Why ecommerce is a game changer for MSMEs

Ecommerce has enabled MSMEs to widen their market reach, create more jobs, and boost revenue. The trend is expected to continue.

Why ecommerce is a game changer for MSMEs

Tuesday March 16, 2021,

4 min Read

Governments, whether of any state or at the Centre, have on various platforms accepted the potential of micro, small, and medium enterprises (MSME) and the pivotal role they play in the Indian economy. No matter what the industry or domain, MSMEs contribute a major role in its growth. But with deeper internet penetration, MSMEs have gained muscle like never before by catering to an online base. The internet was once the weakness of MSMEs, but with the passage of time this has turned into their strength and eventually ecommerce has become a game changer for them.

Enhanced revenues

By embracing ecommerce platforms, MSMEs are surpassing past revenues and business margins due to increased market reach and by establishing online connections with new and unexplored markets. Moreover, several surveys and reports have shown MSMEs that use the internet are making their job way easier than those, which are hesitant or challenged in any manner to embrace ecommerce.

Shot in the arm

Continuing with the positives for the MSME sector due to the ecommerce boon, it is expected to fetch similar returns in the future as well. According to data cited by the India Brand Equity Foundation, ecommerce is on a great run in India and if the trend persists with an upward growth trajectory, India will surpass the US to become the world’s second largest e-commerce market by 2034. In turn, MSMEs will get a shot in the arm for revenue generation.

According to Statista, the ecommerce market in India is expected to reach $84 billion in 2021 due to an ever-growing number of internet users. Moreover, if we talk about online shoppers in India, due to favourable market conditions, their number is expected to reach 300-350 million by 2025.

As per a report by Bain & Company and Flipkart, the e-retail market in the country is expected to clock a compound annual growth rate of 30 percent in terms of gross merchandise value from $30 billion in FY20 to $100-120 billion by FY25.

This means the stage is set for nearly 400 percent growth for MSMEs as well.

Small businesses

Leveraging the power of ecommerce

MSMEs in India have understood the power of ecommerce and that is why they are geared up to grow in leaps and bounds. Policymakers have recognised the challenges MSMEs face, and that’s why the Narendra Modi-led government’s policies such as Skill India, Make in India, Digital India, and Startup India have MSMEs as their primary focus, so that these entities can tap into the immense power and potential of the internet.

Myriads benefits 

The impact of ecommerce growth on MSMEs in India was bound to happen. As the backbone of the Indian economy, MSMEs are witnessing a boom, with ecommerce directly impacting them due to support from allied forces such as finance and technology sectors. 

What mattered for MSMEs in terms of ecommerce were online payments, local-level logistics support due to tech-driven processes, and data analytics to understand, engage, and retain customers. Growth in ecommerce also gave a boost to employment.

Catalyst for growth

Ecommerce has been having a positive impact on MSMEs for several years. The emergence of online marketplaces was nothing less than a catalyst for growth and achieving momentum. MSMEs and ecommerce have been acting as the wheels of a chariot.

With the support of ecommerce, MSMEs acted as the engine of growth and economic development. Now, when a business prepares to be set up, it mostly opts for online first and then offline. Such is the power of ecommerce. MSMEs have been adopting ecommerce channels to register themselves and create a niche in their respective business domains.

Push to go global

Through ecommerce, even small MSMEs get to showcase their products across the globe without spending much on expansion or changing their location. For MSMEs, ecommerce has become synonymous with economic growth and sustainability. Ecommerce has helped MSMEs get rid of business hurdles, in turn getting them a larger customer base and hence a rise in revenue.

Edited by Lena Saha