MSMEs: The untapped powerhouse fuelling India's ecommerce boom

The narrative of India's economic rise often focuses on statistics pertaining to a booming youth population, surging internet penetration, and ambitious GDP targets. These factors undeniably paint a picture of a nation on the upswing. A recent report, by Google, Bain & Company, and Temasek, adds another crucial detail to the canvas: India's consumer internet economy is projected to reach a staggering $1 trillion by 2030.

While these paint a compelling picture, this meteoric growth rests not solely on macro trends, but on the collective efforts of millions of India's Micro, Small and Medium Enterprises (MSMEs). These enterprises, the lifeblood of local communities, are often overlooked in traditional economic analyses.

MSMEs: The stars of the Viksit Bharat Ambition

The government of India's vision of 'Viksit Bharat' (Developed India) hinges on a dynamic economic ecosystem. With their deep local roots, agility, and innovative spirit, MSMEs perfectly embody this vision. They contribute a staggering 40.83% to GDP and employ millions. Yet, their presence in the ecommerce revolution needs to be utilized further. This presents a significant opportunity waiting to be unlocked.

Why MSMEs are ecommerce gold

What makes MSMEs so well-suited for the ecommerce age? Here's why they're gold:

01. Adaptability champions: Unlike larger corporations, MSMEs can pivot quickly to embrace changing consumer trends and preferences. This allows them to capitalize on emerging opportunities and cater to niche markets, a hallmark of the new-age economy. Imagine a handloom weaver in Bengal spotting a rise in demand for sustainable clothing and instantly revamping their product line. This agility is a game-changer in the fast-paced world of ecommerce.

02. Local knowledge powerhouse: Deeply embedded in their communities, MSMEs understand local tastes and requirements better. This enables them to develop and curate product offerings that resonate with their target audience. For instance, a family-run spice shop in Kerala can leverage ecommerce to bring their unique spice blends to a national audience, personalizing the ecommerce experience.

03. Innovation incubators: MSMEs are often hubs of creativity and innovation. Unburdened by complex hierarchies, they can bring new and exciting products to market faster, constantly refreshing the ecommerce landscape. A small toy manufacturer in Channapatna might invent a unique, eco-friendly toy that becomes a national sensation through ecommerce platforms. This emphasis on disruptive innovation is a crucial driver of growth in the ecommerce space.

Bridging the digital divide for inclusive growth

Despite these advantages, challenges persist. Limited access to technology and infrastructure, particularly in Tier II and Tier III cities, hinders the full participation of MSMEs in the ecommerce ecosystem. This digital divide could potentially leave behind a significant portion of the promising driving force behind India's ecommerce growth. Several trends are emerging to bridge this gap and empower MSMEs:

01. Government as enabler: Initiatives like Digital India and Skill India aim to equip MSMEs with the necessary digital skills and infrastructure. Tax breaks, subsidies, and simplified trade regulations are also being implemented to empower them further.

02. Ecommerce collaboration: Collaboration with ecommerce platforms offering bundled solutions like pre-configured software, affordable hardware, and marketing assistance can address upfront investment concerns and provide a one-stop shop for MSMEs. Flipkart, for instance, has programmes like 'Flipkart Samarth' that bring artisans, weavers, and micro-entrepreneurs into the ecommerce fold, providing them with incubation support, training, and reduced commissions. This collaborative approach is critical to empowering smaller players in the digital economy.

03. Knowledge is power: Mentorship programmes involving industry leaders and successful ecommerce entrepreneurs are providing valuable guidance to MSMEs. Additionally, online communities and curated resources are equipping them with the knowledge they need to navigate the ecommerce landscape.

Empowering MSMEs for global trade

The future of ecommerce is more than just domestic. The Directorate General of Foreign Trade (DGFT) is actively propelling ecommerce exports through its 'Districts as Export Hubs' initiative. This programme empowers MSMEs in identified districts to explore international markets via ecommerce channels. DGFT collaborates with ecommerce platforms and service providers to conduct capacity-building programmes and training sessions to make these MSMEs export-ready. Initiatives like BharatMart's warehousing network further bolster India's foreign trade aspirations. By providing warehousing facilities, BharatMart empowers rural MSMEs to bridge the knowledge gap and enter the international trade landscape.

Building a thriving digital Bharat driven by MSMEs

By addressing the challenges and harnessing the power of current trends, India can unlock the true potential of its MSMEs in the ecommerce sector. This will not only contribute to achieving the ambitious vision of a Viksit Bharat but also foster inclusive and sustainable economic growth. With increased emphasis on MSME growth, the near future could witness every MSME, from the local handloom weaver to the family-run spice shop, leveraging the power of ecommerce to showcase their unique offerings to a global audience. This is beyond a utopian vision; it's the roadmap to a thriving Digital Bharat.

The coming years will witness a phenomenal rise of MSMEs in online retail. According to a Redseer analysis, we can expect them to surpass traditional e-tailing with a remarkable Compound Annual Growth Rate (CAGR) of 60-70% by 2027. This translates to a projected contribution of a staggering $50 billion to the e-tailing Gross Merchandise Value (GMV) by 2027.

As MSMEs leverage ecommerce to reach wider customer bases, they will benefit from similar online advantages as more prominent brands. This will necessitate ecommerce platforms to adapt their vendor policies to cater to the unique needs of MSMEs. Streamlining the GST Act and Rules to allow unregistered ecommerce sellers with specific turnovers to make intra-state supplies could significantly unlock the full potential of MSME contribution to ecommerce.

The power of collaboration: A win-win for all

The ecommerce revolution in India hinges on a collaborative approach. By working together, the government, ecommerce platforms, MSMEs, and logistics providers can create an ecosystem that fosters innovation, growth, and inclusivity. This will empower MSMEs to become the true stars of Digital Bharat, illuminating the landscape with their entrepreneurial spirit, local knowledge, and the ability to adapt and innovate constantly.

As MSMEs embrace ecommerce, they will empower themselves and contribute significantly to India's journey towards becoming a global ecommerce leader. The future is bright for MSMEs in the Indian ecommerce space, and, with the proper support and infrastructure, they are poised to be the driving force behind a thriving Digital Bharat.

[Disclaimer: Thoughts and insights shared by Mr Rajneesh Kumar, Chief Corporate Affairs, Flipkart Group]