IMPEDIMENTS OF E-COMMERCE ADOPTION: THE CASE OF SMES
Noor Azuan Hashim
School of Business
Management
Faculty of Economic
and Management
National University
of Malaysia
43600 Bangi, Selangor
Malaysia
E-mail: azuan@ukm.my
Tel: +60-89215751
ABSTRACT
E-commerce has the potential to accelerate existing trends
and introduce new ways of conducting business. It is said that e-commerce has brought undisputed benefits to firms
everywhere such as reshaping the customer and supplier relationships and
streamlining the business processes. Practitioners and policymakers are told
that e-commerce will give a tremendous boost to their firms; businesses that
are not involved in e-commerce will be left behind in the global marketplace. Contrary
to most industry predictions, however, the small- and medium-size enterprise
(SME) market has been relatively slow to adopt these applications. Not many
SMEs are keen to conduct business online and only a few have website. In fact,
some studies claim that trading online by SMEs in some countries is stalling
and in some cases has declined. Drawing
on existing research on ICT diffusion by SMEs, this paper presents some
issues of e-commerce adoption by SMEs in Malaysia. It highlights findings from a series of semi-structured interviews
with the SME managers in Malaysia concerning the impediments of adopting and implementing
e-commerce in the organizations. The findings reveal that SMEs do not embrace
e-commerce because there are skeptical with some of the e-commerce components. Among
the barriers include lack of knowledge in e-commerce; not interested with fancy
stuff; irrelevant to their businesses; and influenced by the failure rate of
their peers. Results are discussed and some implications for the management are
made.
Keywords: ICTs, e-commerce, SMEs, diffusion, impediments.
INTRODUCTION
E-commerce has the potential to accelerate existing trends
and introduce new ways of conducting business (Scupola, 2003; Pool et
al., 2006; MacGregor and Vrazalic, 2007). Policymakers and
practitioners are told that e-commerce has brought undisputed benefits to firms everywhere such as
reshaping the customer and supplier relationships and streamlining the business
processes. (Daniel, 2003, Pool et
al., 2006).
E-commerce will give a tremendous boost to their companies, that businesses not
involved in e-commerce will be left behind in the global marketplace. In fact,
some studies claim that the use of e-commerce is a precondition for a company’s
success in today’s business world, (Porter, 2001; Adham and Ahmad, 2005).
Contrary to most industry predictions, however, the small-
and medium-size enterprise (SME) market has been relatively slow to adopt e-commerce
(Beveren and Thomson,
2002; Fillis et al., 2004; Grandon and Pearson, 2004; Houghton and Winklhofer, 2004). In the US, Grandon and
Pearson (2004) note that e-commerce adoption
by SMEs is limited to e-mail and the company web page. In the UK, trading
online in small businesses is stalling and in some cases has declined (Booz, 2002). In European countries and in
Australia, few SMEs trade online (Beveren and Thomson,
2002; Scupola, 2003, MacGregor and
Vrazalic, 2007),
while in Asia, few SMEs in Singapore, Thailand, and Malaysia have adopted
e-commerce (Kendall et al.,
2001; Lertwongsatien and
Wongpinunwatana, 2003, Yeung et al., 2003; Hashim, 2009).
This result is surprising given the indications that e-commerce
may be valuable to SMEs. It is said that the Internet provides a platform for
SMEs to compete with large firms because the Internet allows equal access for
both small and large firms to explore their potential. The Internet also allows
SMEs to conduct their business 24 hours a day and 7 days a week, and also to
trade internationally. SMEs today may be become a large firm or multinational
corporations (MNCs) in future (Curran and Blackburn, 2001). Thus, why SMEs are reluctance
to become e-commerce-capable deserves serious attention (Curran and Blackburn,
2001).
To date, there has been very few
research that investigate the impediments of e-commerce adoption among SMEs,
particularly in developing country like Malaysia. This study seeks to
fill this gap to help understand the factors that hinder the adoption of
e-commerce by SMEs, particularly in developing countries, such as Malaysia.
This article is structured as follows. Section 1 presents
the research problem, follows by the literature review in Section 2. Section 3
describes the methodology of the study. Findings and analysis are discussed in
section 4. Section 5 presents the discussion, and finally the concluding
remarks are presented in section 6.
