written by
Erik Stollberg
Erik Stollberg
Global Trends
2016-11-04

There’s no stopping it! SMEs are becoming digital

There’s no stopping it! SMEs are becoming digital

More than 35 percent of the total sales volume from all German businesses is generated by the so-called SMEs (small and medium-sized enterprises). Of all trainees, 82.2 percent are trained in companies with fewer than 500 employees. SMEs are the economic backbone of the country. According to a study by the Förderbank KfW, 3.64 million companies in Germany (99.95% of all companies) are SMEs.

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erman small and medium-sized enterprises are still surrounded by an aura of quality, reliability and solidity. Despite these advantages, university graduates still often rate manager careers in medium-sized German enterprises as terribly boring and predictable.

In contrast to this, medium-sized businesses offer financial investors interesting opportunities to achieve above-average returns. Medium-sized enterprises with turnovers of 10 to 20 million Euros are particularly worth consideration by investors if they have a predominantly consumer-focused business and already have an online shop. Many companies are still experiencing difficulty in efficiently creating a balance between stationary retail trade and online presence. But with changing customer demands, SMEs have to offer consumers an integrated strategy. Products and services must be accessible everywhere, to enable the customer to buy whenever the urge arises.

A change in strategy among a large number of SMEs is being welcomed by investors. Direct sales are more profitable, therefore increasing the willingness to finance.   But what is the next step, once the SME has organized funding and wants to enter the digital world? The investments by SevenVentures confirm that high TV reach can win new customers and make it easier for the business to take the lead in their corresponding product segment. As a result, for example, SevenVentures succeeded in increasing sales of a medium-sized business 37 percent by driving targeted and intelligent TV presentation. When the enterprise and the investor act as a team with a common goal, this does not only significantly accelerate the purchasing process, it also addresses new customer groups and decreases scatter loss.

In order to secure future economic success, SMEs must master many challenges to be able to succeed in the digital world as smoothly as possible. Companies frequently hold on to outdated marketing and sales structures and they lack the willingness to adopt innovative cooperation models. Even rivalry between different departments creates conflicts and prevents the effectiveness of the organizational structure. A digital approach also means adapting marketing budgets to meet new challenges. Online activities can only be successful in the long term if they are perceived of as a necessary supplement to – and not as the cannibalization of – the existing core business.

Online shops advertised on TV are not only creating new consumer behavior, they are also rapidly gaining a competitive edge. In the meantime there are industries online, which didn’t seem to have a digital future just a couple of years ago. This has driven online furniture buying, for example. In the past, furniture centers situated in the vicinity of major cities were regional principalities, which hardly had to care about their competitors. But now consumers are tired of traipsing through overcrowded furniture stores on the weekend.  They search online, compare prices and even place their orders online. Primarily women take advantage of the opportunity to buy furniture digitally, with 47% of the female population having ordered furniture online and a somewhat lower percentage of male customers, at 37%. The development in the pharmacy retail business is similar; customers are also expecting solutions here. This includes the ability to order products online. Everything is in flux – nothing stays the same. The only question that remains is: Which industry will be digitalized next?

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