Ease of Doing Business for MSMEs: Selling through the e-commerce channel has helped small businesses realise their potential in boosting top line, reducing costs, and also creating more jobs in the market, a new report gauging the impact of digital adoption and e-commerce participation on small businesses said on Tuesday. According to the report – Does E-commerce Impact Small Enterprises and Employment in India? by Tata Institute of Social Sciences (TISS), SMEs adopting the e-commerce channel to sell goods have recorded 194 per cent jump in revenues in comparison to those selling goods offline.
Moreover, selling online helped nearly 15 per cent of enterprises introduce new products while 5 per cent started new shops, 6 per cent established new storage units, nearly 5 per cent found customers abroad, and more. In fact, “digitized SMEs increased their sales by 42 per cent and 40 per cent in tier-I and tier-II cities respectively,” the report said.
Based on a survey of 361 SMEs across 16 cities and interviews of 165 SMEs between December 2021 and March 2022, the report also noted that the cost of running the business was higher for ‘non-digitised’ SMEs by 25 per cent in tier-I cities and 42 per cent in tier-II cities in comparison to businesses going digital.
Bino Paul, associate dean at TISS and also the report’s author told FE Aspire (erstwhile Financial Express Online) that adopting digital technology helps small enterprises or self-employed mitigate transaction costs, coordinate demand and supply better, and overcome the challenge of space and time.
In terms of employment generation, digital SMEs saw 40 per cent more employment vis-a-vis those who remained offline, the report said. The labour productivity in digitized firms was also higher by 133 per cent. In tier-I cities, it was 68 per cent higher while in tier-II cities, it was 157 per cent higher than their offline counterparts.
“Digitization has not only helped small businesses acquire more employees and increase their sales but also has helped them reach out to the global consumers. It has given women entrepreneurs a way forward with their work,” Paul added.
The report added that e-commerce platforms have helped increase women’s employment, especially in the self-employed category by 59 per cent and the women business owners category by nearly 91 per cent. According to Paul, 30 per cent of businesses surveyed was women-owned SMEs, as he highlighted the disparity in revenue generation by men and women-led businesses.
Male entrepreneurs generated 67 per cent more revenue than their female counterparts in e-commerce. The average revenue of businesses led by men was Rs 15 lakh viz-a-viz Rs 9 lakh generated by the women entrepreneurs, the report said.
“(While) men make more revenue in tier I cities given the competitive nature of the industry and though patriarchy still exists in smaller cities, women are more challenging and adaptive to anything new that gives them a push,” said Paul.
Meanwhile, the reasons for a number of SMEs still being reluctant to get onto e-commerce platforms, according to Paul, was “their disinterest and cynicism about learning new skills.” Moreover, a large number of respondents believed that digital adoption would cost their business extra money which they don’t believe they can recover from sales, despite fair chances of expansion, he added.