LITERATURE REVIEW
2.1 E-commerce
E-commerce is a new phenomenon in business and management
era. Thus, there is no agreement on the definition of e-commerce (Kendall et al.,
2001; Grandon and Pearson, 2004). Many researchers have came
out with their own e-commerce definition based on what they are researching for
(Kendall et al.,
2001; Grandon and Pearson, 2004; Pool et
al, 2006).
However, there are two common elements to most definitions. First, e-commerce
concerns business activities that occur by electronic means, such as sharing
business information, and buying and selling. The second element is the
technological means that enable these activities. The difference lies in how
some researchers define these two elements. Some define e-commerce broadly,
including all business activities carried out over any electronic media (see, for example,
Wigand, 1997; Timmers, 1999). Others define e-commerce more
narrowly by focusing on certain business activities or technological means (see, for example,
Zwass, 1996; Kalakota and Whinston,
1997).
In this study, Zwass’s (1996) definition of e-commerce is adapted, focusing on
Internet-based technology: “E-commerce is sharing of business information,
maintaining business relationships and conducting business transactions by
means of Internet-based technology”. This definition has been used by many
other researchers, such as Poon and Swatman (1999), Scupola (2003; 2009) and
Pool et al. (2006).
The literature in e-commerce adoption by organization
revealed that there are three main e-commerce components that are used to indicate
the prevalence of e-commerce (see Hashim, 2009). These three components are:
e-mail, websites and online buying. E-mail is used among firms to communicate
with customers and suppliers, usually the prerequisites of online selling and
buying. Website is used to indicate online selling. Firms need to invest on
websites to sell online, while online buying can be done anywhere and anytime
as long as firms are connected to the Internet. These three main e-commerce
components are used to investigate the impediments of e-commerce adoption in this
study.
2.2 Small and Medium-sized Enterprises (SMEs)
SMEs play an important part in the economic activities of
most nations (Curran and Blackburn,
2001; Beaver, 2002; Simpson and Docherty, 2004). There are numerous examples
in the literature that illustrate the weight that SMEs carry in their own
national economies. In most European countries, SMEs constitute more than 90%
of businesses (OECD, 1998; 2000; Scupola, 2003). In the UK, for example, there are an
estimated 3.7 million businesses of which 99.8% are SMEs (DTI, 2001). In Malaysia, SMEs (commonly
called Small and Medium-size Industries, SMIs) account for more than 90% of
total businesses (Malaysia, 2004).
Each country has its own definition of SMEs and there is no
formal categorisation of what constitutes an SME (Ghobadian and Gallear, 1996;
Mohd Asri, 1999; Curran and Blackburn, 2001). However, there are two common
ways of defining SMEs: definitions based on financial turnover and definitions
based on numbers employed (Curran and Blackburn,
2001).
Definitions based on financial turnover have been found to be problematic (Curran and Blackburn,
2001)
as this is difficult to measure, and varies by sector (Storey, 1994). Definitions based on numbers
employed are more popular, and most commonly used by policy makers (Curran and Blackburn,
2001)
and researchers (for example, Raymond,
1987; DeLone, 1988; Raymond, 1992; Cragg and King, 1993; Mohd Osman, 2001).
For the purpose of this study, SMEs is defined by numbers of
employees employed by the firm: SME as a firm employing 10 to 250 employees.
More specifically, the definition used by other researchers conducting similar
SME studies in Malaysia will be adopted (Mohd Osman, 2001; Ismail, 2004). This
is in line with the definitions of SMEs used in other countries (European Commission,
2002). Very small firms (fewer
than 10 employees) will be excluded since these are likely to
approach IT issues very differently (Hussin et al., 2002) and because their numbers
would swamp those of larger SMEs.
