E-commerce can boost small businesses in India

India’s 633.88 lakh non-agricultural Micro Small and Medium Enterprises (MSMEs) were responsible for over 11 crore jobs in 2015-16 and contributed 28.77% to the Indian GDP, according to the 2017-18 report of the Ministry of MSME. Yet, most of these small businesses remain just that—small. The reasons are many—from lack of infrastructure, absence of technological competencies and scarcity of capital, to ignorance of opportunities.

But the biggest hurdle can be summed up in three questions: how do I find new customers?; how do I reach them?; and how do I serve them well? E-commerce is the answer. The internet helps Small and Medium Businesses (SMBs) break free from the limitations of location. Traditionally, Indian businesses had to invest in a capital intensive and multi-tiered distribution network to have a nationwide footprint. Not anymore. Studies have shown that small businesses selling online grow faster—with profits growing by over two times—than those that do not. This is directly linked to the larger customer base that e-commerce opens up for them. Digital commerce, which grew at 34% Compound Annual Growth Rate (CAGR) between December 2011 and December 2017, is expected to reach ₹2.37 lakh crore by end of this year, according to a research report by Internet and Mobile Association of India (IAMAI) and IMRB Kantar. That is a sizeable and fast-growing market.

Online commerce also does away with numerous inefficiencies. Historically, it was the middleman who had all the power with his understanding of market knowledge. E-commerce is transparent—even a seller in a small town has visibility over pricing trends across the country and is no longer dependent on a middleman for that piece of information. So why isn’t everyone online yet? Putting up a basic website is easy, but not every business knows how to drive traffic, showcase products, ensure that inventory is mapped, order management is seamless and, after a sale takes place, how to fulfil that order.

This is why a marketplace, with the ability to service a large footprint nationally and even globally, becomes important. However, organisations working with small businesses need to understand that tailor-made solutions are necessary. With growth comes greater ambition. To fuel their ambition, small businesses need easier access to cheaper capital. There is scope for improving the quality of internet connectivity. The recently announced National Digital Communications Policy, 2018, has the stated objective of bringing broadband to all Indians by 2022. That will be a game-changer for small businesses. More jobs will get created and the Indian economy will grow faster.

Gopal Pillai is director and general manager of seller services, Amazon India

The views expressed are personal