New Delhi: The Covid-19 pandemic has wreaked havoc in the economy, with many Micro, Small & Medium Enterprises (MSMEs) struggling to survive due to a lack of cash flow and subdued consumer demand. The fear of contracting the virus has reduced footfalls in physical stores and outlets of all kinds, and consumers are simply unwilling to spend big. This has affected several product categories and there are stories of hardship across the board.
Electronics retailers, small shopkeepers, general stores and craftsmen normally see a boom during the festival season starting before Diwali and lasting till the end of the year. However, they have faced a hard time this year to reach customers through traditional retail channels. Items like sweets, diyas, candles, rangoli colours, idols, agarbatti, oils, traditional clothes and decor also witnessed a reduced demand this time. Even high end products like gems and jewellery, which start going off the shelves in the festive season in anticipation of winter weddings, have also not seen the usual surge in demand.
Perhaps the one ray of hope this year has been the e-commerce sector. The only space the coronavirus has not been able to touch has been the digital world. Online stores were brimming with schemes and offers and our inboxes were flooded with notifications of festive sales and special discounts.
E-commerce has been known to provide an advantage to developing countries, and the best example is of China whose infrastructure was much lower than the US. It is also the perfect solution for the traditionally marginalised sections in international trade, including the youth, women, rural, entrepreneurs and others, who make 12 per cent of all the global trade in merchandise, with a consistently high growth rate over the last few years.
B2C e-commerce sales are projected to grow to USD 600 billion in 2020, up 64 per cent from USD 365 billion in 2019, according to research from Statista, while consulting firm McKinsey estimates that global e-commerce will add USD 1.3-2.1 trillion in international trade by 2030, boosting trade of manufactured goods up by 10 per cent.
MSMEs must take advantage of e-commerce
If there is any way for Indian MSMEs to limp back to normalcy, it is by taking advantage of the online sales channel. Demand for products on e-commerce platforms have reached pre-pandemic levels, driven by smaller cities and towns. With a number of e-commerce portals launching regional language options, it has become easier than ever for MSMEs to go online and start selling to consumers all over India.
Our studies have established that new entrants account for 20 per cent of online sales annually, proving that digitally, e-commerce is the best vehicle for new entrants into businesses. An e-commerce enabled exporter can reach, on an average, 25 countries or export markets while a traditional exporter can reach only three. E-commerce also cuts the middlemen and directly extends the reach of a manufacturer to direct and global customers.
The back-end logistics and supply chain support systems being provided by e-commerce operators have been fairly resilient, in spite of serious challenges during various phases of the lockdown. With many portals continuing to maintain their customer-obsession and commitment to deliver on time, it is likely that MSMEs that partner with e-commerce portals will acquire and satisfy new end-users for their products.
During Diwali this year, thousands of MSMEs witnessed sales worth multiple crores in a matter of days among sales organised by e-commerce players in India. As we move beyond the Diwali season in India, there are significant opportunities for Indian MSMEs to feed the shopping fever during Christmas and New Year in international markets by leveraging e-commerce for exports.
Right time for new policy
This is also the right time for our policy makers to enable e-commerce. Rules for cross border trading where 10-page policies are the need of the hour rather than 1,000-page ones that encompass the whole e-commerce chain, including establishing an online business, setting up an e-commerce chain, to cross border delivery and after-sales services.
The pomp and gaiety of the festival seasons can never be complete without commerce. Besides bringing us closer to our family and friends, festivals integrate various people and creates a connect with local communities through art, craft, food and the various products and services required for each festival and celebration. This gives an annual stimulus to our economy and creates livelihoods. Learning from the online selling experience during the Diwali season in India, Indian MSMEs should now prepare to capture the festive-season demands in international markets.
(Vinod Kumar is the honorary president at the India SME Forum.)