Online business is now the norm across many parts of the globe. In today’s competitive market, the Internet has emerged as a prominent medium for all types of businesses irrespective of how big or small they are. Some people in small enterprises believe that online marketing is limited to large businesses. But with the increasingly competitive environment and with the trend moving towards online trading, enterprises need to move with the times and try transacting business over the Internet. In order to survive in the competitive market, large enterprises as well as SMEs have to reach out to markets across the world and make their products visible. However, achieving success online is not easy and has its own set of challenges. You need to be aware of some basic facts before moving to online business transactions. First, let’s look at the many advantages that online trading offers.
By Richa Chakravarty
Thursday, January 03, 2012: Benefits of online trading
It is convenient and time saving:
Although many enterprises are taking their business online to keep up with the changing times, this concept is still new to India, particularly in the electronics industry. The manufacturers, channel partners and traders, who are presently using this medium for business purposes, find it quite beneficial. RS Components & Controls (India) Ltd, a leading distributor of electronics and maintenance products, is sucessfully driving its online business, backed by a strong sales and technical team. Says its CEO, Shiv Bhambri, “Through our website, we offer our customers a choice of more than 550,000 products from 2500 global brands. We are getting good response from customers, as they can find, compare and buy products that they need at the click of a button. Worldwide, RS does 60 per cent of its business online and I feel online business is picking up very fast in India also”
The search engine on the RS India website helps customers choose products and components easily, check specifications and features, and securely place orders online. RS also offers free software, exciting promotions and freebies for customers who shop online.
element 14 is another company that does extensive trading online. Acknowledging the benefits of operating on the Internet, Navin Honnavar, marketing manager, element 14, says, “More than 60 per cent of our business is done online worldwide, and India is fast catching up with this trend. Online trading is fast and saves time. The percentage of customers that has shifted from the offline to online medium to conduct business with us has grown by double digits.” At the element 14 portal, customers have the option of searching the product, by part number, or select parameters or by manufacturer. It is all about convenience, and Internet today offers that convenience. SK Metals also does 80 per cent of its business over the Internet.
Easy accessibility and wider reach:
Through this medium, one can reach out to more customers than the conventional way of doing business. Online trading also cuts down costs and reduces a firm’s dependence on resellers. This mode of business also gives customers easy access to the seller, enabling them to obtain all the information about products, prices, and features. They can even check the order status before placing their orders online, directly. Delhi based GD Saini, managing director, Singodia Electronics, who ventured into online trading in 2010, says, “The Internet enables direct, hassle free interaction with our clients. It makes the trading process very smooth. We are confident about the effectiveness of this model.”
Enables businesses to go global:
Online trading also helps to promote business overseas, as it does not require actually meeting clients. Radius Industries, which has embraced online business opportunities, aims to tap international customers as well.
“While in offline trading, one is dependent on the supply chain, online trading offers a platform to cater to a larger customer base. Online marketing is a truly enriching experience for customers as they are quickly directed to their items of interest based on the keywords they entered in the search engine. Also, element 14 offers 14 days money back guarantees to online customers in case they are not satisfied by the product or service,” adds Navin Honnavar.
Faster and easy communication:Faster and effective communication plays an important role in promoting business in this competitive world, and this is possible over the Internet. “We have automated the customer care department and for any online or offline customer query, the system will revert back in 24-48 hours,” informs GD Saini. “Business through this medium also reduces sales and distribution costs, and even minimises inventory holding costs if a build-to-order model is used. Online interactions provide precise and faster information about what customers want. So it is essential to tailor the service to meet those requirements in order to make online buying a rewarding experience,” he adds.
Reduces the need for physical inspection:
Since the online business model is more adaptable, easier and faster, the success rates are higher. This business model is ideal for electronics component distributors, as the consumers who know about the products and their features would not want to touch and feel it. There is not much emotional connect with components as in other consumer electronics goods. Since the buyer is already aware of the products, like a capacitor or an IC, there is no hassle. So if the product features, images and technical specifications are displayed properly, a datasheet is available based on which consumers will automatically trust the brand and their buying sense,” shares Navin Honnavar.
Reduces ordering and delivery time:
If channel partners do not have the capacity to stock all the products and spare parts at all times, online trading can solve this problem. It also enables them to serve all their customers at the same time, if required.
Geographic barriers, ordering time and channel partners’ stocking capacities cease to hamper business, if conducted online.
Online orders can be placed at any time and depending upon the urgency, can be routed to a distribution centre or the nearest channel partner, enabling delivery in a matter of a few hours. Online trading allows you to maximise your revenue stream while redirecting sales and marketing budgets to other more pressing requirements of the business. Also, channel partners enjoy additional revenues and improved efficiency. It also gives manufacturers complete control over how products are branded, presented, marketed and sold.
Some challenges faced
While online trading has several advantages, one needs to keep in mind the type of clients one intends to reach out to over the Internet, and the type of website one needs for an online presence. Also, since online business works 24×7, you need to provide the associated client support service that can cater to the needs of the customers, round the clock.
Complex tax structure:Another challenge is India’s complex tax structure, which is absent in other countries. This may make the process a little tedious. The goods and service tax (GST), which will be operational from the next financial year, will ensure that vendors and customers both have a rational tax policy that will be applicable everywhere, irrespective of the state you are purchasing goods from.
Lack of awareness of customers:
“The major challenge that we face is the customer’s initial reluctance to buy online. This may be due to their lack of awareness, inhibitions on web transaction security, and also complexities of tax structure. We, thus, regularly touch base with our customers through our campaigns informing them about ease and security of ordering through our website,” informs Shiv Bhambri. RS targets a niche segment online, particularly design and prototype engineers, who are fully aware of the products, and hence, are comfortable in placing the orders online.
Setting up an online business may require some initial investments, but it is worth the cost. A full time technical person is needed to design, set up and probably even manage a website. However, the revenue that one earns through online business will definitely cover the expenses. Besides, it also reduces the need to hire a good number of dealers and distributors.
Good creditability needed:
Another aspect of the electronics market which may be a hurdle is that to maximise the potential of selling online, a channel partner needs to establish good creditability in the market. Here, building a relationship of trust is much more important and for that it is imperative to provide only superior quality products with the exact specifications desired by the customer. Also, make sure you have a strong understanding of returns, stock control, promotions, fulfilment, delivery charges, distance selling and a fool proof mechanism for accepting payments online.
Real time services:Online trading also needs to be coupled with real time services, for example, providing customers with personalised Web pages that include access to their own product specifications, allowing automated paperless orders, order tracking, asset management facilities and individual support tools. “Customers recognise the value of these services, which, in turn, strengthens customer relationship and provides direct sales operations team an edge in the market,” says GD Saini.
Buyers remain unknown:
Another problem faced by channel partners is that they are sometimes apprehensive about the genuineness of the prospective buyers as they are physically unknown to them, and it is difficult to find out about their competence, both technical as well as financial. Some products, like SMT machines and reflow ovens, need to be tested and tried prior to making a purchase decision. In such a scenario, the dealer plays an important role by demonstrating the products. So, one should thoroughly research the pros and cons of conducting business online and prepare for all kinds of situations, before taking the plunge.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine