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Home Magazine July 2013 Making SMEs Buying Big!

Making SMEs Buying Big!

As we know SMEs suffer due to rise in raw material prices, lack of options in materials to be purchased, escalating production and operation costs, expensive bank finance and labour shortage. Weakened demand and increased competition have further exacerbated the situation. With their bulk buying services, along with institutions like NSIC, a few private enterprises have come on the scene to support SMEs to overcome these challenges and compete on an equal footing with large enterprises. These enterprises operate with the long-term vision of empowering SMEs both at an individual as well as at an organisational level.

BY Anushri Mondal | COMMENTS ( 0 ) |

Power2SME – Buying Club for SMEs

Power2SME is India’s first of its kind”Buying Club” for SMEs in India. The business model is a combination of both online and offline models, wherein the company provides a platform to obtain the best pricing for SMEs’ procurement needs, door-step delivery, online tracking of orders and flexible payment options.

 

Match-Making Buyers and Sellers

Founded by R Narayan, Power2SME’s services go beyond match-making, which is the focus of the majority of the current online business websites for the SME sector. “We procure directly from the manufacturers, taking title of the goods and then sell directly to end consumer organisations. We take complete ownership of the entire order process for the customers, right from ensuring a quality supplier pool, best possible prices, and flexible payment options to ensuring door step delivery of the order. We supply inks, steel, polymers, paints and chemicals, and additives to SMEs, procuring these in bulk from manufacturers,” says Narayan, Founder & CEO, Power2SME, on being questioned about the operation process of this unique buying club dedicated solely towards SMEs. Power2SME has a registered base of more than 13,000 SMEs on the portal.

 

What do SMEs Gain?

SMEs stand to benefit potentially via this unique venture. Research shows that an SME in India, on an average, spends about 75 per cent of its total expenditure on raw materials. The raw material supply is the most critical for an SME to make its business running. Power2SME is operating in this core space of the SME business.

 

SMEs today are Internet-savvy and accessing the Internet for their business requirements. Power2SME provides a simple online platform for their purchase requirements.

 

Over their years of operation, it has been able to increase profit margin of registered SMEs by 3-5 per cent in a month.

SMEs are always operating on low margins and do not have enough capital to spend on R&D. The extra money SMEs generate after dealing with Power2SME can be utilised in R&D and driving sales and marketing initiatives.

 

SMEs face cash flow problems that hinder their business. Power2SME also helps SMEs to raise capital from banks. Narayan says, “We work closely with the banks, educate them about SME requirements and convinces them to lend to the SME community. Banks that are usually wary of advances to SMEs are now warming up to them.”

 

Authentication Process

Power2SME provides a 24x7 online platform that can be accessed without any charges. However, Power2SME follows a strict process to authenticate the identity of an SME. They take numerous details as a part of their ‘Know Your Customer’ process.

 

What do Suppliers Gain?

Power2SME creates a win-win situation for both suppliers and venture itself by placing bulk orders to large suppliers. They purchase raw materials from suppliers in bulk and sell them in small quantities to SMEs, keeping a margin. We ensure a lower sales cost as it offers a gamut of products from a particular supplier under one roof. Since it is an online marketplace, the reach is global in nature. Hence, the supplier can reap the benefits of customers across cities without being physically present, when it associates with Power2SME.

 

Expansion Plans

Power2SME has recently signed a Memorandum of Understanding (MoU) with IIA (Indian Industries Association) for fostering co-operation and promotion of SMEs in Uttar Pradesh. It plans to set up “SME Transformation Camps”, which will help SMEs in transforming their businesses through R&D and better use of technology. “Today, our monthly revenues are around $1 million. We expect the company to do a business of Rs 125 crore in the next one year. We ended the last fiscal year at Rs 20 crore. We are aiming at becoming a $1-billion company in terms of Gross Merchandise Volume (GMV) in the next five years,” says Narayan.

 

SMEsauda – First Online SME Supermarket

Standing in the same space but with a difference is Smesauda. The difference lies in the supplies that it delivers to SMEs. The company does not supply raw materials.  Its focus is on developing the industrial products and supplies range. Smesauda is playing a specific role as an enabler of faster, cheaper and more efficient buying process for SMEs. It is aiming to create the first channel level SME brand characterised by uniform pricing, wide range and assisted buying by experts – a complete professionalising of the buying experience. This helps SMEs buy cheaper, faster and more optimally.  Smesauda is driven by the vision to create ”First Online SME Supermarket”. It is currently focused on office equipments, IT and industrial products and supplies.  Currently, it has a membership base of close to 30,000.

