Micro enterprises and SMEs in India and the drivers of growth

Micro enterprises and SMEs in India

There are about 48 million micro enterprises and SMEs (Small and Medium Enterprises) within the country today, which accounts for about 37.5% of the GDP (Gross Domestic Product). Besides the fact that this sector is such a powerful contributor to the economy, you should also know the fact that it provides employment to 111.4 million persons and accounts for more than 40% of India’s exports. We can therefore, without hesitation make a claim that micro enterprises are the backbone of India’s economy.

Having discussed the above, it is also true that now is the time the industry is going to boom at a faster pace than ever with digital transformation invading at such a pace and among the common masses to make itself resourceful to even the micro enterprises and SMEs.

Here’s how digital is the driver of growth for these micro enterprises

India has an internet users base of about 450 million as of July 2017, which accounts for 40% of the population. Despite being the second-largest user base in the world, only behind China (650 million, 48% of population), it is true that the penetration of e-commerce is low compared to markets like the United States (266 million, 84%), or France (54 M, 81%), but this rate is growing at an unprecedented rate, adding around 6 million new entrants every month. The industry consensus is that growth is at an inflection point.

With this being the state of matter, our micro-entrepreneurs have been smart in already realising and believing that, an online store for their micro enterprise / SMEs is essential not only as a marketing strategy to generate more leads, but also to understand the demand of the product/service. Getting online may be to retrieve services or sell their services. Here are a few digital drivers of growth in the micro enterprise segment.

  1. Digital hiring platforms

    Hiring advancements have been made available to micro entrepreneurs to make their job of hiring an easy swing. Digital hiring portals like Babajob have seen a tremendous popularity because of the listings of micro enterprises’. People are resorting to such hiring platforms for their low cost hassle free hiring options.

  2. Digital invoicing options

    While it is true that the implementation of GST have caused a certain level of discomfort to the SMBs because of the changes brought in to the system, we will also see more and more service providers working towards rolling out innovations and bundled offerings like, invoicing software + laptop + GST ready invoicing – to deliver a one-stop solution for small businesses’ accounting needs.

  3. Messenger apps for business

    Messenger apps like Facebook marketplace and WhatsApp have helped micro entrepreneurs take their sales a notch higher. On these platforms, the micro entrepreneurs can connect them directly to end-customers and open up new avenues of customer experience, support and outreach. The rise of chat-bots and messenger bots will also allow SMBs to automate some aspects of customer experience and service at scale.

  4. E-commerce

     This has been the single and largest driver of growth for micro enterprises for a while now and it is only recently that the other above mentioned players have entered the space. Because of the success seen, it might be right to say that the next wave of e-commerce in India will be driven by millions of small merchants taking their businesses online. Because of the scale of operations let’s dive into this a little deeper.

A peek into the state of matter of the e-commerce sector and micro enterprises (SMEs)
  • According to a study done by Indian Institute of eCommerce, by 2020 India is expected to generate $100 billion online retail revenue.

  • 27% of the SMEs who are online today, use e-commerce.

  • Micro enterprises use e-commerce as an option because it reduces their marketing costs by 60 to 80% and also gives them an understanding of the demand for their product/service.

  • A micro enterprise can get into the e-commerce space with an initial investment of approximately INR 3000/-

  • The major players in the ecommerce space so far have been Flipkart, Amazon, SnapDeal and Paytm

Let’s find out in this article, how the biggies help the local micro enterprises and if there are other entities evolving in the space to help take our micro enterprises and SMEs a notch higher with their businesses and the other drivers of growth.

How e-commerce helps micro enterprises and SMEs

E-commerce may be looked at as a platform that provides an additional source of revenue to micro enterprises and SMEs. It also provides an equal opportunity for all players in the market to showcase their offering and compete with each other. Also, because the players are competing against each other, factors such as the price point and quality become increasingly important and micro entrepreneurs focus on rolling out the best possible offering at the best possible price therefore devouring any fraud and favoring the consumers by making sure they receive the best.

Besides these, you need to know that e-commerce is among the major channels at the disposal of consumers who are doing their research to make a purchase decision. Times have changed and convenience is now the most sought after thing with any transaction. This attitude shift from wanting to be highly involved in a purchase to prioritising convenience has made a majority of people now open to making online transactions. This not only providing the entrepreneurs on their board an increased visibility through an online presence, but also increased business. As per a study, jointly conducted by domestic e-commerce player Snapdeal and market research firm KPMG, 85 percent of SMEs who adopted e-commerce believe that it is a cost effective medium for sales growth. The study also claimed that SMEs who actively adopt the internet for business activities boast 51 percent higher revenues, which results in 49 percent more profit and a seven percent broader consumer base than their offline counterparts.

