MSMEs in 2021: Six key trends to watch out in B2B e-commerce to jumpstart small business recovery
December 16, 2020 11:42 AM
Ease of Doing Business for MSMEs: In 2021, restoring MSMEs' economic momentum will be integral to giving the real GDP growth rate a big push. MSMEs will need to explore sales and distribution opportunities and find new ways for business expansion.
The intent of B2B e-commerce platforms in 2021 will be to integrate MSMEs in Indian manufacturing with global value chains.
By Rahul Garg
Ease of Doing Business for MSMEs: MSMEs in India account for 11 crore jobs and 29 per cent of the country’s GDP. In 2021, restoring MSMEs’ economic momentum will be integral to giving the real GDP growth rate a big push. MSMEs will need to explore sales and distribution opportunities and find new ways for business expansion. MSMEs will also have to rethink market penetration and customer outreach. Most importantly they will need access to easy and low-cost credit. The most reliable way for MSMEs to achieve an end-to-end exponential growth will be to embrace the technology enablement of their supply chain functions. B2B e-commerce platforms with their technological capabilities will partner MSMEs towards these goals with agility at scale in 2021.
The fundamental reason for low technology penetration is the high total cost of ownership (TCO). The situation will change significantly in 2021 due to the government’s Rs 8000 crore BharatNET and FFTH programs that will provide low-cost broadband connectivity to 150,000-gram panchayats across the country. MSMEs will be able to connect to B2B e-commerce platforms better. B2B e-commerce models build themselves on cloud-hosted applications that are scalable and thus offer a high degree of operating and financial leverage. Such cloud applications from B2B e-commerce platforms that drive multiple transactions and automate diverse supply chain functions from sales distribution, analytics-based customer outreach, and supply chain finance will catch traction with MSMEs.
Growing MSMEs’ Sales and Distribution
The pandemic has demonstrated how offline and manual sales and distribution processes can drive a wedge between MSMEs and their enterprise customers and thus create supply chain gaps. The government’s heavy-duty outlay of Rs 2.3 trillion in engineering a 5G optic fiber network across the country will expedite MSME-B2B e-commerce partnerships in 2021. B2B e-commerce platforms will provide a cost-efficient and seamless digital interface between MSMEs and enterprise customers in manufacturing and connect the former to more opportunities to sell higher and better, thanks to the 5G digital infrastructure. MSMEs that enroll in B2B e-commerce ecosystems will have the scope to earn up to 51 per cent higher revenues annually than their offline counterparts.
Through the pandemic, some MSMEs have swiftly switched from the manufacturing of non-essential goods to that of essential goods. What has constrained other MSMEs from doing so is the high proportion of variable costs of offline business expansion routes. The governments’ CLCS-TUS initiative to subsidize technology enablement in MSMEs will be a game-changer in 2021 amid the recovery from the pandemic. B2B e-commerce platforms will be able to enable 60-80 per cent spend reduction for MSMEs through digital business expansion.
Enabling Superior Market Penetration, Customer Outreach
Offline modes of market penetration and customer outreach are not outcome-based and thus increase risks for MSMEs. With B2B e-commerce, MSMEs can reach a 70 per cent broader customer base for domestic and global trade. The government’s initiative to invest Rs 27,300 crore in creating the single-window e-logistics market for MSMEs provides an excellent opportunity for B2B e-commerce and MSMEs platforms to collaborate. B2B e-commerce platforms will enable MSMEs to penetrate deep into remote locations across the country where OEM customers have faced challenges with the procurement of industrial supplies.
Assisting MSMEs with Supply Chain Finance
Delayed payments have been a source of concern for MSMEs through the pandemic. While the government’s legislation to secure MSMEs’ payments within 45 days is laudable, MSMEs need reliable short-term supply chain credit sources. Banks have to follow due diligence to optimize the risks of NPAs in their balance sheets and therefore have to anchor MSME debt offerings to collaterals compulsively. On the other hand, B2B e-commerce platforms can use analytics and big data and create alternative risk assessment models. They can use digital capabilities to analyze MSMEs’ cash flow, turnover, customer portfolio, supplier ratings by leading OEM customers, and records of bad-debts, if any, and provide agile supply chain credit to them.
Enabling MSMEs to be Self-Reliant
MSME units need to make their supply chain faster, more cost-efficient, transparent, and safer quickly. The intent of B2B e-commerce platforms in 2021 will be to integrate MSMEs in Indian manufacturing with global value chains and secure a higher proportion of gross value added in global manufacturing over the long term. B2B e-commerce networks can enable this through greater local capacity utilization of MSMEs and unlocking new opportunities for domestic and global trade.
Rahul Garg is the Founder of Moglix. Views expressed are the author’s own.