Entrepreneurship

Digital First – Understanding the evolving Indian SMB landscape

It is common knowledge that the SMB sector contributes significantly to the Indian economy. The MSME sector employs over 130 million people and contributes to about 25% of the national GDP from service activities.[1] Moreover, the number of registered SMBs in the country grew by 18.5% YoY in 2020 as compared to the previous year. [2]

There is no denying that the second wave of the pandemic posed numerous challenges to SMBs, including supply chain disruptions, paucity of raw materials, and reduced demand with certain business segments being classified as non-essential. However, the past twelve months have demonstrated how digitalization, especially e-Commerce, can help the sector overcome some of these adversities and succeed against the odds.

As the Indian ecosystem prepares for the second half of the year amidst the ongoing pandemic, given below are some of the key e-commerce and SMB trends to bear in mind.

Consumer Behaviour and the Emergence of D2C models

Owing to the second wave of the pandemic, consumers have become even more cautious about offline shopping and continue to shop online. Additionally, loss of jobs and slowdown in economic activity is giving way to the rise of value-seeking customers who scout for better prices online before purchasing anything.

In such a scenario, the SMB sector is witnessing the rise of D2C or direct-to-consumer brands. As SMBs seek to tackle challenges faced in conventional business models, there is a growing impetus for them to turn digital-first – to reach the customer directly either through their own website or by listing their products on an online marketplace. The latter is being preferred by mature SMBs, considering it allows them to capitalize on existing online capabilities and reduce their cost of customer acquisition. This in turn enables them to pass on the benefits to their customers through better prices.

Growth Categories to Watch Out For

In order to succeed in the pandemic-driven world, SMBs will also have to identify the right growth segments and capitalize on these. It is expected that COVID-19 essentials, health, pharma, and groceries will offer high growth opportunities in 2021. Additionally, with work from home here to stay and many companies permanently moving to a hybrid work model, the demand for office supplies, furniture, electronics, and accessories will continue into the latter half of the year.

Renewed Focus on Capability Creation

With strong e-commerce tailwinds, SMBs must focus on capacity building in terms of capital and resources. Further, a strong emphasis on VAS skills such as cataloging, photoshoots, and account management can prepare businesses to cater to the influx of new customers. Building up efficient fulfillment resources, adopting digital payments, ensuring faster, reliable delivery mechanisms, and managing end-to-end customer service becomes crucial, as the business grows to retain and expand the customer base.

There is no doubt that digitalization is the way forward for the SMB sector. SMBs stand to benefit if they commit to e-commerce in the long-run and build strong online channels that can support their current go-to-market plans. In addition to ensuring business continuity, this will also help them reap significant profits eventually. Established players will also play a crucial role in shaping the Indian SMB segment’s success in the coming year.

This article is authored by Pankaj Jathar, Chief Executive Officer, Prione


[1] https://www.ibef.org/download/sucess_story_Digital_Adoption_by_Indian_SMBs.pdf

[2] https://www.ibef.org/industry/msme.aspx

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