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In Singapore, small and medium-sized enterprises (SMEs) play an essential role in the economy, hiring a large number of workers, and contributing to the lively retail and food and beverage (F&B) scene.
According to the Department of Statistics Singapore, SMEs make up 99 percent of the market share in Singapore’s economy (accounting for 72 percent of the country’s 3.7 million-strong workforce and contributing to 45 per cent of the economy’s nominal value).
While this might suggest that the economy is thriving and beneficial for SMEs, data from the National Business Survey 2018/2019 highlights that only 1 in 5 businesses were satisfied with the current global economic climate.
Aside from worrying about global uncertainty, the retail sector in ,Singapore is experiencing their worst year since 2013. Combined with an expected further decline in sales due to the economic fallout caused by the COVID-19 pandemic, the future of many SMEs may be threatened. Already, this is reflected through the latest SBF-Experian SME Index which saw its reading for overall business sentiment for the following 6 months fall to 48.3, from 50.4 just three months ago.
It is the lowest value since 2009, when the index was first created. With domestic-facing retail and F&B sectors severely affected, incorporating digital strategies for SMEs into current business models might be the best way for SMEs going forward.
A recent study by Bloomberg underlined the importance of building a sustainable model that supports business strategies, utilising digital data to react to customers’ needs swiftly and efficiently.
This suggests that in today’s crowded market, having a digital strategy might be paramount for SMEs to remain competitive. Furthermore, the National Business Survey highlighted that compared to only 1 in every 3 SMEs, 3 in 5 large companies are prioritising the development of digital business capabilities.
With large companies already putting more emphasis into embracing the new digital economy, SMEs must turn their focus to digital strategies so that they can continue to remain relevant and be able to match the changing expectations of customers.
Digitalisation does not mean that SMEs have to convert from brick-and-mortar to online-exclusive retail shops. It merely means adopting digital business capabilities that would allow SMEs to enhance themselves and garner more revenue.
One such marketing strategy would be to utilise an online-to-offline (O2O) model. Such a model allows retailers to attract consumers online and compel them to visit physical retail stores by either making an attractive voucher purchase in advance or having attractive incentives while at the store. Wafuken – a popular healthy food restaurant in Singapore – has been using Fave’s O2O platform to attract new customers.
Since then, they have witnessed a 60 – 70 per cent conversion of their customer base into regular patrons. On average, the business has consistently gained a return of S$9 for every S$1 issued, in the form of cashback as return on investment (ROI).
Digitalisation enables merchants to quickly reach out to a wider audience through channels such as emails and app notifications. It is also easier for consumers to view what retail stores have to sell without having to physically visit the store.
In doing so, businesses are able to sell to a larger crowd around the clock, especially during significant promotion periods like the 11/11 sales. Concurrently, digital strategies for SMEs allow business owners to better collate data on the expenditure pattern for different demographics, enabling for more targeted sales strategies.
An example of a SME retailer that has employed the use of a digital strategy would be IUIGA. Through the usage of Fave’s eCards, IUIGA provides customers with the option of pre-purchasing credits.
These pre-purchase credits build upon the O2O model, attracting online customers by promising them significant savings of up to 30 per cent when they pre-purchase eCards in advance. Such eCards can then be used at a later time when customers are at the physical stores of the merchants.
eCards allow for IUIGA to enjoy upfront revenue, encouraging customers to spend more per visit, while also providing them with incentives to return and purchase again. This helps retailers to build brand loyalty, increase repeat customers and receive advance payments.
By adopting digital strategies for SMEs like these, they can build a sustainable model of long-term growth, reacting quickly to external factors with the availability of data analysis that comes with digitalisation.
Strategies like these are also relatively easy to implement and do not require SMEs to remove their brick-and-mortar presence. Furthermore, Enterprise Singapore (ESG) has launched the E-Commerce Booster package, a programme developed to help SME retailers in Singapore offset up to 90 per cent of the costs associated with setting up their online shopping presence.
Amidst the uncertainties of the current global economic climate, coupled with the ease of creating an online presence and financial assistance, adopting digital technologies appears to be one of the best methods to stay ahead of competitors and to remain sustainable in Singapore.
It is imperative that SMEs plan for long-term growth instead of chasing short-term gains to remain operational even during periods of economic uncertainty.
This article originally appeared in the Entrepreneur's Digest print edition #91 and has been edited for clarity, brevity and for the relevance of this website.
About the Author
Joel Neoh | CEO and Co-Founder | Fave
As one of the initial founders of Groupon in the Asia Pacific region, Joel was instrumental in establishing the high-growth business model that propelled Groupon into a multi-billion-dollar business, with thousands of employees spanning across 12 countries. Joel has received the Ernst & Young Entrepreneur of the Year Award and was named Young Global Leader by the World Economic Forum. Malaysian Tatler also awarded Joel Entrepreneur Par Excellence in 2018.