2.3 E-commerce Adoption by SMEs in Malaysia
Studies showed that SMEs everywhere were not adopting
e-commerce readily (Beveren and Thomson,
2002; Lertwongsatien and
Wongpinunwatana, 2003; Fillis et al., 2004;
Grandon and Pearson, 2004;
Houghton and Winklhofer, 2004). In Malaysia too, studies of
e-commerce adoption by businesses, particularly SMEs, are mostly limited to
awareness and readiness of Malaysian companies. Sulaiman (2000), for example, found that although
many Malaysian firms have Internet access, most usage is limited to e-mail (Sulaiman, 2000). Other studies, such as
Paynter and Lim (2001); Albert et al. (2002) and Ang et. a.l (2003), also found e-commerce usage
by SMEs in Malaysia is still in its infancy. Indeed, many companies, especially
SMEs, are reluctant to go online (Karkoviata, 2001).
Adham and Ahmad (2005) investigated the adoption
rates of website and e-commerce technology by all 562 Malaysian public
companies (reputable SMEs and large companies, listed on the main board of
Kuala Lumpur Stock Exchange (KLSE[1])). Their study
examines company websites for operability and whether these websites
incorporate e-commerce systems for online transactions. Only 62% of websites
are operable with 96% providing only company and product information and only
4% equipped for e-commerce transactions (Adham and Ahmad, 2005). Surprisingly, even
well-known companies in Malaysia with excellent profit track records are yet to
use online transactions.
Hashim (2009) recently investigated the adoption of
e-commerce among SMEs in Malaysia. Her survey includes SMEs that have received
government grant to adopt e-commerce. There is a varied exploitation of
e-commerce among SMEs in this study. Of 522 SMEs, more than 95% have an
Internet connection and have used e-mail. Although e-mail was widely used among
SMEs, the usage is limited by the SMEs’ recognition of the importance of
face-to-face interaction with their customers and suppliers. Although more than
60% of SMEs have websites, many of these websites were mainly to promote the
company’s goods and services, and the company itself. Websites with online payment facilities and
online buying are rare among SMEs in this study. Online buying is almost
unpopular among SMEs in the study. This indicates that SMEs in Malaysia are
still not adopting e-commerce as readily as most industry predictions, and as
readily as the Malaysian government expected.
2.4 Inhibitors to
e-commerce adoption
There is not much research that investigates inhibitors to
e-commerce adoption, particularly among SMEs. As such, a review of inhibitors
to ICT adoption affecting firms was used as a guideline. Among the inhibitors
faced by firms include high investment costs and unfavourable financial
conditions, shortage of highly-skilled workers, lack of ICT specialists, and
insufficient ICT oriented training (Yap et al., 1992 and Chapman et al., 2000).
Other inhibitors also include information barriers (reflecting technological
uncertainty) and also managerial barriers, such as insufficient awareness of
managers (Chang et al., 2003). Table 1 shows some studies on inhibitors of ICT
adoption among SMEs.
Table 1: Inhibitors of ICT Adoption Among SME.
TABLE 1
Author
|
Sample
size
|
ICT
studied
|
Data
gathering method
|
Inhibitor
|
|
Auger
and Gallaugher
|
141 SMEs in iMall
database
|
|
Postal
questionnaire
|
Difficult to
promote website
Lack of company
resources
Product not well
suited
|
|
Chau
(2001)
|
462 SMEs (non-EDI
adopters)
|
EDI
|
Postal
questionnaire
|
Lack of knowledge
Unsatisfactory
internal ICT support
Non-positive
attitude
Insignificant
influence
Poor promotion
campaign
|
|
Thong
(2001)
|
130 Singapore SMEs
|
IS
|
Postal
questionnaire
|
Managerial time
|
|
Scupola
(2003)
|
7 SMEs in Italy
|
E-commerce
|
Semi-structured
interviews
|
Lack of ICT
knowledge
Unfamiliar with
the Internet
Fear of the
Internet
Lack of critical
mass
|
|
Drew
(2003)
|
50 SMEs in the
East of England
|
E-commerce
|
Telephone
interviews
|
Lack of technical
skills
Lack of knowledge
Insufficient
funding
|
|
Sumpson
and Docherty
|
2 UK SMEs
|
E-commerce
|
Case studies
|
Lack of ICT knowledge
|
Table 1 summarises 6 studies of ICT adoption by SMEs. Among
the inhibitors are lack of knowledge (Chau, 2001; Drew,
2003; Scupola, 2003; Simpson and Docherty, 2004), lack of resources (Auger and Gallaugher,
1997; Drew, 2003) and feat of the Internet (Scupola, 2003). The sample sizes of SMEs
that have been used in these studies range from 2 to 462. Data gathering methods are mainly postal
questionnaires, and semi-structured interviews. Studies using large sample
sizes and combining semi-structured interviews with postal questionnaires are
rare in the literature.
