How MSMEs are seizing new growth opportunities through digital reskilling

By Team YS|15th Jan 2021
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Micro, Small, and Medium Enterprises (MSMEs) have been at the centre of the conversation around India’s business landscape, given that India’s 70 million MSMEs contribute to almost 30 percent of the country’s GDP and that it creates 11 crore jobs. It is therefore imperative for the country’s economic growth that the sector should steer past the numerous challenges of last year.


Key among them is the lower rates of productivity and the inability to upgrade operations— challenges that were systemic to MSMEs, and which got further exacerbated by the pandemic. However, one trend that helped MSMEs to survive in the new landscape was the adoption of digital solutions.


According to a survey conducted by IT company Endurance International Group (EIG), between March and June 2020, about 30 percent of Indian MSMEs launched a website or enabled ecommerce functionality, while more than 50 percent of MSMEs embraced video conferencing tools to keep their businesses afloat during the pandemic.


The report also noted that companies with existing ecommerce operations contributed an approximately 50 percent increase in the business’ total revenue. Also, for MSMEs in retail and educational services, increase in revenue from ecommerce was 53 percent and 65 percent, respectively.

The benefits of digital reskilling for MSMEs

The revenue increase brought about by the digital reskilling of MSMEs could be attributed to an improvement seen in various other facets. Studies carried out among small businesses have shown that more than 40 percent of the business reported customer growth that could be attributed to the use of digital tools.


Close to 90 percent of these businesses also reported higher levels of innovation while communicating with customers and entering new markets.


The study also noted that digital reskilling has a cascading effect with its benefits. The more digitally savvy the business, the more the number of people it employs. In fact, businesses in the study that are skilled in using more advanced tools often employed twice the number of people as compared to those businesses that had a more rudimentary use of digital tools in their operations. They are also known to show greater employment rates.


And businesses that hire more people have shown to be more productive. The productivity data from manufacturing MSMEs from countries of the Organisation for Economic Co-operation and Development (OECD) shows that the productivity levels of medium firms that hire between 50 and 250 people are around 80-100 percent greater than the productivity of micro firms, which hire less than nine people.

Stories of digital transformation from the field

Ribbon Candy is a Vadodara-based girls’ hair accessories and apparel brand founded by Meghna Gandhi that quickly reskilled to adopt digital technologies, and transform the way business was done last year.


Despite marketing budgets being cut to reduce expenses, she saw a surge in online demand from impulsive buyers. According to her, the Ribbon Candy website and ecommerce sites brought in sales despite the company working on bare minimum budgets, which was crucial to maintaining operations last year.


Further, digital payments have become an important part of Ribbon Candy’s operational process. With contactless payments becoming the norm, Meghna’s customers and suppliers began transacting through digital payment mode such as UPI. “Earlier, we used to do bank transfers. Most payments are now happening through Google Pay and Paytm as they are faster and more convenient,” she says.


Coimbatore-based catering company Madhampatty Thangavelu Food Factory also struggled in a tough business environment last year. It usually catered to large weddings and events, and was proficient in making sweets. But due to the COVID-19 pandemic and lockdown, there were no events happening in the city.


With no gatherings to cater to, managing partner Krishnakumar Thangavel realised that he had to pivot the business, or risk shutting shop. Krishnakumar and his partners decided to boost the sales manufacturing of sweets. They decided to go with the services of an end-to-end business process management solution company from the same city and reach customers by going online. With the help of the platform, Madhampatty Thangavelu Food Factory is now fully managing ecommerce orders. With no clear indication about when large gatherings will return, Madhampatty Thangavelu Food Factory is managing to stay afloat through its sweets business.


Such stories show the various ways that MSMEs have stayed resilient in the face of a highly challenging business environment. It also goes to show that as the world moves towards the next normal, it is by embracing digital transformation through the adoption of digital tools and reskilling that MSMEs can productively move towards new growth opportunities.


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