Behind the Scenes of Bangalore’s product based SMBs: A Field Visit

One sunny morning, our cab slowly made its way through the busy streets of K.R. Market. I noticed the curious glances from people walking alongside the cab and their apparent disregard for why a cab was on such a crowded street. This prompted me to suggest that we get out and walk towards the stores on foot. It turned out to be a good decision, as a few meters ahead, the roads were blocked for vehicles to control traffic. Our first stop was a store selling sanitary wares. From the outside, it looked like a small shop, but inside, it was filled with branded premium sanitary products, organized by brand, and bustling with customers. I held my interview script tightly, but as soon as the business owner or employees started speaking, I became more of a passive listener as they answered all my questions before I even asked them. The next three days of interacting with ten different product-based businesses was an incredible experience, revealing a great deal of insights that I could never have gained through a remote Zoom session.

The diversity and uniqueness of the products were fascinating: I was amazed by the rich artisanal businesses, where age-old skills passed down through generations were used to create sculpted handicrafts in one store. In another, I encountered exceptional quality snacks made without refined oil and maida, and some businesses had even got investment from the renowned Sharks on India’s Shark Tank. Most of the businesses we visited were run by families and extended relatives. Here are some of the insights from the fieldwork:

Starting with Minimal Capital: Most small and medium businesses started out of passion with minimal capital. On the third day of our visit, our car stopped in front of a residential area. Initially confused, I checked the map again, thinking it was the wrong location, and found the owner standing in his garage. He was an artist and a lecturer at a private college, running a business specializing in digital paintings and unique Indian products made from ceramic and clay. He initially began by uploading pictures on Facebook and started receiving orders. Now, he sells on three e-commerce platforms: Amazon, Myntra, and Flipkart. Additionally, he employs underprivileged people, empowering various families through his passion and business. Losing jobs during the COVID-19 pandemic also prompted some people to start their own businesses.

Shouldering Multiple Responsibilities: Store owners often juggled multiple roles, such as cashier, accountant, salesperson, and proprietor. Due to a lack of skilled workforce and difficulty finding dedicated employees, they ended up handling the entire workload themselves. Concerns about unproductive staff and low retention rates left them with little time to focus on business growth. The lack of training for employees further complicated the situation, especially when seasonal workers were hired only during peak periods or when only family members were involved during festive seasons. This led to employees lacking motivation to understand customer needs. Proper training became challenging as business owners struggled with numerous daily tasks and responsibilities. They often relied on intuition and memory rather than structured customer feedback, which hampered their ability to effectively analyze and respond to customer needs.

Technology adoption surged across generations, though it revealed a significant digital divide: Businesses increasingly embraced technology, utilizing platforms like WhatsApp Business, Google Maps, and digital marketplaces. Many found WhatsApp Business an effective and easy-to-use platform for managing and updating catalogs and product prices while maintaining communication with existing and potential new customers. By listing their store locations on Google Maps and seeking reviews and ratings, businesses attracted more customers. Owners also began registering their product information and store locations on platforms such as Justdial and IndiaMART, generating leads and visibility in the online space. Generative AI tools like ChatGPT, Gemini, Bing, and Perplexity helped businesses create marketing content, craft emails, and develop advertisements from scratch without needing an experienced professional. Social media platforms like Instagram and Facebook also play a crucial role in communicating about the business to customers. However, some businesses felt deceived and experienced fraudulent activities due to a lack of digital literacy. Some businesses also retracted from using technologies and relied on traditional techniques due to the instinct that technology would not be useful and was a curse to running a business peacefully. Lack of expertise and prompt guidance was also a crucial factor in tech reluctance.

Handling product returns was a persistent headache for businesses:The challenge lay in managing return requests while maintaining customer satisfaction. For damaged products, businesses faced additional complications. They might offer refunds to customers for defective items but often did not receive compensation from their suppliers for these returns. This lack of reimbursement from suppliers could lead to significant financial losses. For e-commerce businesses, the burden of managing returns was even heavier. E-commerce platforms frequently placed the responsibility of handling returns and covering shipping costs on the businesses themselves. This policy meant that businesses had to cover the expense of return shipping, which strained their financial resources, especially when dealing with high volumes of returns. The shipping of returned products was also problematic. All businesses showed us different products returned instead of the actual product shipped to the customer.

