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E-Commerce Platforms and The Acceleration of Indonesia’s SMEs to Go Digital

March 15, 2021

“The gears of the nation’s economy need to start moving again, through how? By purchasing local products, ... purchasing products from SMEs,” ⏤ Joko Widodo, Indonesia’s President.1

Ever since the start of the pandemic, the Indonesian government, propelled by the President himself, has accelerated the shift of priority from improving the country’s infrastructure to empowering SMEs instead.2 New regulations and financial aids3 have greatly called attention to the SMEs’ critical role in reviving the nation’s economy.

SMEs and their amplified role towards the economy

With at least 62.9 million SMEs covering 99% of Indonesia’s overall business units today,4 it is undeniable that SMEs are among the backbone elements of the country’s economic growth. As an illustration, SMEs’ contribution towards the nation’s Gross Domestic Product (GDP) in the past 5 years has increased from 57,8% to 61%.5 The growth of SMEs, especially at a time like now, heavily affects the future unfolding before us.

Fortunately, the growth of SMEs have shown positive progress over the years, while boosting the people’s welfare by employing 97% of the country’s human capital.6 However, the pandemic’s limitations brought unfamiliar challenges that no business across any scale could have foreseen. During midyear of 2020, the Indonesian Politics Indicator Survey revealed the 4 main challenges burdening business owners amid the pandemic; the weakened economy, the scarcity of incoming orders, the increment of raw materials’ price points, and consequently, operational costs.7

With Indonesia’s multiple reinforcements of large-scale social restrictions since last year, businesses, particularly SMEs, have gone through a curving path in regenerating an effective performance in their offline operations. According to the Head of Indonesia’s Shopping Center Management Association (APPBI), the average number of shopping center visitors only makes up 20% of the overall capacity during social restriction periods. They predict that this figure would only go up once the vaccination has been widely rolled out, creating a safer public environment for all.8

Competing for the 20% visitors’ attention with the rest of the retail stores available is indeed a far-fetched goal to accomplish on a daily basis, resulting in a decrepit store performance that does not suffice in covering high operational costs.9 Accordingly, the restrictions of offline retail spaces have amplified the possibilities offered by online retail spaces, or in other words, e-commerce. At the end of 2020, one of Indonesia’s marketplaces, Tokopedia, recorded 100 million consumers of local products.10 This could illustrate that on top of fulfilling daily necessities, e-commerce has been considered a suitable medium to bring forth local products into a wider market.

Going digital despite the hurdles

This stern change of normal shopping habits happened quite swiftly during the pandemic, hence requiring the swiftness of SMEs in adapting to it as well. While that is the case, not even 20% of SMEs in Indonesia have gone digital, as per the Ministry of Cooperative and Small and Medium Enterprises, Teten Masduki’s statement in November 2020.11 Masduki also elaborated several factors behind the SMEs’ lack of successes in going digital, entailing the high competition against big brands, as well as the limited capital, which could bring challenges to fulfil the growing demands in e-commerce.12

When outlining these reasons into two general categories, the pain points of SMEs in going digital include its competitive branding as well as sustainable sales management, among other issues that are unique to each industry. Establishing an ideal or the best practice for one’s online business is indeed a challenge for owners everywhere—one that requires agility and continuous learning to keep up with the current trends. However, with the right tool and resources to accommodate their needs, such is not impossible. Furthermore, the right tool must fit the needs of SMEs; easy-to-use, reliable and affordable.

The grass is greener with SaaS

Software-as-a-Service (SaaS) refers to a type of software that is hosted by a central provider and offered to users through the Internet. It allows its users to access the software online without having to download it into their devices.13 Since it’s hosted through the Internet, all data on the software is stored in the cloud and almost requires no offline space.14 With one common infrastructure for all users, the creators are able to innovate quickly and apply constant improvements into the software, giving it an unlimited shelf life when maintained optimally.15 To sum it up in simple terms, the needless of offline space to display goods, the customers’ boundless access to the site, and the continuous improvements offered by the provider makes SaaS an ideal tool that is not only easy-to-use, but also efficient in budget as well as performance⏤just what SMEs need.