Another interesting thing to appreciate is the efforts of the e-commerce players in helping the micro enterprises and SMEs successfully sell on their platforms. Not all of them are only providing a platform, but some are also taking that extra mile to introduce programs to help the rural and non-tech savvy micro entrepreneurs get on board. For example: E-commerce giant Amazon has partnered with FICCI-CMSME (Confederation of Micro, Small and Medium Enterprises) to educate exporters and manufacturers on B2C exports via e-commerce.  The effort is focussed on Amazon’s Global Selling Program that enables easy and convenient access for all Indian exporters – including entrepreneurs, SMEs, manufacturers — to sell their products to millions of consumers across the globe through 10 international marketplaces.

Another interesting initiative was when Snapdeal signed a memorandum of understanding with Small Industries Development Bank of India (SIDBI), to see the state-owned financial institution join the e-commerce company’s ambitious Capital Assist initiative. Through this partnership with SIDBI, Snapdeal provided small and medium-sized businesses the necessary financial and non-financial support to help expand their business and reach.

So, for all these reasons and more, we can say that the contribution from the e-commerce space towards the micro enterprises and SMEs has been commendable for the micro entrepreneurs. But! Are these the only drivers of growth? Let’s look at the other drivers of growth which are not really spoken of too often, yet have the power to change the tables of fortune for all micro enterprises and SMEs.

Other drivers of growth for micro enterprises and SMEs

Technology companies have played an interesting, educational and handholding role when it comes to micro enterprises. Here’s is a list of companies that’s contributing towards the growth of micro enterprises and how they’re doing it.

Google – Google took an initiative to enhance the business efficiency and productivity of micro enterprises and SMEs with its initiative, ‘Google Advantage’. This was a tool launched to let micro entrepreneurs make the most of and leverage the growing internet user base. Besides the Google Advantage, Google also has the ‘Google My Business’ wing to help Indian SMB’s gain online popularity and succeed in spreading the word about their business. This comes in as especially helpful for local business listing by letting them put up their business information on Google maps, Google search and Google+. This can be rolled out in languages other than English, such as Hindi and so on.

Microsoft – Small and medium businesses (SMB) can improve cash flows by up to 308% as a result of the “dexterity and flexibility” enabled by adoption of cloud technology, a survey by Microsoft India has claimed. Also, the use of cloud technologies allowed them better control over business and people processes. Overall, the study suggested that there is a greater than 75 per cent possibility that an SMB adopting cloud will see improvement in different metrics within two years. The other benefits of being on cloud were reduction in operating expenses and improvement in cash flow. Disclosing all these information to the public post their study, Microsoft launched the Cloud Adoption Program for small and medium scale businesses and micro enterprises under the Cloud Solution Providers (CSP) model.

Infosys and GE also joined hands to develop new Internet of Things (IoT) solutions that will help all manufacturers and relevant micro entrepreneurs among the other players to enable them to improve on their efficiency of their offering to the masses.

Besides the large technology companies, the smaller companies have also entered the space to provide their support in helping micro enterprises achieve their maximum potential. For example, a Bangalore based startup named App Browzer let’s micro entrepreneurs list their service or products by creating an app on the AppBrowzer app interface within under 5 minutes. AppBrowzer started off as an app aggregator platform and having acquired a large user base, added this wing to help micro enterprises harp on their user base and generate more leads thus leading to an increased business. This is especially beneficial for the local players to sell their offering to the local audiences as the listing appears in a section called ‘local services’.

A host of other startups are also helping retailers get a web presence, build their brand and make more money. The Indian startup culture has thus, yet again, proven itself to make India better.

While a large number of people have contributed towards the growth of these micro enterprises and SMEs, it would not be wrong to dream of a tomorrow where India’s GDP will grow exponentially because of its SMBs and be the primary cause for the country to have hit new benchmarks in the export business. The only thing micro entrepreneurs will now have to realise is the fact that they cannot averse themselves from technology and must get involved to sway with the wind of technology to stay up to date and be aware of the numerous opportunities technology will bring to their tables and indeed make the most of it. This again, is not a big hassle in itself with companies like Microsoft working towards helping the small business owners adopt to technology with their well research programs as mentioned above.

To close the article, we would like to quote Co-founder and Chief Executive, Kuna Bahl from Snapdeal who in a relevant interview stated, “India is a powerhouse of talent and resources, and if channelized well, the SMBs community in India has the caliber of being one of the front runners in the digital story of the country.”

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