Building SMEs digitally

By Uwin Lugoda

Covid-19 has left many Sri Lankan small and medium-sized enterprise (SME) business owners battling on multiple fronts, including supply chain disruption, reduced local and overseas demand, and a serious depletion in workforce. These market challenges have accelerated the need for sustainability and new solutions in order to continue in the new world Covid has created.

A webinar titled “Overcoming Market Challenges” was conducted on 6 June for SMEs by the Sri Lanka Chamber of Small and Medium Industries together with Blue Lotus 360. Among the main areas of discussion at the webinar was the topic of “Leveraging on Digital Platforms”.

LankaClear (Pvt.) Ltd. General Manager (GM)/CEO Channa de Silva

The panellists were National Enterprise Development Authority (NEDA) Chairman/Director General (DG) Anushka Gunasinghe, Managing Director (MD)/Country Head Rakhil Fernando, and LankaClear (Pvt.) Ltd. General Manager (GM)/CEO Channa de Silva, and the discussion was moderated by management consultant, senior chartered accountant, and HCP Consulting (Pvt.) Ltd. Chairman Chaaminda Kumarasiri.

Forced digitisation

According to NEDA Chairman/DG Anushka Gunasinghe, promoting local SMEs to go digital and getting local buyers to support them will create sustainability and help in facing new market challenges.

“During the lockdown period, we saw a lot of people moving businesses online out of desperation, so we have to sustain that transition and give more SMEs the knowledge to move online,” he said.

According to Gunasinghe, while Covid has had devastating effects on local industries, it has also seen an increase in the country’s e-commerce, as the pandemic forced consumers to search online to fulfil their needs.

This point was supported by MD/Country Head Rakhil Fernando, who added that they have seen a 40% recovery and are seeing people go online even for non-essential items such as toys and electronics. However, he explained that while consumers are going online, many of the local sellers outside the Western Province are yet to adopt a digital approach.

Age and digital literacy

Gunasinghe stated that one of the main issues faced by entrepreneurs outside of Colombo is that most of them are from older generations and therefore are less technologically literate. He explained that most of them have trouble building their online accounts, listing their products, and collecting payments off online platforms.

Taking a “kithul” seller as an example, he stated that the NEDA looks to train them to move their products online and to teach them how they can collect and transport their products to other parts of the country. He went on to state that promoting local SMEs will also help Sri Lanka get out of the mindset that e-commerce is only for imported products.

“We want to promote local products to the local consumers. The Government is of a similar mindset and even released a gazette banning many imports in order to support the local market,” he noted.

Gunasinghe stated that the NEDA has already been given directions by Minister of Small and Medium Business and Entrepreneur Development, Industries, Supply Management Wimal Weerawansa, who had told them to cease the importation of products such as brooms and ekel brooms within the next four months. He stated that the organisation has now begun work to help broom manufacturers in Sri Lanka evolve so that they can compete with the imports. This plan also includes introducing these manufacturers to online platforms in order to open them up to bigger markets.

He also pointed out that SMEs could even use digital mediums to reach out to other businesses and start B2B (business-to-business) transactions instead of just selling to the end consumers. He explained that this could also be beneficial for the buyers as they can opt to buy from several sellers simultaneously to meet their quantity requirements.

Gunasinghe further explained that in order to help SMEs in Sri Lanka, government authorities have introduced mechanisms down to the smallest stakeholder to help them create their own digital platforms or get on already existing platforms like Daraz. He stated that while the country has around two million SMEs and entrepreneurs, the NEDA wants to bring new ones aboard to cater to the demands of the country.

“We do not live in a world where we can just provide services and products that we want to the market, but instead have to cater to the demand of the market. We want to promote this and also look at giving local entrepreneurs the analysis of the current market and what the demand is for whatever product or service,” he added.

Beyond Colombo

Fernando also stated that growing this ecosystem is one of Daraz’s main priorities as well as for their local consumers to depend more on local sellers and less on foreign sellers. He noted that as it stands, 70% of transactions on the Daraz platform is between local consumers and sellers, while only the remaining 30% is between local consumers and foreign sellers. However, he explained that these sellers were mostly concentrated in the Western Province, despite them having customers islandwide. Managing Director (MD)/Country Head Rakhil Fernando

He stated that the development of sellers is stronger in this region due to the theme being comfortable selling online and being willing to make the move. This is due to sellers in other regions finding it difficult to sell online due to educational barriers, not knowing how the payment system works, and/or being hesitant to upload their products to an online platform because they think their products are not good enough.

In order to counter this, Fernando suggested educating the sellers and also helping them improve their products in terms of packaging and how they present their products online because at the end of the day, they are competing with all the other sellers from around the island. He explained that there is also a lack of resources and information, which government authorities can help the sellers with.

He made an example of China, where Alibaba, Daraz’s parent company, started a programme called “Taobao Villages”, a model where they went to the provincial and suburban areas of  China and developed digital micro ecosystems. Fernando explained that the programme got the biggest businessmen or village elders to be a representative of the company, to create a physical presence for the e-commerce platform, and to get comfortable for people to interact with.

“When a seller is selling something online, they go through that representative, so that they have a physical point of contact, and we are currently trying to replicate the same here in Sri Lanka, which is called “Daraz Doors”. We have already started this in a small scale and currently have around 400 stores who are our physical representatives. So a buyer or seller can go into the store and ask questions regarding how to sell or buy,” he informed.

Furthermore, Fernando stated that Daraz also released other stimulus packages for local SMEs a couple of weeks ago, which saw them remove all commissions and fees from SME sellers. He went on to state this was done to remove all barriers and help businesses to explore this new channel.

“The last couple of months have forced people to buy online and through this, they have experienced e-commerce and realised that it is a trustworthy system. So now it is up to us to see how we can get local SMEs to adopt it as well. We want the smallest seller in the most distant part of the island to be able to sell to the wealthiest buyer elsewhere. The traditional brick and mortar ecosystem does not support those two people meeting; technology is the only thing that will enable that,” he pointed out.