MSMEs to propel about $50B in e-tailing sales by FY27: Redseer

MSMEs will drive an estimated $50 billion in e-tailing sales by FY27, outpacing the projected 25% CAGR growth, Redseer Strategy Consultants said in a report.

"This is testimony to MSMEs' adeptness at harnessing online platforms underscores their pivotal role in India's economic makeover," it added.

In a study titled, MSMEs - The Next Catalytic Force for Indian E-commerce, Redseer highlighted that ecommerce acts as catalysts for improved customer insights, targeted outreach, effortless service, and enhanced profit margins.

Ecommerce entities are adapting policies to bolster MSMEs, extending benefits like reduced commissions, expanded user bases, cost-effective logistics, streamlined onboarding, potent marketing tools, and robust seller dashboards.

The retail market in India is anticipated to reach $1.4 trillion by 2027, with MSMEs accounting for 65-75% of the market, it said. However, MSMEs—contributing 30% to the Indian GDP—who sell offline face several obstacles, including overhead expenses, extended settlement periods, etc.

Meanwhile, adopting an online channel resolves additional challenges for MSMEs, where payments are settled quickly, and they can reach across the globe, resulting in greater reach with low marketing costs and competitive intensity, the report added. 

“Ecommerce has been a crucial growth driver in India where about 200 million people shop online,” the report said, adding that MSMEs have begun to list themselves as sellers on ecommerce platforms, thereby expanding their customer base and increasing sales. 

MSMEs creating more jobs

The report revealed that out of the 85 million MSME sellers, 70% are connected to the Internet. Redseer projected that by 2027, internet connectivity will expand to encompass 80% of the MSMEs.

It emphasised that 60% of MSMEs have embraced e-payments, utilising online payment services like net banking and UPI, and by 2027, it predicted the adoption of e-payments will rise to 70%.

Presently, the online presence of MSME sellers ranges between 1.5 million and 2.5 million, resulting in a penetration rate of 2-3%. The rate is anticipated to double and reach 5-6% by 2027, accounting for 5.5-6 million online sellers. These additional MSMEs are expected to create over 35 million new job opportunities while participating in online sales.

Importantly, these estimates could experience a substantial increase of 20-25% following the enactment of proposed amendments to the GST Act and Rules. The changes would enable unregistered ecommerce sellers with turnovers up to Rs 40 lakh per annum for goods and Rs 20 lakh per annum for services to engage in intrastate transactions.

Redseer also indicated that within the initial year of operating on ecommerce platforms, online sales contribute to one-third of total revenue. This figure surpasses 50% within three years.

Further, noteworthy improvements in net profits were reported by MSMEs in categories like fashion, beauty, and personal care after venturing into the online market, it added.

An impressive 96% of surveyed MSMEs in these categories reported higher net profits and more than 55% of those with turnovers exceeding Rs 1 crore per annum noted an increase of over 15% in net profits.