METHODOLOGY
Semi-structured interviews were carried out with SME
managers in Malaysia who did not adopt any of the e-commerce components. Interviews
are important to provide a thorough understanding of the most relevant concepts
and detailed insights into the issues being studied (Greene et al.,
1989; Silverman, 1993; Creswell, 1994). They help the researcher to answer the ‘why’
questions. Interviews allow researchers
to adapt questions when necessary, clarify doubts, and ensure that responses
are properly understood (Scupola, 2003). It allows interviewees to talk freely about
the subject, thus adding useful information from which it is possible to create
new themes (Creswell, 1994). The questions addressed the
following: Why SMEs did adopt or use, or stop using e-commerce in their
businesses. The interviews were conducted personally face-to-face lasted
approximately one to one and half hour. Whenever possible, the company’s
website was visited to gain better understanding of its use of e-commerce.
Twenty-nine SME were chosen from the list of SMEs which did
not use or adopt any of the e-commerce components. Twenty-nine
pre-interview calls were made with the SME managers to make appointments for
full telephone interviews. Pre-interview calls made sure managers spare time to
be interviewed so that the conversation would not be interrupted. Only eighteen
agreed to be interviewed. The interviews provided an opportunity to explore the
non-adopter issues in-depth and gather information on constraints or incentives
encountered.
findings
AND aNALYSIS
In-depth interviews
were conducted with SME managers who did not have an Internet connection, did
not use e-mail, no longer had firm websites, and also those who did not buy or
had stopped buying online. A condition
for each firm agreeing to participate in the research was that the information
provided would be treated in confidence.
Thus, names of the firms and individuals involved in the interviews are
disguised.
Table 2: Firms’
main products and services
Firm
|
Type of firm
|
Products and
services
|
A
|
M
|
Food and crackers
|
B
|
M
|
Coconut and palm
industries
|
C
|
M
|
Bakery products,
shortening and star fruit
|
D
|
M
|
Beverages
|
E
|
M
|
Plastic motor
components
|
F
|
M
|
Automobile
manufacturing
|
G
|
M
|
Elastic bands,
knit tape, narrow fabric accessories
|
H
|
M
|
Electronic alarm
system and engineering services
|
S
|
M
|
Wooden rubber
wood furniture
|
J
|
M
|
Motorcycle spare
parts and accessories, motorcycles
|
K
|
M
|
Building
manufacturing
|
L
|
M
|
Agricultural
products and chemicals
|
M
|
S
|
Imaging
technology
|
N
|
S
|
IT infrastructure
and system integration maintenance
|
O
|
MS
|
Gold and
jewellery services
|
P
|
MS
|
IS and IT
consultancy, and executive desktop
|
Q
|
MS
|
Health and food
supplements
|
R
|
O
|
Building and
constructions
|
Note:
M: Manufacturing
S: Services
MS: Manufacturing and Services
O: Others
As illustrated in
Table 2, the firms are involved in a variety of products and services, and it
is difficult to classify their activities into discrete categories. Three firms (A, C and D) were involved in
food and beverage production. Three
firms (M, N and P) were principally involved in IT services. Two firms (B and L) produced agricultural
products. One firm (Q) produced health
and food supplements. The remaining
firms manufactured finished products and some (firms G and S) were subsidiaries
of large organisations.
4.1.2 Internet and
E-commerce Usage of SMEs Interviewed
Of the eighteen respondents, two interviewees (A and B) did
not have an Internet connection. Two SMEs (C and D) used to have an Internet
connection and e-mail in their businesses.
Fourteen of the eighteen interviewees had e-mail. Eleven SMEs abandoned their websites, and the
other seven still had simple websites.
(A simple website displays only information about a firm and its
products and services without any price quotations.) Five SMEs had once bought online, but had
decided to stop. The remaining firms had
an Internet connection and e-mail, but did not have websites and did not buy
online (see Table 3).
