same three-year period.

As many as 58 percent of the total companies surveyed (or 244 companies) had an export trade ratio exceeding 40 percent while 28 percent (118 companies) had an export ratio exceeding 86 percent.

The aforementioned results show that IT service companies should now turn toward SMEs as one of their potential markets. They should offer SMEs various products and services of effective, down-to-earth technology management.

They should not consider SMEs small-fry just because they do not have large capitals at their disposal; rather, IT service companies should consider SMEs as potential partners and consumers that should be developed.

Because when those small companies grow and expand, IT companies will then also enjoy bigger, long-term benefits. SMEs are the superior "seeds" of business in the future.

Certainly, IT companies should offer applicable programs that are most suitable to their basic needs, such as ones that help them access the marketing world or ones on financial management.

Unfortunately, one of the lessons that has often gone unlearned is the inability of e-commerce portals to offer integrated business solutions and bring them to fruition.

A website should not be merely a promotional space, but also a tool to achieve regular business transactions such as a payment system, delivery and quality control as well as to seek out potential buyers. The online programs offered should not only create business transactions, but also finish the process in a real and integrated way.

The attractive potential business that is SMEs is certainly a cause for competition among portal managers -- they basically have to fight one another for a portion in the same market and for customers.

This is why some companies make use of more than one website for market access -- a practice that reflects democracy in marketing where everyone is free to enter or exit in accordance to the rules.

So, how to determine which trade website has the most prospects and can yield real profits for SMEs? The answer is: those that are the most serious in keeping their commitment and give real solutions to normal business transactions. Such IT services companies will win and prove to be a favorite among their customers, which is the business circle of the SMEs.

Getting new members and the highest hits on a website, however, is not a guarantee for continued survival for portal managers as business institutions.

A number of giants among international e-commerce portals are at the moment facing uncertainty, as they have had to jump from one investor to another.

Despite the optimism accompanying descriptions about SMEs, it is important to note that this group of business ventures is not the most superior.

In a number of regions, many SMEs have collapsed or are in financial difficulties, just as their bigger counterparts are.

The fate of 170,000 SMEs with bad debts below Rp 5 billion -- and who have been put under the management of the Indonesian Bank Restructuring Agency -- should serve as a lesson for potential SMEs so that they are better able to withstand either conventional or universal business obstacles.

The writer is the research director of Business Intelligence Report (Biro) (www.biro2000.com).