How E-commerce Initiatives are Helping the MSME Industry in India

Although India’s tryst with e-commerce dates back to 1999 and K Vaitheeswaran’s Fabmart, the real boom came nearly a decade later, with Flipkart paving the way for a host of other international and domestic platforms. India’s e-commerce market is believed to be valued at $84 billion and is set to grow to $200 billion, as per data from Statista.

The pandemic has brought a mixed bag of fortunes for the e-commerce sector. While the first wave saw a high increase in online orders, the enthusiasm had waned during the second wave, with non-essential items like fashion taking a huge hit. Despite that, the future continues to look optimistic for online commerce in India. This has been further buoyed by initiatives like Digital India, and as per data from IBEF, there were over 776.45 million internet connections in the country as of September 2020. The widespread use of mobile phones and the rise of digital payment platforms have also played a significant part in the growth.

However, one particular sector that has been fairly reticent in adopting online selling has been India’s Medium Small and Micro Enterprises (MSME) sector. Despite being one of the most significant contributors to employment and the GDP, the sector was among the worst affected during the pandemic due to a continuing preference for traditional, largely cash and customer-credit-based transactions.

With around 63.4 million units in the country, MSMEs employ over 120 million people, contributing around 6.11% of the manufacturing GDP, and 24.63% of the GDP from service activities, as well as, 33.4% of India's manufacturing output as per statistics from the Confederation of Indian Industry. The urgency to boost its fortunes is therefore understandable.

Recent findings in a July 2021 report by the India Brand Equity Foundation show that MSMEs are increasingly being encouraged to sell on e-commerce sites, with the eponymous Government e-Marketplace (GeM), the preferred procurement platform for ministries and public sector undertakings. The platform has recorded transactions worth Rs. 55,048 crore ($ 7.5 billion) as of September 2020.

Private e-commerce players are also rolling out initiatives to onboard MSMEs:

In April 2021, Amazon India announced that it had onboarded 2.5 million MSMEs, resulting in cumulative exports worth $3 billion.

Over 95 per cent of the three lakh sellers on Flipkart Marketplace are believed to be small businesses. The platform has dedicated teams to assist them with onboarding, product listing, and pricing of products.

According to several media reports in November 2020, Facebook announced its Season of Support initiative where teams from Facebook would help small businesses boost their sales.

The social media platform also announced $4.3 million in grants for small businesses. WhatsApp’s messaging service, especially catering to businesses that can create a verified profile and label all free of cost, has also been a boon for small businesses to stay in touch with clients, transact and collect payments.

Powered by private and government initiatives, e-commerce could herald significant growth for the  Indian MSME sector, giving them unprecedented access to customers across the globe. It also offers insights into what customers want and the ability to deliver customized products and solutions. And all this while lowering operational costs and access to global supply chains and Direct to Customer (D2C) sales to a much larger pool of clients.

In terms of upfront investment as well, MSMEs can make significant savings by testing the waters with how their products cater to new demographics of customers to whom they previously had no access. They can also stress-test other features like shipping and returns.

MSMEs have contributed significantly to India's economic growth. If the government’s Atmanirbhar Bharat and Make In India and the world vision are to be realized, MSMEs need to continue to be a part of that growth story.

And e-commerce will be a key enabler in making that success story a reality.