 

What Makes SMEs Come to Smesauda?

A number of factors make Smesauda stand on a platform higher than other existing models that deals with bulk buying. A key component is that Smesauda uses the power of Internet to drive aggregation of demand. “A lot of vendor research and product search is happening online particularly in Tier I and II cities.  It is not getting converted to aggregation of demand as there have been no online business models offering that till now. At Smesauda, we have been pleasantly surprised and motivated by the wide geographical spread of our customers- both small and medium sized. Our robust membership growth, order velocity and revenue growth further validates our belief in this model,” says Priyankar Baid, Founder, Smesauda.

 

Finally the online activities of Smesauda get complemented by offline brand building and awareness generation activities.  This ensures SMEs to trust the brand and do their purchase dealing as per their requirements.

 

Authentication Process

On being asked about the authentication process through which they select an SME, Baid replies, “Our authentication procedure is based on company name of the buyer and a secondary search on the company. As we develop the model further, PAN/ TIN number based identification will become mandatory.”

 

Expansion Plan

Down five years, Baid envisions towards leveraging innovative offline concepts to complement online growth. He also intends to use franchise model to expand their reach.  “In fact, we get many franchise enquiries on a regular basis.  The other change in the model will be using mobile in a big way to reach customers.  The rates of both mobile growth and access of Internet over mobile exceeds conventional Internet growth,” says Baid.

 

Medimanage- one stop destination for group health insurance policies for SMEs

Another player in the healthcare space is Medimanage. It is the first and only dedicated health insurance broking company in India. The company focuses to be the client’s advisor/consultant/partner in customising health benefits for employees by offering a 360 degree perspective.

 

Why Insuring Health a Necessity for SMEs?

It is observed that most MNCs and large organisations with a high employee count receive group insurance from insurance companies at discounted rates. SMEs with a head count of 50-5,000 do not receive this benefit due to their limited number of talents. What Medimanage does is to target all these SMEs and provide them group mediclaim/health insurance at the same rate as the insurance company offers to large enterprises.

 

Employee retention gets difficult for those SMEs that do not provide health insurance. This is simply because employees do not get inclined to work for an organisation that does not support them in up-keeping their health and covering risks. With hospital bills skyrocketing, employees find it extremely difficult to undergo the risk of wiping off their entire savings in paying off their bills. Medimanage helps in curtailing such risks for SMEs by acting as the middle man in securing a health insurance plan. Currently, it has 200 SMEs registered on its portal.

 

Plans in Operation

Presently, it operates under two plans The TechieHealth Plan through NASSCOM for IT companies and the ERA Health Plan through Employers Recruiter Association for Recruiting Agencies. The company is looking for Technology and Digital Media marketing companies to partner with them to spread such initiative/s to many other groups.

 

Expansion Plans

With a growth rate of 25%, Purandar Bhavani, CEO, Medimanage, wants to consolidate their presence in six cities in India over the next couple of years, expand the sales force in these cities, build synergies, revamp their technological platform and make it comprehensive, create a “pull” factor through customisation and offer products and services that are individualistic.

 

Standing a Class Apart

Due to extreme fragmentation of the customer and supplier bases, the web-based model of these SME enabling businesses enhance its reach or accessibility. One just needs to go online, fill up the adequate information and immediately receive a confirmation on the services being asked for. Once the initial level of registration gets cleared online, individual account managers are given the task of handling the client. This makes the entire process personalised and adds exclusivity. Moreover, the stringent rules and regulations of associations dealing in the same space that delay the entire process of receiving supplies gets curtailed to a significant degree. This makes these businesses more demanding when compared to other government bodies and associations.

 

The Last Word

The SME supplier landscape currently is an unorganised and localised marketplace resulting in non-uniform pricing, tedious purchase process and lack of guidance in buying process. Since SMEs operate singularly with limited resources and human capital, they do not get entitled to benefits like large corporates. Companies like Power2SME, Smesauda and Medimanage are acting as enablers to help SMEs seek their industry requirements at competitive rates.

 

As we know SMEs suffer due to rise in raw material prices, lack of options in materials to be purchased, escalating production and operation costs, expensive bank finance and labour shortage. Weakened demand and increased competition have further exacerbated the situation. With their bulk buying services, along with institutions like NSIC, a few private enterprises have come on the scene to support SMEs to overcome these challenges and compete on an equal footing with large enterprises. These enterprises operate with the long-term vision of empowering SMEs both at an individual as well as at an organisational level.

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