In the past decade, there has been an abundant number of SaaS products that have fulfilled the needs of business owners in selling per se, in addition to boosting the e-commerce industry’s growth as a whole. When it comes to selling online in particular, there are a variety of SaaS product categories available to make digital business processes second nature for SME owners everywhere, as illustrated in the breakdown below.

The fundamental business processes of SMEs in the digital age are mainly in line with the first 5 SaaS categories mentioned above; Web Hosting & E-commerce, Communication Platforms, Customer Relationship Management (CRM), Payment Gateway, and Accounting.

Apart from the essential operational aspects entailing Communication Platforms and Accounting, the rest of the services cater to the specific aspects for an online business to have. In creating an end-to-end customer journey, a CRM platform could automate certain initiatives and target a large audience in parallel; sending out promotional emails in bulk or tracking the online store’s traffic. In facilitating transactions, a payment gateway platform provides the enablement of multiple payment methods and even facilitates transactions from foreign countries. Hence, one of the pain points which SMEs face in sales management could be fulfilled by optimising these two categories of SaaS.

Acting as the primary medium, where the other SaaS product categories are integrated to and are navigated towards, is the Web Hosting & E-commerce category. Web hosting refers to the service that enables an individual or organization to publish a website on the Internet,16 such as the Google Cloud platform. These services facilitate the existence and running of other SaaS products published on the web, including e-commerce.

E-commerce varies from website builders and Content Management Systems (CMS), multichannel management platforms, chat commerce dashboards, marketplaces including Tokopedia and Shopee, along with other platforms in support of the online shopping ecosystem. Each e-commerce platform directs the user to a different market with particular objectives. With competitive branding being another pain point that SMEs face in going digital, the utilisation as well as strategic management of these multiple selling platforms simultaneously can in fact help SMEs expand beyond their customer base and create an integrated branding. All in all, the business is exposed to additional values from going digital with e-commerce SaaS.

Reported on Lazada’s survey results, SMEs which have gone digital particularly feel the ease of selling online through various aspects with technology being one of the valuable fundamentals. On the operational aspect, they are greatly accommodated in terms of infrastructure and the human resources capabilities. On the business aspect, they experience ease in terms of product innovation, customer management and market penetration.17

In parallel to these sentiments, SIRCLO’s internal findings indicate that there has been a minimum of 130% increment in new SMEs webstore creations through SIRCLO Store’s solution during the pandemic, with a majority of it coming from the Fashion as well as Food & Beverages industry. It was also worth noting that webstores from several industries experienced significant traffic upsurge during the pandemic. Most notably, webstores from the the Household Appliance industry experienced 190% of traffic increase in comparison to its traffic performance last year, similarly reported on our findings.

Parting Words

There are over 11,000 SaaS companies in the world today,18 offering many options for SMEs to choose from. The multitude of SaaS product options either to the consumers’ or the sellers’ advantage have taken the hassle out of everyday dynamics that are now safest to be conducted remotely. Not only can SaaS products automate various business processes, but it can also make the customers’ digital shopping journey more enjoyable and easy to navigate at all times.

As Indonesia’s leading e-commerce enabler offering diverse SaaS products aimed to help businesses across all scales in selling online, SIRCLO puts a lot of emphasis on how the technology can extend its agility to adapt to the changing circumstances or upcoming opportunities in the horizon (suchlike the Ramadan season that’s right around the corner). Bearing in mind that while SMEs play an integral role in navigating the nation’s economy against hiccups, their very own financial hiccups shouldn’t be overlooked.

Honoring our dedication to accommodate and empower SMEs, SIRCLO Store now offers an unlimited Starter plan for FREE. This plan has the purpose of helping Indonesian SMEs sell online through their very own official brand.com website that’s integrated with the fundamental third-parties (payment gateway, 3PL, etc.) as well as SIRCLO’s other solutions (coming soon). Visit store.sirclo.com/starter to find out more.

Disclaimer

SIRCLO neither provides regulated advice nor guarantee results. The materials we convey reflect general insight and best practice based on information currently available, and do not contain all of the information needed to determine a future course of action. Such information has not been generated or independently verified by SIRCLO and is inherently uncertain and subject to change. SIRCLO has no obligation to update these materials and makes no representation or warranty and expressly disclaims any liability with respect thereto.

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