Can E-Tailers Help In MSME Recovery? E-commerce will give the MSME sector an opportunity to access liquidity as well as conclude any financial transaction within minutes
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Despite several hurdles that the current pandemic brought to various sectors in India, the e-commerce sector saw a boom in business. In fact, during the recent festive season sales, Flipkart as well as Amazon accounted for more than 90 per cent of the e-commerce industry's gross sales of around INR 29,000 crore as per a RedSeer Consulting report. As the e-commerce industry continues to grow and play an important role in India's growth, they are expected to play a major role in helping the recovery of the MSME sector.
Smooth financial transaction
E-commerce will give the MSME sector an opportunity to access liquidity as well as conclude any financial transaction within minutes. Such frictionless payments are of high importance during such times with social distancing being the norm and contactless payments being adopted across sectors. Several e-commerce companies are also associated with fintech players that help in managing large sums of transactions. With such associations, MSMEs can definitely benefit and overcome any financial hurdles that they may face. Recently, Paytm announced that it would be aiming a disbursal of INR 1,000 crore in loans to the MSME sector by March, 2021. Such initiatives definitely help the sector in managing its debts and slowly moving towards recovery.
Larger market and logistical strength
E-commerce not only helps in providing a smooth transaction process, but also opens up markets and areas that MSMEs have yet to venture in. While many would be aware of the kind of market hold that Flipkart and Amazon have in India, few have understood the potential international market the giants open up for. Recently, Flipkart announced that it was enabling cross-border trade for local Indian MSMEs in Nepal. Amazon, being a global giant, reported that Indian MSMEs on its global selling programme crossed $2 billion in exports. This exposure, along with the logistical strength that the e-commerce sector provides, helps the MSME sector to explore a larger market and customer base that wouldn't have been possible through traditional routes. With the pandemic having forced digital adoption and transition online, it is an opportune time for the sector to utilise these strengths. Amazon recently announced that the Great Indian festival saw the participation of over one million MSME buyers, which was 61 per cent higher than the previous year's event. The volume of orders increased by 108 per cent compared with last year as per Amazon which in turn led to 291 per cent jump in sales.
Enhancing digital experience
A Zinnov Consulting survey highlighted that one-third of MSMEs in India have enhanced their digital presence during lockdown. Digitization is definitely the way forward for the sector as it transitions online and adopts digital technology. But the lack of understanding will be one of the major hurdles for the sector. As per another survey conducted by SME body—India SME Forum, 70 per cent of MSMEs cited lack of knowledge and guidance in using digital tools, cost of investing and lack of talent to manage digital technologies as the key challenges towards its adoption. This gap can be reduced with the help of the e-commerce sector. With years of experience and top talent as part of it, e-commerce can help MSMEs by guiding and managing such tools through partnerships and collaborations.
Commerce minister Piyush Goyal recently tweeted that the government e-marketplace (GeM) was playing a crucial role in catalysing MSME growth in line with the Central Government's vision of an Atmanirbhar Bharat. The portal witnessed its order volume growing 88 per cent from 26.1 lakh in November, 2019 to 49.4 lakh in November, 2020. These sales that are being made to government organisations and departments also includes women sellers which has increased by 92 per cent. With the government also in the final stages of drafting the national retail and e-commerce policy, it is expected that the new policy will benefit 65 million small traders, minister of state for commerce and industry Som Parkash said at an event. With further stimulus being provided to the MSME sector through loan moratoriums, the government is also exploring the advantages of the e-commerce model and implementing it to help the MSME sector. This in turn will help the MSME sector as well as, with the government intent, recovery in the sector is expected at a faster pace with activities restarting and demand increasing amongst government organizations.