India is home to ~63 Million MSMEs (micro, small and medium enterprises) that contribute to nearly 40% of India’s exports. This accounts for 6.11% of the manufacturing GDP, making MSMEs crucial to upscaling cross border eCommerce efforts. In 2022, the top export destinations for Indian MSMes were the U.S, UAE, Hong Kong, U.K, Germany, China and Belgium, with figures ranging from USD 4.73B to 54.7B!
MSMEs are amply aided by the fourth industrial revolution in retail,aka Retail 4.0 which is focusing on unifying the 2 Os,i.e offline and online. These omnichannel experiences aim to meet varying expectations and shifting demand by incorporating convenience, simplicity and transparency, which MSMEs can capitalize on with digital literacy. The key to achieving this digital literacy lies in switching from manual operations to automated eCommerce, which can empower personalization, multi-channel engagement and fad-focused shopping.
In this post, we’ll go into how MSMEs are doing their bit to elevate India’s status on a global platform and the role eCommerce plays in furthering international recognition and trade.
What qualifies as an MSME?
MSMEs are businesses that come under the MSME Development Act which first came into effect in 2006. Nearly 14 years later, the Act was revised under the Atmanirbhar Bharat package and is classified as follows
Several sectors in the Indian economy have benefited from MSMEs which in turn have penetrated the eCommerce market through rising internet and mobile content consumption. Where eCommerce was previously frowned upon and viewed as a competitor, it is now turning into a game changer for MSMEs ,with several enterprises leveraging multiple online channels to reach the right and relevant audience. But even as we speak, the road is being paved for omnichannel eCommerce which is widely regarded as the future of eCommerce.
In fact, ~52% of eCommerce sites have omnichannel capabilities to facilitate a seamless tracking and improvement of customer engagement by syncing multiple offline and online touchpoints.
So what really is eCommerce, or electronic commerce?
eCommerce refers to the purchases and transactions made online through the Internet. This is a textbook definition that nearly everyone knows, but did you know that eCommerce sales are expected to make up 20.8% of retail sales globally in 2023, which is estimated to rise to 24% within the next three years?
The interesting thing here is, in spite of being around for nearly 3 decades, it took the pandemic to make sellers and buyers realize the tremendous potential eCommerce holds. The subsequent rise in online transactions presented sellers with the opportunity to make hay while the sun shines. But just as demand and buying behavior evolved, so has the need for greater ground coordination, streamlined operations and supply chain management. Fast forward to today, the buyer journey has various permutations and combinations added, all of which point to one goal- seamlessness. The key to providing that consistency and accuracy to the end consumer lies in algorithms that can pick up on buying patterns, seasonality, item popularity, stock performance and transactional touchpoints- i.e.
What ultimately answers the question of how your prospect became a customer, and why!
This highlights an observation from an Ali Baba survey that post pandemic, 70% of small companies are investing more in digital technologies, with ~36% of small businesses reportedly using eCommerce as a survival strategy. The reason being that eCommerce has a record of capturing more sales and increasing customers by opening up more sales channels sans the costs normally associated with setting up a storefront. Moreover, not every product requires a brick-and-mortar outlet so long as your supply chain is streamlined, which again, goes back to the eCommerce enablement solution you use!
GoDaddy has further underlined the importance of eCommerce for MSMEs in its report where 62% of Indian SMBs use websites, online stores and eCommerce platforms as their mainstay channels for business growth. Of the 570 business owners surveyed, 65% made 50% of their revenue purely through online sales. And yet, it’s slightly alarming that the actual percentage of successful online sellers in the SMB space is only 10% which can be attributed to the lack of awareness of eCommerce advantages and regulatory obligations to sell online. In the next section, we’ll shed some light on the benefits of eCommerce adoption.
How eCommerce will unleash the potential of MSMEs
In a Growth of Retail and eCommerce workshop conducted in April 2023, IAS Dr.Rajneesh, who currently serves as the Additional Secretary and Development Commissioner for the MSME Ministry quipped,
India is set to become a $10T economy by breaking away from traditional ways of business.
For this to happen, online and offline retail channels need to be integrated through an eCommerce solution. Additionally, a number of government-led initiatives have been introduced for MSMEs, which include
- Collateral-free automatic business loans up to ₹ 5 lakh crore
- MSME registration using the Udyam website at zero costs, whether you’re a new user or migrating with an existing UAM.
- Waiver for procurement global tenders up to ₹ 200 crores
- Stronger digital governance through the launch of Champions , a Grievance redressal portal.
- Recognizing Retail and wholesale trades as MSMEs for the last two years.