Table 3: Internet and e-commerce usage of firms
Firm
|
Have Internet connection
|
Use e-mail
|
Have website
|
Buy online
|
||||
before?
|
now?
|
before?
|
now?
|
before?
|
now?
|
before?
|
now?
|
|
A
|
No
|
No
|
No
|
No
|
No
|
No
|
No
|
No
|
B
|
No
|
No
|
No
|
No
|
No
|
No
|
No
|
No
|
C
|
Yes
|
No
|
Yes
|
No
|
No
|
No
|
No
|
No
|
D
|
Yes
|
No
|
Yes
|
No
|
No
|
No
|
No
|
No
|
E
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes
|
No
|
Yes
|
No
|
F
|
Yes
|
Yes
|
Yes
|
Yes
|
No
|
No
|
No
|
No
|
G
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes*
|
No
|
No
|
H
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes*
|
No
|
No
|
S
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes*
|
No
|
No
|
J
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes*
|
No
|
No
|
K
|
Yes
|
Yes
|
Yes
|
Yes
|
No
|
No
|
No
|
No
|
L
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes*
|
Yes
|
No
|
M
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes*
|
No
|
No
|
N
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes*
|
Yes
|
No
|
O
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes
|
No
|
No
|
No
|
P
|
Yes
|
Yes
|
Yes
|
Yes
|
No
|
No
|
Yes
|
No
|
Q
|
Yes
|
Yes
|
Yes
|
Yes
|
No
|
No
|
Yes
|
No
|
R
|
Yes
|
Yes
|
Yes
|
Yes
|
No
|
No
|
No
|
No
|
Note:
Yes*: SMEs with simple websites with simple information
about the firm and its products
4.2 Impediments to E-commerce Adoption
The
interviews revealed some evidence why some SMEs did not adopt or use or stop
using e-commerce. The analysis provides a detailed evaluation of problems
encountered and is divided into a few thematic. The findings from the interviews
show that there are two principal reasons why SME managers did not adopt or use
or stop using e-commerce. First, some interviewees suffer from constraints to
adopt e-commerce. Second, some of them are not inclined to adopt e-commerce due
to several reasons. Table 4 displays the summary of the findings.
Table
4: Non-adopters of e-commerce and reasons found in the study by rank
TABLE
4
Dimension
of inhibitors
|
Barriers
|
Non-adopters
of e-mail (n=4)
|
%
|
Rank
|
Non-adopters
of online buying (n=18)
|
%
|
Rank
|
Non-adopters
of website (n = 11)
|
%
|
Rank
|
Barriers
to adopt e-commerce among SMEs
|
Lack
of time
|
3
|
100%
|
1
|
2
|
22%
|
3
|
7
|
50%
|
2
|
|
|
Lack
of external infrastructure
Technology
infrastructure
Basic
infrastructure such as transportation and delivery service
|
2
|
67%
|
2
|
10
|
44%
|
2
|
10
|
36%
|
3
|
|
|
Lack
of IT expertise and financial resources
|
N/A
|
|
|
5
|
56%
|
1
|
8
|
57%
|
1
|
Reasons
why SMEs have lack inclination to adopt e-commerce
|
Concern
about security
|
N/A
|
|
|
8
|
89%
|
1
|
11
|
71%
|
1
|
|
|
Lack
of trust of e-commerce
|
N/A
|
|
|
7
|
78%
|
2
|
11
|
79%
|
1
|
|
|
High
cost
|
N/A
|
|
|
5
|
56%
|
3
|
10
|
86%
|
3
|
|
|
Customer-related
constraints
|
N/A
|
|
|
N/A
|
|
|
9
|
64%
|
4
|
|
|
Inadequate
support from government and e-commerce consultants
|
N/A
|
|
|
N/A
|
|
|
9
|
64%
|
4
|
|
|
Lack
benefits of e-commerce
|
N/A
|
|
|
N/A
|
|
|
8
|
57%
|
6
|
Table
4 displays ten inhibitors of why SMEs in this study did not adopt e-commerce.
Three of them are the constraints the SME faced to adopt e-commerce while the
other seven are some sorts of reasons that SME managers gave why they are not
adopting it. Most of the inhibitors are
common among the three e-commerce components. But, most inhibitors were
acquired from SMEs that were not using websites. Table 4 also displays these
inhibitors according to ranking, i.e. which are the inhibitors that found in
most SMEs. Each of these inhibitors is describe below.
