The impact of digitization on small to medium-sized enterprises (SMEs) can be profound if organizations embrace the move to a digitized business.
One report showed just how profound this impact can be with 79.7% of survey respondents seeing an increase in productivity of up to 60% in comparison to non-digitized organizations that used more traditional management and sales methods (Ikumoro & Jawad, 2019).
While it is true that organizations of all sizes and across all sectors are embracing digitization to increase reaching prospective clients, increase productivity, and improve profits, SMEs seem to be lagging.
As with all economic and business changes, education is critical to implement the evolution of SMEs into the digital market. This article will explore what is needed for SMEs to successfully institute digitization.
Your (Virtual) Office on the World-Wide-Web
In Africa, SMEs account for around 82% of all jobs across the continent and 46 million SMEs are present in Sub-Saharan Africa alone; the far-reaching impact of digitizing SMEs could bolster not only organization profit but continental profit too (Ogigai & Nwafor, 2022). Over the last few years, Africa has become an attractive business investment hub. This has afforded Sub-Saharan Africa the unique opportunity to capitalize on growth on economic growth and development. Building a website for an SME is the first step in transitioning into digital commerce, but before a website is launched, it needs to be tested for accessibility. Once businesses are online, SMEs need to maximize the numerous opportunities available to them to drive potential customers to their site in the hopes of converting digital traffic to sales.
Creating a Website
Creating a website helps SMEs become more visible on electronic platforms and provides credibility. A website explains and informs prospects about an organization and allows SMEs to boost a brand’s recognition while creating value propositions. Most SMEs are not afforded the opportunity to remain firmly in a brick-and-mortar phase and having a website is the very least prospective clients expect. This is because consumers will turn to the internet to search for the products they are looking for even if they opt to shop in a physical store. Website design has evolved with the increase of online business and most website design software is easy to use and organizations do not need to employ coders or specialized employees. Regardless of what program or host an organization uses, website hosting companies have made it simple for SMEs to build a professional-looking website. To create a website, the following steps will need to be followed:
- Choose a domain name: If possible, this domain name should be an organization or brand’s recognized or legal entity name so that consumers can locate the brand easily. Should the organization’s exact name not be available, an easy variation should be selected.
- Determining the primary purpose: While websites are certainly designed to inform prospective and current clients about an organization, a company needs to still decide what the website’s purpose will be. A website’s purpose can be varied and can include e-commerce, information, interaction, lead generation, services, etc.
- Choosing a Web Host: All websites need a server on which data is stored. This server is called a web host. SMEs should decide what budget will be spent on a host and should consider data security.
- Build the website: SMEs need to build a website that includes multiple pages that are dedicated to the various aspects of the business. These pages should include information on the organization’s primary purpose as well as a call to action. The website should be engaging, informative, and strategically communicative, enticing prospects to commit to a sale to the organization. Depending on the size and function of an SME, some external professional assistance may be needed in the form of programmers to help business owners create a cohesive, user-friendly website.
- Payment systems: Should the organization require a payment system it will need to be set up. The easiest way to set up a payment system is through e-commerce software or by outsourcing to credit card processing solutions companies. E-commerce and services SMEs will need to ensure payment solutions are secure.
- Test the site: Before a website goes live it is important to check how well it works across all browsers and channels. This means viewing the site on different internet browsers, as well as ensuring the site is mobile-friendly.
- Launch: Once the site has passed all testing phases, it can be officially published or launched and advertised.
Driving Traffic To a Website
Having a website is great but if an organization cannot drive traffic and prospects to the site, it will not cover the costs of the website or create profit. Driving potential customers to a website can be done in several ways, but a multifaceted approach that links all channels that prospective clients are using is best.
It is important to keep a website up-to-date and relevant as well as ensure that the site is optimized for mobile users. Marketing the SMEs website through social media is one of the most effective ways to ensure relevant prospects are visiting a site. Cross-channel marketing using all social media platforms including Facebook, Pinterest, LinkedIn, Pinterest, TikTok, etc. It’s important to announce website updates on social media channels so that a brand can balance out content with promotional and non-promotional material. Social media links should also be present on websites to allow for traffic to interact between different electronic mediums.
