SMEs: Still playing catch-up in areas like digitisation and e-commerce

The panellists said that SMEs here lag behind their regional counterparts in developing e-commerce infrastructure and that Singapore retailers have not been quick to push their businesses online.
The panellists said that SMEs here lag behind their regional counterparts in developing e-commerce infrastructure and that Singapore retailers have not been quick to push their businesses online. ST PHOTO: YEO KAI WEN

Small and medium-sized enterprises (SMEs) here need to adapt to a more volatile, disruptive environment, panellists said.

They noted that local firms still lag behind their regional counterparts in areas such as digitisation and e-commerce.

"We are behind the curve on digitisation," said Ms Aparna Bharadwaj, principal at the Boston Consulting Group (BCG) in Singapore.

"We are way behind the curve," agreed Mr Kurt Wee, president of the Association of Small and Medium Enterprises (Asme).

Ms Bharadwaj cited the findings of a BCG study that broke down the components of digitisation in different markets. The first criterion was infrastructure, in which Singapore scored highly.

The missed opportunity to reach a wider market is something that firms here should focus on.

The second was consumer savvy - and Singaporeans were found to spend a large amount of their time online or on their smartphones.

But when it came to the third criterion - where Singaporean shoppers actually spend their money - the study found that most did their shopping on American and foreign websites, rather than local e-commerce portals.

"That's a supply-side issue," said Ms Bharadwaj, noting that online retailers here simply do not offer the same variety and range of brands as their counterparts in the United States.

That Singapore retailers have not been quick to jump on the e-commerce wave may be worrying.

"Until today, we don't have an e-commerce superstructure - a payment gateway system that allows Singapore companies to sell instantly within the region to Singapore, Malaysia, Indonesia, at least two countries," said Mr Wee.

In contrast, Chinese businesses are "far ahead in e-commerce development", he said, with a large proportion of their traditional businesses transacting online now.

"Retail is definitely one sector that will face a big shake-up," said Mr Wee, giving the example of a brand of health supplement he had seen on sale at a store here. It was priced at about four times the price on a US website.

"So, structurally, we have some room to correct there," he said.

The missed opportunity to reach a wider market is something that firms here should focus on, as internationalisation is also a good way for them to relieve some of the high cost pressures which arise from operating locally.

"Our SMEs need to find their own disruptive model. So far, they are finding it through some level of low-hanging fruit - digitisation, job redesign. "But to do that successfully, I think we need to give them a bigger market space," said Mr Wee.

"Because it's no use if you have an innovation and then you can't get the scale: Who is going to pay for that innovation? If we can open and have bigger markets for our SMEs, they can find a broader base for their costs," he added.

But given that building an e-commerce infrastructure is a huge endeavour that the private sector has so far failed to deliver on, the panel suggested that the Government could play a role in cutting across different industries and agencies to stitch together solutions.

"There's some ground noise calling for, maybe, a minister for SMEs in time to come," said Mr Wee.

"We could use a bit of a more heavy political hand in coordination and strategy that's focused solely on SMEs."

A version of this article appeared in the print edition of The Sunday Times on October 18, 2015, with the headline 'SMEs: Still playing catch-up in areas like digitisation and e-commerce'. Print Edition | Subscribe