Here’s what eCommerce SaaS automation gives MSMEs;
- Performance analytics
An eCommerce platform that streamlines inventory and order management can rapidly digitize operations and reduce overheads associated with a supply chain for MSMEs. For instance, through EasyEcom, MSMEs can access a plethora of reports concerning how their products are performing based on sales and revise pricing against seasonality, demand and historic trends. Even better, both inward and outward workflows can be 100% streamlined and managed on the go through a dedicated android-friendly app. Even through the system, all information pertaining to sales, inventory and orders can be accessed through a unified dashboard, enabling MSME sellers to determine which channels are making them the most, and least money.
- Market Expansion
eCommerce has broken down geographical barriers, making the international market more easily accessible to MSMEs sitting in India and South East Asia. This way, your store is visible through eCommerce platforms that invite traffic through good SEO and digital marketing efforts. In fact, offline outlets are an option rather than a necessity, and MSME sellers can even hit the brakes on existing expansion plans provided there is a substantial boost in online sales performance!
- Funding opportunities
Investors place their bets on businesses that thrive. And with eCommerce, MSMEs can experience a surge in order volume and online transactions, which are external indicators of the potential within. This can ultimately help MSMEs to secure funding which can be used to expand operations and hire more, and better!
- Community participation
Platforms like Amazon offer sellers exposure to insights, feedback and community acceptance. In fact, an Amazon update pertaining to its Vine program expanded the enrolment figure from 60 to 200, which are essential for MSMEs especially in the nascent stages. A community can give such participants equal opportunities for support and advice without the fear of going obsolete or being undercut. The feedback can also push the seller to innovate in future iterations and launch products customers are willing to pay for, rather than experiment without an end goal in sight.
With India’s GDP approaching the $5Trillion mark, experts are cautiously optimistic about the role MSMEs will play in the country’s progress. It’s also worth noting that India’s eCommerce market size will triple by 2025, hitting a valuation of $99B. This presents MSMEs with a huge opportunity to tap into eCommerce and gain entry to overseas markets and customers.
After two years of deliberations, the Government of India released its Foreign Trade Policy (FTP)on 31st Mar 2023 which includes measures such as e-certificates, paperless filing, transactional cost reductions and increase in domestic manufacturing. The policy extends a number of beneficial measures for eCommerce exports too to enable the industry to hit the $200-300B mark in the next decade. The government has also stated plans for export hubs with built-in warehousing facilities to help eCommerce aggregators maintain stock adequacy, process orders accurately, clear customs and process returns. Considering these measures and how people have adapted quickly to executing purchases from the convenience of their mobile phones, social network and websites, eCommerce can no longer be overlooked.
Just In: India's Q4 GDP has risen by 6.1% with the RBI governor predicting that the GDP could cross 7% this year. The drivers behind this growth are agriculture, manufacturing and construction sectors. In fact, the manufacturing sector grew in value by 1.3% in FY23 fueled by domestic consumption and private funding.
- What is the role of eCommerce in MSME growth?
Thanks to the increased internet penetration, MSMEs have grown, and contribute to sectoral growth.Financing and technology have facilitated a positive cascade impact on Indian, MSMEs helping the “Local for Global” and “Made In India” labels to be actualized. Through eCommerce, MSMEs can promote merchandise, gain cross border knowledge on imports and exports duty and upscale revenue generation to strengthen India’s Gross Domestic Product.
- Why is ecommerce good for small businesses?
eCommerce platforms have helped small businesses by removing geographical and language barriers, thereby helping to grow the consumer base substantially. NRIs are a strong and relevant audience, championing products reminiscent of their homeland which influence demand and encourage purchases without high investments.
- What are the MSME registration formalities for an eCommerce business?
Sellers wishing to register their MSME will need to visit the Udyam website which offers them the benefits of availing government schemes, tax exemptions, loans and a refund on ISO certificate acquisition costs. The steps are completely online and free
- On the portal, click on the option applicable to you which are, ‘For new entrepreneurs who are not registered yet as MSME ‘or those with EM-II’.
- Enter your Aadhar number and business name and enter the OTP sent to the mobile number that is linked to your Aadhar.
- Next, enter your PAN number and validate it.
- If you have a GSTIN, enter it in addition to the type of ITR filed in the previous year.
- Under the activity head in the form, state “eCommerce”.
- Mention your financial details, i.e. Investment and turnover and hit the submit button to get the final OTP.
- Your e-registration certificate will be emailed in 2 working days if all the steps above are correctly followed.
4. How can sellers use Amazon business after MSME registration?
The MSME Accelerate program lets 3.7L sellers avail deals and savings which are useful to small businesses. Additionally, MSME registered businesses can
- Make bulk purchases.
- Offer cashbacks and discounts against bulk orders.
- Save up to 28% on GST input tax credit with e-invoicing that simplifies claims.
- Diversify payment methods to reduce payment failures.