E-Commerce and the Festive Economy: An Opportunity for 6.3 Crore MSMEs to Double Their Revenue and Scale Business

The Indian e-commerce industry is set to grow by 84% to $111 billion by 2024. The Indian e-commerce market has transformed the way business is carried out in India, especially over the last two years by supporting small businesses in leveraging online platforms and giving them wider access to audiences, scaling-up production, and accelerating digital transformation. Festive season and the sales that come with it, play a crucial role in increasing the output of businesses, influencing the level of economic growth, employment, and the balance of payments. India is home to approximately 6.3 crore MSMEs, contributing around 6.11 percent of the manufacturing GDP and 24.63 percent of the GDP from service-activities to the country. Given that Indians have a tendency to make large purchases during festivals, with the rise of e-commerce we only see this trend getting stronger in the coming years. E-commerce platforms like Amazon managed to service customers shopping online from 99.7% of India’s pin-codes during the month-long festive celebrations; including 79% of new customers which hailed from tier 2 and 3 towns. Additionally, 12 local shops on Amazon grossed sales of more than 1 crore and over 330 local shop owners became Lakhpatis during the Great Indian Festival clocking in a 2X spike and selling over 10 products every minute.

In line with this, CUTS Institute for Regulation and Competition (CIRC), a not for profit and independent research and capacity building organisation, conducted a multi stakeholder discussion on “Festive economy and e-commerce sales of small and medium businesses in India” to understand the festive economy in India with respect to e-commerce channels serving as a vehicle to promote the festive businesses for SMBs. Speaking on this, Shri Kundan Kumar, Joint Secretary and Adviser, NITI Aayog, highlighted, “E-commerce has changed the way businesses are conducted in India especially with regards to the rate of growth seen in the sector. It has also led to an increase in demand post pandemic especially during the festive season as e-commerce platforms were used by consumers to buy goods for themselves and relatives.” Shri Bidyut Swain, Secretary, Ministry of MSME, highlighted that, “We are gradually moving into a hybrid field where physical retail will stay and virtual retail will continue it. 68% of MSMEs in the country are service oriented, and are onboarding onto e-commerce platforms today. Many micro businesses that reported temporary close-down in 3-4 months of COVID lockdown, have shown resilience and have been able to reel out of the effects of the pandemic due to e-commerce platforms. E-commerce is no longer a luxury but a necessity for MSMEs. It is an inescapable reality.”

Shri Vinod Kumar, President, India SME Forum, stated that, “During the last lockdown, local circles were created by most of the big e-commerce platforms. Amazon claims to have more than 28,000 neighbourhood Kirana partners as a part of their AmazonFresh initiative and other networks. This acts as an enabler for retailers, sellers and service producers to be able to stock and deliver to customers within 15 minutes. Sellers now only need to handover their product to e-commerce platforms and then the fulfilment services offered by the platforms take the product forward to the consumers in major cities and two-tier and three-tier towns.” Shri Pradeep S. Mehta, Secretary General, CUTS International said, “There is a need to protect the retail chain. Linking of the e-commerce supply chain with the kirana stores is unique in India given the extra push from policy, as it also benefits consumers by delivering the product faster. For a country like India which is projected to become a two hundred billion dollar e-commerce industry by 2026, there is a need for a level playing field with regards to policies to tackle the challenges that occur when a new sector comes in.”

Shri Ramesh Abhishek, Former Secretary, DPIIT and Director, Paytm Payments Bank, highlighted, “The e-commerce space is driven by FDI and FEMA related laws, making it crucial to have a level playing field, where same laws apply to all the players whether domestic or FDI controlled. With regards to innovations in e-commerce like flash sales, one cannot be selective about discounting schemes wherein the discounts in the offline sector are condoned but not on online platforms. There should be no law or policy for regulating commercial decisions like discounting, and should be left to the people to decide.” Dr. Arvind Mayaram – Former Finance Secretary of India, Chairman of CIRC, said that, “For a country like India, that is home to approximately 6.3 crore MSMEs and small businesses makes it all the more vital to encourage ease of doing business and foster a business-friendly environment by leveraging the opportunities offered by online platforms. Local shops form the backbone of the retail market and e-commerce companies have been actively working on onboarding them for greater market access with innovations like converting local shops to last mile delivery centres.”