4.2.1 Barriers
to e-commerce
Since
e-commerce relies on telecommunication networks, a poor telecommunications
infrastructure presents a significant barrier to the application of e-commerce
technologies (Slyke and Belanger, 2003). In Malaysia, while a
reliable telephone service and dial-up to the Internet are commonly available,
access to a broadband infrastructure still remains beyond the reach of
potential users in many locations.
Because of their location in remote areas, many SMEs suffered from poor
telecommunications infrastructure.
The
government said that we are ready to get connected anytime and the Internet is
ubiquitous. I don’t think we are up to
that standard yet. Not everybody can
have a broadband facility.”
SME
manager from firm O
In
addition to the technology services, SMEs managers also claimed the transportation
and delivery system for e-commerce in Malaysia was not efficient. Many SME managers said they could not provide
prompt delivery to their customers. They
still had to use traditional carriers, such as Pos Malaysia Berhad (the
Malaysian post office). Although they
had alternative ways to send items, such as DHL, they were quite costly. SME managers also said that the traditional
carriers did not deliver at the weekend.
Most of the time, sellers and buyers needed to go to the post office to
send and collect the item.
“In
order for e-commerce to succeed, everything needs to be efficient – the order
and payment systems, the online tracking system as well as the delivery
system. If all these things can be
fixed, then we may be ready for online transactions.”
SME
manager from firm L
4.2.1.2
Lack of Time
Lack of time to set-up and maintain
e-commerce is the major constraint for almost all interviewees. Most SME managers interviewed claimed that
they were very busy with their routine business operations. They stated that they were required to do so
many things at the same time. They
rarely had a normal day, as there was always something urgent to do, an
important problem to be sorted out and an order that needed to be dispatched (Hunt,
2003).
Most of the interviewees saw e-commerce in
their business as yet another task to be done.
They already had a great many things to do, and they were not convinced
that adding more would be useful. They
argued that acquiring websites was not as simple as it was made out to be. Managers needed time, money and effort to
maintain and update their websites, especially websites with online transaction
facilities.
“Time
is very precious for SMEs like us. We
have so many other things to do rather than sitting in front of the computer.”
SME manager from firm L
The other constraint in adopting e-commerce,
according to the interviewees, was the limited resources available to SMEs. SME
managers said they needed a technical expert who could set-up and maintain the
websites for them because they were not able to do that on their own. However, they were not willing to hire
dedicated IT expertise or an IT consultant since that would cost too much. SME managers claimed that setting-up a
website with online transaction was not easy.
They said that e-commerce is not a simple and straightforward process
requiring only the installation of hardware and software.
“We are delighted if government or
e-commerce consultants can provide us with training to set-up and maintain the
website. We don’t need anything fancy;
we just want simple and manageable websites.
The training package for creating a website is too expensive and too
complicated. We don’t have resources for
that now.”
SME manager from firm R
As illustrated in Table 3, most interviewees
use e-mail in their businesses, but rarely have websites and buy online. All but three interviewees stated they needed
e-mail to communicate with their customers and suppliers. Seven SMEs wanted firm websites, but simple
websites with simple information about the firm and its products. Those that bought online before declined to
continue the activity. This gives an
indication that most interviewees have a good idea what e-commerce all is
about. However, many remain disinclined
to implement e-commerce, particularly online transactions.
Concern about security is also one of the main reasons why SME
managers in this study were reluctant to adopt e-commerce. Most of the
interviewees were uncertain how secure e-commerce was for online transactions. Some SME managers worried about the
possibility of Internet errors in online trading. One SME manager (firm K) had picked up
computer viruses that were delivered through the Internet. He had to reformat most of his computers’
hard disks and this was costly and inconvenient.
The
interviewed SME managers also argued that it was not secure to disclose credit
card information on a website, particularly to those that are not well-known
and have no track record. According to
the managers, Internet hackers may hack information about their credit cards
and use it somewhere else.
“If
I were to buy online in future, I would only buy from large and reputable
organisations that promise secure protection on online transactions and also
those who would pay me back every single cent of what I have spent if something
goes wrong with the delivery or if I were to return their products.”
