Author Article by Rahul Raj, Co-Founder & CEO of FloBiz

Small and Medium Businesses (SMBs) in India are on a meteoric rise, especially with the adoption of digital technologies. The role of digitalisation in the growth of small and medium-sized businesses (SMBs) is crucial, and it has the potential to reshape the SMB landscape.

Out of India’s 75 million SMBs, only 8 million have been operating as digital SMBs from the beginning, creating a significant opportunity for technology companies to assist the remaining 67 million SMBs in transitioning to digital platforms.

A digitalisation journey: step by step

Over 30% of all SMBs in India are yet to fully embrace digital technologies, particularly for traditional segments such as manufacturing, retail, and NGOs. While some digitisation efforts are underway in these segments, they are still far from becoming native SMBs. 

This presents a significant opportunity for technology-independent software vendors (ISVs), start-ups, and other players in the ecosystem to help these SMBs in their digital transformation journey.

The remaining 70% can be categorised into five primary levels of digital readiness: 

Level State of Readiness SMB distribution
01 Ubiquity of Connectivity and Communication (Smartphone/ PC/ Internet/ WhatsApp) 48-52 million
02 Speed of Transactions (UPI/ IndiaStack/Payment Wallets/ PoS) 18-21 million
03 Rise in Discoverability (Website/ Online Listing/ Social media) 16-18 million
04 Enhanced Productivity (ERP/CRM/ Accounting) 8-10 million
05 Technology sophistication (IoT, Robotics, AI) <50 k

Source: Zinnov

As the table above shows, the concentration of SMBs is in the Level 1 bucket, where they have just begun their digital journey. A recent survey by NowFloats, a hyperlocal research and content marketing outfit, reveals that since the pandemic, 90% of Indian SMBs are adopting digital tools faster to keep up with the fast-changing preferences of customers. 

As customer demand increases, business owners, especially in Tier II and Tier III markets, are evolving fast and combining offline efficiencies with digital tools to enhance business. 

Some examples of the same are

Omnichannel marketing Besides their brick-and-mortar outlets, Indian SMBs have added or upgraded technologies that enhance customer connectivity. They create a personalised and seamless customer experience and consistently cater to their demands. As a result, they are building a loyal customer base that they retain over a long period. A study by Harvard Business Review reveals that companies with robust omnichannel customer engagement strategies retain 89% of their customers compared to 33% with weak omnichannel strategies. 

Adopting e-commerce benefits SMBs have been able to tide over traditional barriers to entry to physical markets, such as high investment costs and limited budgets, by leveraging the power and reach of online marketplaces. By taking advantage of established platforms such as Amazon, Flipkart, and other e-commerce platforms offering a readymade infrastructure, payment gateway, and logistics SMBs can focus on their core product development competencies and reach a pan-India audience.

Digital payments Indian SMBs are adopting digital wallets and UPI to cater to customers who prefer cashless transactions. According to a Google and Boston Consulting Group report, India’s digital payments industry is expected to reach ₹500 billion by 2025. 

Online accounting tools For ages, small businesses relied on the conventional approach of handling accounts manually till the pandemic led digital push. Today SMBs are proficient with online accounting tools that help them access critical data round the clock with remote access technology across devices. This has made accounting more accessible and error-free, allowing them access to essential reports that provide actionable insights. 

Digitising supply chain Given the various impediments in traditional supply chain management, there has been a significant trend among small and medium-sized businesses (SMBs) in India to digitise their supply chains. Several factors have driven this trend, including the increasing adoption of technology across various industries and the need for greater operational efficiency.

One of the key technologies driving this trend is cloud-based software, which enables SMBs to manage their supply chains from a single platform accessible from anywhere with an internet connection. 

Cloud-based supply chain management systems offer several benefits, such as real-time tracking of orders, automated inventory management, and integration with other business systems, such as accounting and customer relationship management.

Moving with the times Unlike large enterprises that have intricate issues (SMBs) are seeking fast and efficient solutions for their relatively simpler needs that technology companies can address. With various opportunities across various industries and regions, these companies are working hard to develop targeted strategies for SMBs.

The convergence of various factors, such as technological advancements, government policies, and supportive ecosystem players, creates a favourable environment for SMBs to thrive. These conditions have led to an unprecedented digital opportunity, which presents numerous possibilities for SMBs across various industries.

Embracing digital opportunities Governments are implementing policies and regulations that support SMBs, including access to funding, digital infrastructure, and skills development. NGOs also play a critical role in empowering SMBs by offering training and mentorship programs.

As SMBs continue embracing digital technologies, they increasingly combine their offline expertise and online tools to advance their businesses. The supportive environment, increasing digital literacy, and changing consumer behaviour presents a vast opportunity for them.

As technology solutions become more pointed, SMBs will continue combining offline and online tools to advance their businesses and take advantage of the massive digital opportunity.

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