There is clearly a strong opportunity for tech and digital players who can step up to instill confidence in MSMEs by creating awareness and guide them on how technology can help and act as a catalyst for their growth.
It has been more than two years that COVID-19 has swamped the globe, rupturing the healthcare and economy worldwide like nothing else has done in recent times. India, one of largest economy of the world could not be insulated from the havoc of COVID 19. It has been amongst the worst hit with a significant decline in the economy.
Micro, Small & Medium Businesses – MSMEs (businesses with less than 500 employees), lifeline of Indian business economy with contribution of 99.8% to all businesses in India, employing more than 120 Million people and contributing to almost a third of the total GDP of the country, got most significantly impacted. A large chuck of this business segment had been fighting for their survival.
MSMEs turning the tide by joining the digital bandwagon
While as a country we are still in the midst of the pandemic after two years, interestingly the MSMEs have been able to turn the tide very well. They are not only surviving but staying competitive as well during this overwhelming period. Needless to say, that technology esp. digital technologies have played a big role here.
To delve into detail, Kantar had interacted with more than 11000+ MSMEs at Pan India level towards the end of 2021 and early 2022 during 26th year of “ITOPS Business”, an annual syndicated study on India Businesses, and found out how digital technology adoption have helped MSMEs to sail through to remain competitive during this overwhelming period and the businesses who have adopted digital are much better off today than their other counterparts.
Now the question is, how can we say that convincingly? To answer that, we need to take a step back and understand how digital savvy are Indian MSMEs traditionally and what changes have COVID brought in amongst these businesses towards digital adoption?
There is no denial of the fact that this business segment as whole were not very prone to invest in digital and was moving with a very slow pace in adopting the same. However, the COVID crisis has put MSMEs on the cusp of digitalization. As per Kantar digital hierarchy (based on ITOPS business), more than 40% MSMEs were offline in 2019. But with the onset of pandemic, more and more MSMEs went digital and by the end of 2021, merely just over 1 out of 10 businesses remained offline. Moreover, 2.5X increase was noticed from 2019 to 2021 amongst the businesses that were using digital technology to sell or doing paid communication online (engaged segment).
Here, it is very critical to mention that being digital is not a ‘Big city’ or vertical specific phenomena, it’s been spread across the board – more than 3X increase noticed from 2019 to 2021amongst MSMEs beyond Tier 2 cities that are selling or communicating online.
The insights from the above is clear – the value of going digital has started being recognized. And I am sure that this trend is set for an upward swing, with more and more MSMEs joining the digital bandwagon.
Digital transactions getting significant traction
With this backdrop, let’s answer the bigger question, how “going digital way” has helped the businesses? Kantar has noticed distinguished behavioral and attitudinal differences amongst the businesses that have adopted digital vis-à-vis those are still offline.
To start with, online businesses today which are leveraging digital technologies are far more financially literate than their offline counterpart. While cash is still the most prevalent form of transaction, digital transaction is getting significant traction. As per Kantar’s ITOPS Business 2021, 3X increase noticed in UPI payment acceptance and more than 100% uplift in business related payment made through UPI compared to the pre-pandemic era. Even usage of net banking and e-wallet have almost doubled in last two years. As of 2021 end, less than 2 out of 10 of the MSMEs were operating in “cash only” w.r.t. their business transactions.
As we are discussing about financial literacy, I would like to call out that while almost all Engaged businesses have bank accounts, less than 3/4th of the Offline businesses are having so.
Stark difference in attitude amongst the MSMEs those are leveraging digital technology to sell or communicating online compared to their offline counterpart
Lastly but most importantly, there’s a stark difference in attitude amongst the MSMEs those are leveraging digital technology compared to offline businesses. Offline businesses are much more watchful and safe players than those are digital. The MSMEs which have adopted digital are at the peak of the digital hierarchy (engagement segment that are leveraging digital technology to sell or communicating online) are much aggressive in terms of willingness to invest in business (almost 6 out of 10 business).
As a matter of fact, there is substantial difference in terms of future plans for both the kind of businesses. By 2021 end, IT Investment by an Engaged business was higher by 3/4th than the offline businesses. It is evident from the fact that the businesses who are on digital path are already investing much more in technology such as devices, software, cloud, social etc. Here it is very important to mention that such micro businesses also strongly believe that technology has the power to ease and improve the way they do businesses.
Having said the above, it’s not all lost for offline micro business. Some of these have certain business goals such as launching products, exploring new business models, increasing staff – albeit in limited capacity – as their outlook towards business remains very conservative. Also, such businesses do not prefer to focus on their digital presence or technology upgradation. The barrier to going digital for them is not cash crunch, but the issue is largely attitudinal over here as many of them are yet to understand the potential of technology to bring in a paradigm shift in their business.
So, what does it mean for the marketers?
There is clearly a strong opportunity for tech and digital players who can step up to instill confidence in such businesses by creating awareness through various engagement activities and guide them on how technology can help and act as a catalyst for their growth.
Below are some of the Golden rules for communicating to the MSMEs and getting them onboard:
Segment & Target: MSMEs are of various hues and there are many who are riding the tide currently while others are weathering the storm. It is important for the marketers to identify whom to speak to for what. While, Manufacturing and Retail might not be looking for high technology investments currently, segments like Healthcare, Pharma and BFSI would need several technology products and solutions to serve their customers better.
“Built for MSME”: Marketers that are serious in targeting MSMEs should have a customized communication line created for targeting the MSMEs. Remember, the one that worked for a large organization or for consumers may not work here! In many cases, communication meant for one type of MSME may mean something completely different for another type of MSMEs as these businesses are highly heterogeneous in nature.
Be a friend: MSMEs do need guidance at this stage. A little bit of handholding at this stage could prove a win-win for both the marketers and the MSMEs in the future. It’s essential to make this segment understand that their customers are looking for solutions/products at their doorstep and their interaction with digital media has grown much more than earlier. Thus, it is critical for the MSMEs to engage digitally and sell products online. In a way, digital presence is inevitable and there is no other route to it.
Indranil Dutta, Vice President, Insights Division, Kantar