Micro, small and medium-sized enterprises (MSMEs) are known to have a significant impact on the Indian growth story as these have contributed to the economy in more ways than one. No matter the industry or sector, MSMEs are considered very important to their overall growth. However, with the advent of the e-commerce industry offering various online shopping platforms, MSMSs started to be overshadowed due to shifting consumer demands.
By joining the online bandwagon, MSMEs have proven that they can cater to their audience no matter the medium. While the online shopping space initially proved to be a threat for MSMEs, with time, it offered stability and became a game-changer for MSMEs.
What is the contribution of MSMEs to our economy?
The MSME sector has been one of the fastest-growing sectors that have significantly contributed to the Indian economy and have accounted for a substantial portion of the country’s GDP through industrial development. The last few decades have seen MSMEs thrive, so much so that these have been considered a major threat to large established businesses. MSMEs are gaining momentum not just domestically but also worldwide and are further being aided by eCommerce establishments. The question then is, are MSMEs fetching benefits from e-commerce or are they facing a threat from the online marketplace?
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Is eCommerce helping MSMEs?
E-commerce has gained a vast footprint in the country’s retail industry. It comes with several benefits, especially for MSMEs. E-commerce supports MSME growth by enhancing its income-generating capability, higher profit margins, wider market reach, easy and streamlined marketing capabilities, and constant consumer feedback for continuous improvement in products and services.
Although MSMEs in India do not enjoy an online presence, they can participate in online sales through e-commerce. Due to the onset of the COVID-19 scenario, many consumers are switching to online shopping as the preferred choice.
What are the benefits of e-commerce for MSMEs?
- MSMEs are now able to sell their products and services through e-commerce without any restriction of location.
- MSME audience is not just restricted to a local area. E-commerce offers MSMSs a platform for conducting business and entering into transactions at a national as well as international level.
- With the help of e-commerce, MSMEs can reorganise, cut expenses, and even explore expansion opportunities for achieving higher growth and profits through optimal utilisation of resources.
- MSMEs can have access to a wider market for promoting their products and services since e-commerce offers technological advancements and a wider customer base through the internet.
How does e-commerce affect the growth of MSMEs?
Although e-commerce fetches billions of dollars every year, it comes with many drawbacks that end up impacting MSMEs. Here are some of them:
- While e-commerce sales are growing faster than physical ones, it’s the physical stores that continue to account for at least 90% of total retail sales in India. The main benefit of physical stores is the see, touch and try aspect, which is not always possible in the case of online shopping.
- Since e-commerce companies do not have actual stores like traditional merchants, consumers cannot often request repair or replacement. This results in a loss for consumers. As compared to online shopping platforms, physical enterprises allow business owners to have a stronger connection with clients and maintain long-term relationships.
- E-commerce websites have to heavily rely on the internet. This makes them vulnerable to various cyber-attacks. Online payments can also carry high risks. At times, the bill amount may be deducted multiple times and the refund process can take a long time resulting in customer frustration.
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Ecommerce Levels the Playing Field
The ongoing Covid-19 pandemic has impacted almost every business in some way or the other. One of the most impacted is the MSME sector. The pandemic caused shutdowns resulting in a major economic impact on the MSME sector and significant losses that also saw many businesses shutting down.
In general, e-commerce can transform the connection between buyers and sellers by acting as a mediator or facilitator between the two. Due to ever-changing technologies, MSMEs can be better prepared for the future by partnering with e-commerce institutions. This way they can surpass many difficulties and gain a competitive edge over other sectors.
FAQs - E-Commerce – A Boon or a Bane for the MSME Industry
Which business is best under MSME?
Some of the businesses that can have better chances of generating higher profits under MSME include gold and diamond jewellery, skills development and training, jute bag manufacturing, cold storage facilities, etc.
- Is e-commerce good for the Indian economy?
As economies across the globe are witnessing enhanced knowledge and information technology expansion, e-commerce is proving to be a boon globally. The Indian economy is also benefiting massively due to e-commerce.
- What are the benefits of e-commerce for a small business?
From wider reach, enhanced revenue, reduced operational costs, to online reputation, small businesses are benefiting majorly from e-commerce.
- Which industry comes under MSME?
MSME mainly covers the manufacturing and service industries. Trading companies are generally not considered as part of MSME.
- Which e-commerce is best in India?
There are many well-established e-commerce companies in India including Amazon, Flipkart, Myntra, Shopclues, etc.
- What is a key negative impact of e-commerce?
One of the main negative impacts of e-commerce in the Indian economy is slower business growth for small businesses since not many can join the online marketplace without having sufficient funds.
- What are the four types of e-commerce?
The most basic categories of e-commerce include, Business-to-Business (B2B), Business-to-Consumer (B2C), Consumer-to-Consumer (C2C), and Consumer-to-Business (C2B).
- What are the disadvantages of eCommerce for customers?
From privacy to security and even lack of in-store experience are some of the main concerns of customers with regards to e-commerce.
- What is the best way for a small business to sell online?
It is easy for a small business to start selling online by either starting an independent online store or joining one of the major e-commerce portals to enter the online marketplace. There are also many loan opportunities available for small businesses to expand online.