By- Lakshmi Venkataraman Venkatesan
The rise of Online marketplaces has opened doors across borders, allowing small businesses to compete with their larger counterparts. In today’s digital age, using online marketplaces presents a great opportunity for the country’s 63+ million micro-enterprises to expand reach, increase sales and achieve sustainable growth.
Today, artisans from Kashmir Valley can sell their products throughout the world without moving out of their State.
Digital marketplaces offer a host of benefits to micro-enterprises. Firstly, digital marketplaces enable micro-enterprises to reach customers beyond geographical constraints, helping them tap national as well as international markets.
Secondly, digital platforms reduce the need for physical storefronts, which eventually reduces establishment cost and enables businesses to operate more profitably and efficiently.
Thirdly, being part of a digital marketplace increases brand visibility, attracting more customers, which can be done through targeted advertising and SEO. Also, access to customer data and analytics can help micro businesses understand market trends, consumer behaviour and inventory management.
Lastly, online marketplaces offer integrated payment gateways that simplify transactions and ensure secure and fast payments, which helps in running the business without impacting the working capital cycle.
While digital marketplaces provide a host of benefits to micro-enterprises, there are also numerous challenges that these enterprises are encountering in today’s competitive business environment.
There is a constant threat from quick commerce platforms that now make up around 40-50% of all e-commerce sales of FMCG firms. These platforms are posing a threat to micro-enterprises like small traders, chemists and kirana stores, who are losing business as customers are drawn by higher discounts and the convenience of home-delivered products.
Secondly, limited knowledge of digital tools and online marketing strategies hinder the ability of micro-enterprises to effectively use digital marketplaces. This is further compounded by issues like infrastructure bottlenecks, poor internet connectivity and irregular power supply.
Thirdly, while online platforms can reduce the cost of marketing in the long run, the initial investment in technology, training, and marketing can be a barrier for micro units.
Fourthly, high seller commissions, which can range from 2% to 30%, depending on the type of product, are a big hindrance. Also, since the digital space is highly competitive, players are always vying for customer attention, making it challenging for micro-enterprises to stand out.
Lastly, efficient management of logistics and supply chain is crucial for timely delivery, managing returns and refunds and ensuring customer satisfaction. These issues can sometimes be a challenge for micro businesses.
Hoping for measures that will reduce their financial and operational burdens, micro-enterprises have high expectations from the ensuing budget.
Infrastructure development is expected to be a big focus, like investment in improving internet connectivity and ensuring regular power supply through Solar Power installations. This may be difficult to implement for micro startups but viable for micro-enterprises more than 3 years in operations.
Efficient and affordable logistics solutions customised for micro-enterprises can ensure smooth and timely delivery of products to customers.
Micro and small entrepreneurs would also look to budgetary support for software/tools and training programs to enable them to utilize social media for setting up direct-to-consumer businesses, which do not involve any middleman or seller fees. Therefore, funds should be allocated for training programs to enhance digital literacy among micro-entrepreneurs that should cover essential skills such as digital marketing, e-commerce operations and cybersecurity. Grants and subsidies to micro enterprises can support them to purchase technology, access digital tools and set up online stores.
Simplified e-commerce regulations and tax structures can encourage micro-enterprises to participate in digital trade without facing high entry barriers.
For this purpose, awareness about the ONDC platform should be created amongst units located in Tier-III and Tier-IV towns and rural areas so that they achieve better sales and higher profit margins. This can be done effectively through MSME Tool Room/Technology Centres and Extension Centres to create digital literacy amongst micro-businesses.
Lastly, strong cybersecurity frameworks should be implemented to protect micro enterprises and their consumers from online fraud and data breaches.
While the country is moving towards a digital future at a fast pace, it is crucial for the Union Budget for FY25 to address the unique needs of micro-enterprises in achieving robust digital readiness, to be able to fully utilize the benefits of digital marketplaces. The government can empower these small businesses to thrive in the digital economy by providing the necessary support in terms of financial aid, infrastructure, training and easing their regulatory burden.
(Lakshmi Venkataraman Venkatesan, Founding and Managing Trustee of Bharatiya Yuva Shakti Trust)
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