SME
manager from firm J
Lack
of trust in e-commerce is another prominent reason why SME managers were reluctant
to adopt e-commerce. SME managers said
that e-commerce is not reliable. They
claimed that they did not trust e-commerce because they did not trust the
Internet. According to the managers, in
the Internet world anybody can be a seller and a buyer because nobody knows who
is behind the Internet. They were unable
to determine genuine sellers or buyers on the Internet.
SME
managers were also doubtful about having a website with online transaction
facilities. If customers were to order
and pay online, product and service information, including prices had to be
available on the Internet. According to
them, this could lead to loss of competitiveness in the marketplace because
other firms could imitate them.
“Trust
is still an issue and there is a lot of spin and self-interest out there”.
“Online
payments need control. Control needs
trust, ownership and protection. I don’t
think this technology will last long.
And I don’t think people will be able to put their trust in the
Internet.”
Another main reason SME managers were
reluctant to have e-commerce in their businesses was the high start-up and
maintenance costs, particularly in adopting a website. SME managers said if they were to have a
website with online transactions they had to invest more money to buy more
advanced machines, hire more people with ICT skills, and send more staff for
training.
“We are SMEs. We are not as rich as large
organisations. Our works are on a
day-to-day basis. We have got to make
sure that our businesses run smoothly in order to survive. How can we compete with large organisations
which have a lot of money? With the Internet, the large organisations are the
ones who benefit most. Previously, they
may have looked for SMEs to sell their products to the local people. However, with the Internet, they can sell
directly to the people at a cheaper price without us.”
Some managers claimed that online buying
also involved high costs. They needed to
do research before buying on the Internet, which was time consuming. Since there is a wide range of websites on
the Internet, buying online sometimes takes longer than traditional
shopping.
Another prominent reason why SME managers
were reluctant to have e-commerce in their businesses was that the demand for
e-commerce from customers was very limited.
SME managers stated that e-commerce needs not only active sellers, but
active buyers too. To capture the
attention of customers to buy online, SMEs needed an attractive website, which
would take time, effort and money. Even
then, this did not guarantee that the SMEs would be able to sell online.
“I have had online ordering and online payment
on the website for nearly two years. I
think I did a lot of advertising to promote the website. Not a single buyer has purchased through my
website. I would rather use my energy to
promote my business and keep my customers with me.”
Governments
and e-commerce consultants usually act as catalysts to increase the diffusion
of e-commerce (Hadjimanolis, 1999; Gladwin et al., 2002; Scupola, 2003). They usually play an
important role in influencing SME managers to adopt technologies and ideas. In
the process of getting SME managers to adopt e-commerce, both the government
and e-commerce consultants made many promises to SMEs. However, most of the SMEs were ignored once
they adopted the technology. SME managers suffered with the technology and
drifted in their own world without proper direction.
“The
consultants gave us a lot of promises before we used their services to have a
website. They came and visited us almost
weekly during the trial period to see our progress dealing with the website. After we had signed an agreement with them,
we could hardly get in touch with them.
We needed to call them several times before they agreed to meet us. They said there were no dedicated consultants
for each SME, but one consultant for many SMEs.
So, the SMEs in trouble were required to make appointments. It sometimes took weeks and months.”
Most
interviewees that received the government grant also regarded the government
grant as relatively short-term. They said that the government only gave
assistance once to SMEs; however it did not ask any feedback after the grant
has been given.
“The
government should follow up with the companies who received their grants. Then
they would realize what problems arise after the e-commerce grant has been
spent.”
SME
manager from firm L
4.2.2.6 Unclear Benefits of E-commerce
Another reason why SMEs did not adopt
e-commerce was a failure to gain any advantages from using the technology. SME
managers said the benefits of having e-commerce were not clear. Many SME
managers in this study who used to have more complex firm websites have scaled
down. They hardly sold online and never
gained any profit from complex websites.
Instead, they needed to invest even more to maintain their
websites.
“All this while, we heard many good things
about e-commerce, such as how SMEs can increase their sales and how to save
costs using e-commerce. So, we invested
in a complex website for online transactions.
