ArticlesMSMEs Take-On International Markets with E-Commerce Channels


MSMEs Take-On International Markets with E-Commerce Channels

Despite difficulties in staying afloat, MSMEs in India are embracing the e-commerce model in an attempt to boost their global market. This is essential if India is to become a manufacturing and export capital.

By India Index

4 min read

India is already the fourth-largest retail market in the world aiming to reach a sum of $1.5 trillion by 2030. MSMEs or Micro, Small, and Medium Enterprises account for a third of the national GDP and are responsible for much of the country’s exports. 

According to the Ministry of MSMEs the Udyam Registration Portal–via which MSMEs register themselves – had 12,201,448 MSMEs on 25th November last year (however, officially registered MSMEs are only a small portion of functional MSMEs most of which still remain informally structured). 

That said, both registered and unregistered MSMEs were particularly impacted by the pandemic. Business for MSMEs declined disproportionately with the national GDP that only contracted by about 7.3% in 2020, and then experiencing a growth of around 8.9% in 2021; in contrast, small businesses experienced a 46% decline in 2020 which was then followed by an additional 11% in 2011. 

To counter this, the Indian Government initiated some short-term relief measures that included monetary support for MSMEs which did help them stay afloat. 

The new Aatmanirbhar Bharat (Self-Reliant India) agenda, for example, focuses on production-linked incentives (PLI) to ignite local manufacturing and support domestic exporters. 

Most recently, the 2023 Budget Announcement also proposed presumptive taxation on a higher income ceiling of two crores for MSMEs. However, more substantial procedures are needed by e-commerce platforms themselves to ensure that MSMEs are digitized and therefore continue playing their pivotal role in exports and the economy.

China’s system of e-commerce exports – in direct competition with India – initially contributed to making it the manufacturing capital of the world. Alibaba, an online e-commerce platform, successfully connected small Chinese businesses with markets across the globe. 

Although India currently lacks a similar platform, many villagers are on the e-commerce retailers that currently dominate the country, namely Amazon and the Walmart-owned Flipkart. 

And these channels do seem committed to MSMEs. In March of 2022, eBay India signed an MoU with Madhya Pradesh aimed at launching small businesses online. Flipkart similarly drew up an MoU with Textile MSMEs in West Bengal under the Flipkart Samarth programme, to support local artisans and weavers while leveraging their own platform. 

Perhaps the most significant is the 2015 Amazon Global Selling platform, a flagship initiative that helps small businesses expand their exports worldwide. In July 2021, Amazon followed this with a Digital Kendra in Surat to teach businesses about digitizing directly. The Kendra served over 4000 sellers. 

The company says to have aided over 4 million Indian sellers with its variety of helplines and promises to bring another 6 million into their fold by 2025.

However, it would be impossible to ignore that large e-commerce channels haven’t always been lucrative for Indian MSMEs. The rest of the world cites various interviews with local Indian businesses that claim they were unhelped by big platforms. 

A furniture manufacturer on Amazon, for example, only saw a rise in his sales for the first month as he received requests from all over the world, and then witnessed a decline so pernicious that he could no longer afford to keep his business online and also pay the 16% commission fee. According to him, he sees deeply discounted knock-offs first in the search results. Similarly, a dry-fruit packaging company in Kashmir thought that Amazon would be a good first foray into the online market. 

After failing to receive a single order, this seller also realized that search results presented Amazon-owned products while his own were buried too deeply to find. 

And, in an October 2021 publication Reuters, suggested Amazon had been selling low-quality, inexpensive imitations of products created by Indian merchants, under its own Cloudtail label–a business model founded by the N.R.Nayana Murthy of Infosys. In response to the allegations, Executive Chairman Jeff Bezos testified in a US Congressional hearing and promised to disband Cloudtail. In a gesture of goodwill, Jeff Bezos committed another $1 billion to helping MSMEs digitize via Amazon.

Although some sellers have resultantly left Amazon and other global platforms, they have embraced the e-commerce model and understand that it will dominate the market; they are now attempting to begin their websites and take advantage of social media.

Despite difficulties, MSMEs are catching on to E-Commerce. In adapting to the pandemic, sellers were forced online, and are now engaged with social commerce and cross-border trade. According to a recent survey 9 out of 10 MSMEs are attempting to increase their footprint in international trade and 2 out of 3 MSMEs are active on social media.

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