A lack of proper billing and inventory management presented significant challenges for many businesses: Often, they struggled with limited shelf space in their physical stores, particularly in a city like Bangalore, where rent and other expenses were high. For e-commerce platforms, businesses faced additional hurdles. These platforms typically required businesses to maintain bulk inventories, even though they could not predict with certainty which products would sell. This uncertainty could lead to overstocking, tying up capital in unsold goods, and increasing the risk of financial losses.

Businesses relied on methods such as Excel, third-party apps like Tally and Lemlist, and physical spreadsheets to manage their inventory and billing processes. Prices of different products tended to be negotiable, and setting a fixed price on a product was often challenging because customers typically expected flexibility and discounts. This resulted in a lack of digitalized and structured payment processes.

Expansions through e-commerce platforms came with significant cost: In response to evolving market demands, most retail store owners ventured into the e-commerce space as a strategic adaptation. Representatives from major e-commerce platforms frequently visited business owners to offer the opportunity to list their products on various online marketplaces. This shift to e-commerce introduced a range of challenges that required continuous monitoring and management. Retailers had to diligently manage order placements, ensuring that orders were dispatched on time. Any delays or product issues could result in penalties imposed by the e-commerce platforms, adding financial pressure. The payment processes on e-commerce platforms often lacked transparency. Businesses faced high surcharges and fees for selling products, which could erode their profit margins. This lack of clarity regarding fees and payment structures further complicated financial management and diminished the overall profitability of e-commerce ventures.

Maintaining customer relationships offline was not as challenging compared to online: While we were inside the store, it was fascinating to observe the interactions between customers and employees or the owner. Various tactics were employed, ranging from warm smiles and providing snacks to offering personalized attention. We noticed gestures like making adjustments to the final payment, rounding off numbers, and giving discounts based on the customer’s nature. One effective approach involved offering coupons and discounts to regular customers, which not only rewarded their loyalty but also encouraged repeat visits. Regular updates and customized messages about special offers and promotions through digital channels helped ensure that customers felt valued and informed, leading to positive word-of-mouth.

In contrast, the store’s online presence often struggled with maintaining prompt and effective customer relationship management. The lack of immediate responses to complaints or queries on these platforms created challenges in balancing customer expectations and resolving issues efficiently. This gap underscored the importance of building trust and loyalty through proactive and personal engagement.

Obtaining loans was often a challenging process for small business owners: Many relied on support from family, friends, and acquaintances when seeking financial backing, as traditional lending institutions frequently refused loans due to collateral requirements or inadequate documentation. Business owners often struggled to provide the necessary paperwork to prove their business’s viability and financial health. Common issues included not maintaining adequate financial records, failing to use accounting software, and not accurately calculating profits and losses, all of which hindered their ability to secure loans. A lack of awareness about government policies and financial literacy contributed to these difficulties.

AI was welcomed but should operate under careful supervision: Business owners appreciated the potential of AI to enhance various aspects of their operations, such as customer service, order processing, and marketing. However, they were cautious about fully delegating these critical functions to AI without human oversight. They believed they knew their customers better and what worked well and what did not. By retaining oversight, business owners aimed to balance the advantages of AI with the need for a personal touch and control, ensuring that their customers received the best possible service.

Not adhering strictly to textbook rules, businesses relied on innovative shortcuts and practical tricks: We observed that SMBs thrived by deviating from conventional methods and employing adaptive techniques. Instead of sticking to traditional practices, these businesses often used practical adjustments to overcome challenges and achieve success. We witnessed a diverse range of approaches, such as creating multiple accounts on e-commerce platforms, boosting product value, commenting on their products, and using their own staff to create a sense of urgency in shops. They also copied product specifications from various vendors, uploaded their content, and made random adjustments to bulk stock levels. Various marketing tactics were employed, even if they did not always align with actual product availability.

In conclusion, the drive for growth and expansion was a common theme for SMBs. Many businesses focused on enhancing their brand recognition, opening additional stores, setting ambitious targets on various platforms, and increasing their inventory. These aspirations highlighted significant untapped potential for improving and elevating SMBs. By addressing these areas, there was considerable opportunity to enhance the success and quality.