MSMEs adaptability to e-commerce and its benefits have already been established by the Government e-Marketplace’s (GeM) dazzling success.
India’s Micro, Small, and Medium Enterprises (MSMEs) are the gears that keep our economy running. The MSME sector, which consists of approximately 63 million recognized businesses as of 2021, contributes to 30% of our GDP, accounts for 45% of our exports, and comprises almost 40% of our informal workforce by employing over 120 million Indians, making it the second largest employer after the agriculture sector.1 In fact, after the latest definition revision, 99% of Indian businesses can be categorized as MSMEs.
Most of these small enterprises, such as kirana stores, are present throughout under-served pin codes in India, thereby providing the opportunity to not only promote economic growth, but also much needed social development across the country. For example, the Indian Brand Equity Foundation’s (IBEF) latest report on MSMEs shows that the sector has played a key role in supporting entrepreneurship development in semi-urban and rural areas of India. Honing the fiscal potential of the MSME sector along with its possibility to empower economic agents across India equally can bring us closer to Aatmanirbharta.
Therefore, it is now more important than ever to support our MSMEs by providing them with optimal infrastructure for smooth operations and logistics in a world that is increasingly plagued by turbulence. Just like many other services and industries, it is time to get MSMEs online. After experiencing the kinds of market disruptions brought by COVID-19, we can be sure that if we want to achieve the dream of India becoming a USD $5 trillion economy in the next five years, we must integrate MSMEs into the digital economy.
Programs like Digital India are already paving the way to internet access, enabling more and more Indians to become connected, with almost 782 million internet connections in India as of April 2021. Due to the increasing smartphone and internet penetration, the Indian e-commerce market is also expected to grow to USD $111.40 billion by 2025 from USD $46.2 billion as of 2020. With the e-commerce industry so fertile, and the public more receptive to digital solutions in the wake of the pandemic, this is the perfect time to introduce MSMEs to the possibility of digital transaction across their supply chain.
While business owners may have become more familiar with the concept of digital Business to Consumer (B2C) sales through the increasing popularity of runner-based delivery platforms and larger multi-retail online outlets such as Amazon or Flipkart, it is now critical to introduce online Business to Business (B2B) commerce to the MSME sector through platforms that can offer them an open and inclusive trade ecosystem across the entire value chain, allowing them to not only digitize their own value chain, but also helping them connect to other local supply chain networks. Through an aggregated service, small businesses are given the luxury of choice between the increased variety of SKUs from multiple sellers at competitive prices, all available at their screen without the costs of time and travel to search for products of superior quality. Using such democratic digital tools also equips these enterprises to eventually penetrate global supply chain networks, with the elimination of physical distance and market inaccessibility as a barrier to trade. B2B e-commerce platforms empower businesses to directly interact with other buyers and sellers in the market, ensuring the most efficient transaction experience, without disrupting the traditional supply chain. By preserving traditional supply chains and protecting the core value systems of trust between buyers and sellers that characterize Indian supply chain networks, digital platforms provide a modernized e-commerce experience that is attuned to the Indian business sentiment, allowing us to shape success for millions of indigenous enterprises across the country.
Digitizing MSME retail also allows creation of valuable data through embedded financing. Now, any businessperson who chooses to transact over the platform leaves a trail of information about their retail volumes, costs, and procuring habits. Such data when aggregated can lend meaningful insights into nation-wide retail cycles and can reveal the fiscal footprint of a previously unaccounted network of informal micro and small enterprises.
MSMEs adaptability to e-commerce and its benefits have already been established by the Government e-Marketplace’s (GeM) dazzling success. The GeM was launched in 2016 as a Government-to-Business (G2B) e-commerce platform, featuring an end-to-end online marketplace to facilitate the procurement of common use goods and services required by central and state ministries, government departments, public sector undertakings and other local institutions at the best price and quality through transparent and efficient means. The e-commerce method in government procurement was pathbreaking, as it helped the government procure more cost-efficiently, improved transparency and decision making in public procurement thereby reducing malpractice, all while giving online access to under-served sellers which reinforced India’s growth principles of Atmanirbhar Bharat, Vocal for Local, and Make in India. In fact, as of June 25, 2021, the Government e-Marketplace (GeM) portal fulfilled 6.87 million orders worth USD $5.67 billion from 2 million registered sellers and service providers for 52,651 government buyers.2 Following this success, the Department of Commerce has even formed a steering committee to oversee the development of a government backed online B2C platform for Indian MSMEs, called the Open Network for Digital Commerce (ONDC).
Riding the ripples of the e-commerce boom is the only way for MSMEs to move forward, and to make this happen, government as well as private interventions are needed to help digitize their end-to-end operations. In a nationwide survey of MSMEs conducted by Solv, more than 90% felt that online B2B e-commerce platforms customized for their sector, would help them grow their business faster in terms of getting better rates to procure goods, accessing cheaper and faster credit, and increasing sales. With enough upcoming B2C digital solutions, the eB2B industry remains ripe and is expected to grow over USD $60 billion in market size by 2025.3 There are ample opportunities to open up bottlenecks in the current B2B value chain, to correct supply malpractice, perform quality control in B2B transactions, and organize the roughly 70% informal MSME sector, making B2B retail the opportunity to tap into for actualizing the fantasied USD $5 trillion Indian economy. The current USD $714 billion B2B retail market has the potential to reach USD $1.3 trillion by 2025,4 and it can only be done through modern, sustainable, future-friendly solutions which can create a participative economy which is inclusive of the entire trade ecosystem involving verified sellers and buyers, competitive quality and prices of goods, door-step pick-up and delivery of goods, timely and easy access to finance, and simplified business support functions.5
Small retailers, embedded equally across small towns and big cities, are the key to unlocking inclusive growth for India on all fronts, economic and social. It is imperative now that we empower them with the appropriate technology to mark their presence in the dynamic and digital global marketplace, enabling them to connect with us as well as with each other.
Source: Business World