But,… we are only able to look at it, edit it and maybe feel proud of
it. That is it. How to make customers buy from it is the
biggest problem in e-commerce.”
4.2.2.7
Not Interested and Not Relevant
Some SME managers in this study stated that
they were just not interested in Internet activities. One particular interviewee (firm B) opposed
the Internet because of the failure rate of his peers who had adopted the
Internet. Two SMEs (firms C and D) used
to have Internet connection, but decided to discontinue the Internet connection
to cut their operation costs.
“I only use computers to keep information
about my customers and the firm inventory.
I have the Internet at home for personal access. But I am not fond of having an Internet connection
in my firm because I don’t like to spy on my staff.”
SME managers from firm B
Some SME managers also said e-commerce was
not relevant in their businesses because they served only local people. They said the nature of their business and
the product mix offered needed face-to-face interactions. This, according to
the managers, did not come with e-commerce.
“I have been selling medicine for more than
a decade. My firm website is only to
display the kinds of medicine we have.
We are reluctant to sell online because not all medicine is suitable for
everybody. We need to talk to our
customers first and give proper advice to them.”
.
DISCUSSION
The
findings from the interviews give some ideas the barriers and why SMEs are not
inclined to adopt e-commerce. Some of the inhibitors that found in this study
are similar in other studies. For example, Chappell and Feindt (1999) and Sadowski et al. (2002)
found that lack of time is the factor hinder SMEs to adopt ICT, Craag and King
(1993) and Purao and Campbell (1998) found that lack of IT expertise is one the
major concern for SMEs to use ICT in their businesses, and lack of external IT
infrastructure is the one the barrier found in Hadjimanolis’s (1999) study. Concern
about security (O'Keeffe et al., 1998;
Hadjimanolis, 1999; Walczuch et
al., 2000; Lawson et al., 2003; MacGregor and Vrazalic, 2007), lack of trust
of e-commerce (Paul, 2003; Pease and Rowe, 2003; Scupola, 2003) ,
high cost (Lawson et al., 2003; Pool et
al., 2006), unclear benefits (MacGregor and Vrazalic, 2007),
and irrelevant to the business (Beveren and Thomson, 2002; Hughes et al., 2003; Brown and Lockett, 2004) are also among
reasons that other studies reported of why SMEs are not adopting e-commerce.
In
general, this article highlights a few important findings. One important
finding in this study was lack of external infrastructure that cause not only
by technology but the poor basic infrastructure such as transportation and
delivery service systems. A clear message from this study is that the
government is yet to provide an appropriate infrastructure. Other reasons that
were found in this study of why SMEs were not inclined to adopt e-commerce are
customer-related constraints and inadequate support from government and
e-commerce consultants. Many SMEs said that the demand for e-commerce from
customers to buy online was very limited, and thus this did not permit them to
sell online. The analysis of the interviews also raises questions about the
effectiveness of government support. The interviews revealed the evidence that
government grants are inappropriate because they are generally too small, and
because they are one shot of assistance.
The government shows little interest in whether its support brings
additionality to SMEs.
Concluding remarks
This article presents the findings of the impediments of
e-commerce adoption among SMEs in Malaysia. In order to encourage SMEs to adopt
e-commerce, all the factors that impede SMEs to adopt e-commerce should be
solved. One way is to make SMEs understand what e-commerce is all about. For
example, practitioners as well as academicians need not only highlight the
important of e-commerce to SMEs; however, they should make SMEs understand what
e-commerce is. E-commerce demands a radical change in the company’s strategy
and logistics. It requires time and
resources, which are precious and scarce in SMEs. SMEs need to be aware that they need to take
e-commerce seriously if they really want to invest in it. They need to have a
clear assessment of the value that e-commerce might bring to their
company. SME managers need to be
educated about the potential of e-commerce and learn from the experience of
others, which may not necessarily be Malaysian-based. They also need to identify which e-commerce
activities are appropriate for them. Without
adequate information, the anticipated benefits of e-commerce and its development
cannot be achieved. For policymakers, they should provide not only the
technology infrastructure and services, but an appropriate delivery service and
transportation systems coupled with reliable and reasonable technology infrastructure
and security systems would enable SMEs to see the ease in e-commerce.
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