To increase the profits for the Indian SMEs is the mission of Power2SME.
In a chat with SME Channels R. Narayan, CEO and Founder reveals the idea behind this venture and the plans for the future.
What made you come out with this portal for SMEs ?
When we thought about launching Power2SME,the idea was not to start an online market placededicated to the SME community. There areplenty of them in existence, and we sincerelybelieved that we could not really make a differenceto the SME in that model. The idea we decidedon was to launch Power2SME as a ‘Buying Club’,which would help the SME through the entireprocess of procuring the raw materials and ensuring smooth delivery of the same at the customer’s doorstep delivery.
The idea to start Power2SME came aboutduring my experience with the SME communityon the field. I used to deal with both the SMEs andenterprise segments. I have seen price quotationsthat have been sent to an SME as well as a largeenterprise, for the same product, where the variancewas to the tune of 20-45%. This was mainlydue the size of the orders and SMEs’ weak negotiationpower. With 70% of Indian job marketpowered by SMEs, I felt this was an unfair gapbetween SMEs and enterprises. In 2009, I conductedresearch with the help of IIM-Lucknowstudents which validated this notion of unfairadvantage enjoyed by corporates. At that pointin time, I decided to build a portal where SMEscould submit their requirements and I would buyon their behalf.
Moreover, getting SMEs online wasn’t much ofa problem because of the eCommerce era that hasemerged over the last 2-3 years. The widespreadadoption of the internet has given a large numberof individuals the option to search for options andorder/procure items for their personal needs viathe internet. A large number of these individualsare people who work at senior levels at theseSMEs.
What kind of opportunities are you looking at ?
Power2sme is pioneering a unique businessmodel that has no parallels in any other countryand can directly benefit more than 35 millionSMEs in India and enable them to compete moreeffectively and successfully against larger andestablished organizations by reducing some ofthe biggest disadvantages they face currently. Webelieve that enhanced efficiencies in supply chain,the transparencies in the system and the technologicaladvantage can play a critical role in drivingSMEs.
Even if we manage to capture 1% of the marketshare in the business we are in, Power2SME willbe a billion dollar company. The opportunities inthis segment are huge.
What goes into providing thebest options in terms of pricingand other for the SMEs ?
Today, we have a registered base of more than10,000 SMEs on our portal and we are able to increase their profit margin anywhere between3% to 5% in a month. But this is restricted to thecategories that we are dealing with. The true benefit will come, when we are able to cater to 50% oftheir raw material requirement, and are deliveringsavings on that whole amount.
Tell us about your recentfunding.
Power2SME has raised capital from Accel Partners,a leading Silicon Valley venture capitalfirm, last month. Our disruptive and innovativeconcept caught the eye of Accel Partners, havinga strong history of identifying trendsetters likeFacebook, Groupon, Dropbox, Angry Birds(Rovio), etc. which have the potentialto makeexisting business models obsolete in a matter ofyears.
The funding from Accel Partners will helpPower2SME to further scale up operations, focuson new sectors while deepening its research into the SME sector and enter new markets in India.We are pleased with the confidence that AccelPartners, along with our previous investors, haveplaced in us to empower the SMEs in India. In ourSeries A fundraising Kalaari Capital had joinedhands with Inventus Capital Partners to support our expansion plans in India.
Differentiation is a key factor in this business? How do you differentiate from others ?
Our services go beyond match-making, which is the focus of the majority of the current online business websites for the SME sector. We procuredirectly 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, from ensuring a quality supplier pool, best possible prices, flexible payment options and door step delivery.
What kind of model do you follow ?
Our model is not that of an online market place. Power2Sme is a buying club for SMEs. Power2sme helps SMEs to benefit from the economies of scale through collective buying from a large network of manufacturers. The company aggregates demand from SMEs and places a large order with the supplier. It then splits the large order into smaller parts as per the requirement and gets it delivered to the small business using a third party logistics provider. Because we buy for aggregated demand, our prices are lower than most suppliers. Pooling of the demand of several SMEs enables us to obtain the best possible prices for the raw materials from a large pool of suppliers, thereby leading to significant cost savings. Our business model is a combination of both the 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.
How do you plan to attract consumer mindshare and capital ?
In today’s times, numerous SMEs are already online. Power2SME provides an online platform for them to indicate their purchase requirements. We already have a registered base of more than 10,000 SMEs on our portal. Our marketing strategy is very ROI oriented and the focus is on running targeted campaigns so that we are able to reach the prospective customers with minimal spill over. We are targeting LinkedIn as a platform to connect with both prospective vendors and customers in a targeted manner as they have the largest pool of professional across a wide spectrum of industries available under a single roof. This is enabling us to expand our geographic reach and generate more leads.
We are seeing a huge transition online among our target customers. They are shifting to online to improve their business productivity. We have created several SEM campaigns to pitch our range of products and the competitive rates directly to our end customers Participating in various industry associations such as TiE, FICCI, CII, etc. is an important part of our marketing initiative. The Call Center that is run from our premises is also an integral component of our marketing strategy.
What kind of revenue are you looking at this year ?
Last fiscal ended with a turnover of Rs. 20 crores and we want to increase this to Rs. 125 crore in the next one year. Today, our monthly revenues are around $1 million.
We have a registered base of more than 10,000 SMEs (with turnover ranging from Rs 5to 250 crore) on our website.
We are expanding our team on pan India basis to ensure that we are able to cater to demand from multiple regions. We started our operations in Delhi NCR region and recently started operations in Mumbai, Pune, Gujarat and Rajasthan and we are doing about Rs. 1 crore of business every month in these locations. We are now aggressively expanding across North, West and South India. We plan to further expand in the southern and eastern region in this financial year.