Added to this, SMEs should consider using search engine optimization (SEO), carefully selecting meta descriptions, and keywords, and ensuring content remains relevant. SEO tracking and selecting tools are readily available and free to use for SMEs and will help organizations not only identify the right keywords to optimize traffic but also analyze how well each keyword is working. A great way to ensure that optimization continues to work is to publish fresh content through blog pieces that incorporate chosen keywords. When optimizing a site, SMEs should maximize reach by placing internal and external links on their website and making sure that images are optimized. Finally, a website needs to be maintained frequently with updates about products, services, offerings, and news to encourage prospects to return to the site. Having a website is a great low-cost investment to help SMEs draw potential clients and remain relevant in a highly competitive marketplace.
Meeting Clients Online
SMEs that are data-driven are 23 times more likely to attract new clients and are six times more likely to convert these clients to sales (McKinsey Global Institute, 2020). Meeting clients online and collecting customer data provides SMEs with valuable information that traditional brick-and-mortar clientele cannot. Through data collection, SMEs can ascertain who a target market is, how they shop, what their needs are, and what their online preferences are. Added to this, data collection affords SMEs the unique opportunity to interact with and focus on the clients they want to attract to the organization. It’s important for companies to know how to gather customer data in a way that is ethical and compliant with international standards, as international investment means international trade and therefore international customers. Meeting customers online lets organizations stay ahead of the competition and can ensure they are innovative in their product and service offerings.
The virtual customer, like other traditional customers, will browse online, looking for offers that fulfill their needs. Unlike traditional clientele, online customers are more likely to abandon their cart or leave a website without making a purchase. When this happens, it usually means the website they have visited is not properly targeting the needs of the customer or not compelling them to commit to a purchase. For a brand to truly know what it takes for the targeted demographic to commit they will need to interact and collect enough data to gain a deeper understanding of why a customer is not committing and what it will take to encourage brand loyalty. This data collection and interaction, however, needs to be done ethically so that the SMEs can use this feedback for marketing purposes. Successful e-commerce companies use customer interactions to help:
- identify obstacles and issues a customer is facing
- address complaints properly
- forecast sales
- guide customers into purchasing or give customers more information
- assess competitors and find gaps in the competition
- promote the company more effectively
There are many different ways to collect data online but SMEs need to understand that this data should be both quantitative and qualitative. Having a website that is linked to social media channels, and taking into account all interactions across all channels, will help an organization to finetune its communication with its target demographic. Simple, cost-effective, or free ways to collect data from clients which are ethical can include:
- subscription services
- customer surveys
- asking for feedback from customers who have interacted with the company
- promotions and competitions
- analyzing previous orders or services purchased
- Google analytics
- social media interactions
- customer reviews
- customer referrals
Meeting clients online is not nearly enough, brands must efficiently communicate with clients so that they institute the best e-commerce solutions for the brand and the proposed selected demographic.
Buying and Selling; The Dangers of
By the end of 2022, it is estimated that global online sales are to gross $5.7 trillion worldwide. Over the next few years, this number is expected to rise exponentially and as such, online business is crucial for Sub-Saharan SMEs. Up to 19.7% of all retail sales in 2022 are expected to come from buyers online and this equates to just under a quarter of every dollar spent being funneled into online purchases (Bernhardt, 2022). The benefits of online business may be great but it’s important that SMEs are aware of the pitfalls of doing business online as well, and as such, an open discussion about e-commerce risks will help to educate emerging and evolving African online businesses. Perhaps the greatest of these risks is online security breaches and with cybercrime costing almost $1 trillion globally, it is important to ensure that online businesses keep their web services protected (Riley, 2020).
Types of cybercrime include malware, credit card fraud, ransomware, and phishing attacks, to name a few, and these types of attacks can have far-reaching consequences for any online business. As such, SMEs need to ensure that clients are justifiably assured of their online privacy, and that digitized information that could pose a potential threat to customers is properly protected. Clients need to be advised of not only what security measures have been put into place to protect their data, but also how a company may gather or use their data. Another risk to assess is copyright and trademark infringements. With online competition being so fierce, smaller companies need to adequately protect their intellectual property. This can pose an issue for SMEs as the cost of properly protecting property can be expensive, but in the long run is well worth the investment. Intellectual property that belongs to other companies should always be handled properly and even with proper advertising, SMEs can run into trouble with larger organizations. Downtimes can cost SMEs money as well, and even a few minutes of an organization’s platform going down can result in lost profits. Surge traffic, coding errors, and issues with payment platforms can be prepared for but are often difficult to avoid, and when launching online, SMEs should factor some platform downtime into profit margins.
Other potential risks are not that different from traditional brick-and-mortar stores and include non-compliance with local and international regulations, product liability and product defect issues, and human error. For online SMEs who keep inventory, it is also very important to properly insure against property and inventory damage due to disaster, or transportation disruptions. It’s important to note that with the correct preventative measures in place, many of these risks can be avoided or at least mitigated and comprehensive business insurance from an authorized commercial insurance provider should negate most of the risks mentioned. Having said that, negligence will not be covered by any insurance company and as such, the onus is on the SME to take all reasonable and responsible precautions to prevent such losses.
What Products and Services Can Be
Sold and Provided Online
While there are numerous products and services that can be sold online, each of these can be divided into commoditized or niche products. Commoditized products are the most abundant on the internet and are usually high in demand. These products are items that everyone needs and include clothes, food, pet products, certain tools, etc. A commoditized product or service can be either a physical product that is delivered to a customer or a digital offering. Before the COVID-19 pandemic, certain commoditized services, like healthcare, were exclusively offered in person, but with many people not being able to leave home, these services evolved to offer digitized services. The same can be said for educational institutes, food deliveries, etc. Niche offerings are goods and services that target a smaller or more specific demographic. For example, online SMEs may be looking to ensure against digitally specific risks. Niche product offerings would offer a policy and a service which specifically covered e-commerce business risks.
When it comes to deciding what to sell online, there really is no magic formula or answer. What to sell ultimately comes down to what a company can offer its targeted demographic and how e-commerce fits into the SMEs business model. It’s important that SMEs do not compare themselves to other companies or brands that do not offer the exact same service as certain models of e-commerce work better than others for specific businesses. Drop shipping, for example, may work well for one SME but won’t work for another. SMEs need to ascertain what business model best suits them and devise proper marketing strategies surrounding this business model. Some of these e-commerce business models include:
- White labeling: A B2B option in which manufacturers supply to sellers who then resell products. White labeling business can include almost any product that is digital or physical products.
- Drop shipping: Drop shipping is similar to white labeling but involves only physical products. Drop shipped products are sourced from a bulk supplier, relabeled (or not), and sold to the public under a different brand name. Some sites that can be drop shipped on include Amazon, Shopify, and Etsy.
- Produce on demand: A B2C option, businesses supply a product or service on demand. Products and services can include homemade products, consumable products, or on-demand services like house cleaning, moving services, or specialized home repair services.
- Wholesale: Usually B2B, wholesaling involves a company purchasing in bulk from a manufacturer and supplying to a business with a marked-up price. The wholesaler will usually only supply bulk quantities and does not white label the product.
- Retail arbitrage: Perfect for deal hunters, retail arbitrage involves purchasing heavily discounted products from another supplier to resell at a later stage for below-market-value but still-at-profit. Many retail arbitrages will purchase products from auction to resell later. A business can sell any physical product including property and vehicles as a retail arbitrage.
- Amazon storefronts: An Amazon storefront is an online “physical store” that is hosted on Amazon’s website. With an Amazon storefront, businesses do not need to have a website and can utilize Amazon’s in house marketing programs (at a cost) to advertise physical products.
Regardless of the business model, SMEs need to look at the targeted demographic and ensure they are producing services or products that solve the needs and problems their customers are facing. When brands choose to solve customer problems rather than sell a product they can improve upon their offerings, giving the SME a unique position in the market.
With global commerce expected to reach almost $6 trillion worldwide by the end of 2022, and with this number expected to rise exponentially over the next few years, businesses are being forced to move toward digital offerings and services in order to remain relevant. Because SMEs provide 82% of all jobs across the continent of Africa, and Sub-Saharan Africa is a massive contributor to this percentage, it is critical that these SMEs make the move into digital offerings. The far-reaching impact of digitizing SMEs has the potential to boost the continent’s GDP, attract foreign investment, and solidify Africa as one of the world’s most powerful trading forces once more.