We all know how globaliation has contributed towards creation of wealth, improving standards of living, allowed consumption of greater variety of goods, created employment and promoted convergence of income across economies. Though the initial beneficiaries definitely had been the larger corporations but the time has now come to shift the focus towards SMEs, the largest segment of economy for the majority of the nations.
In the Indian context this focus on SME becomes all the more critical due to the all- round impact that the segment brings in, from driving employment to leading innovation. At the same time, SMEs are central to the efforts to achieve environmental sustainability and more so the inclusive growth that the country needs the most.
The internet has empowered SMEs to sell to much bigger markets and grow their business at a fast pace. Now with over 80 per cent of global trade taking place through global supply chains, the agenda should be how to facilitate this access of SMEs’ to participate in these global value chains (GVCs). The successful SMEs have been getting connected to the e-commerce marketplace platforms Amazon, Flipkart which are opening up a much bigger market for SMEs’ products both domestically and internationally.
The ecommerce marketplace platform contributes the maximum from the SME’s seller’s perspective by providing them with wider reach and instant credibility to their offerings. This allows the SMEs platform to continue to focus upon its core work and keep innovating to be unique and relevant from buyer’s perspective.
As in the case of eBay, its registered online sellers, in the selected APEC economies are able to export globally, compared to a relatively small percentage of SMEs in traditional (offline) business. In the US, while 95 per cent of online seller’s export, less than 5 per cent of traditional business SMEs do so offline.
Among APEC economies, Thailand, China, Korea, and Chile have a relatively higher percentage of exporting SMEs offline, but this is still less compared to 100 per cent online sellers who export. In addition, SMEs that sell online are able to reach more markets than those in traditional business. On average, firms are able to reach an average of 30 different economies using platforms for e-commerce.
There are estimated to be around 42.50 million SMEs in India accounting for 95 per cent of the total industrial units, contributing 45 per cent towards country’s GDP, which is almost three times than what the corporate India contributes. Not only that, SME is also driving employment by employing 106 million, which is 40 per cent of India’s workforce. The large SME base in the country presents itself not only as sellers who get global access for their products but also the eco system attached with it, could also be the consumers for e-commerce Marketplace.
SMEs continue to get plagued by various challenges ranging from poor infrastructure to production capacity, lack of adequate funds, low on innovation and technology knowledge gaps. India needs to augment its innovation capacity when compared to global peers and stands at 66th position among 130 nations. India is also the third-largest and the fastest growing e-commerce market after China and the US. But, to compete with these two countries, it has to improve its performance. The SME sector is also poised to become a $25.8 billion market for emerging technologies by 2020.
Since SMEs can be instrumental in pushing innovation, e-commerce and technology, it is imperative that they embrace digitisation which would enhance their participation in an open and integrated economy. A sound business environment and a well-functioning entrepreneurial “eco-system” for business would foster participation of SMEs in a globalised economy. This is even more important in the current context, as increased competitive pressures and the fast pace of technological change demand agility, innovative behaviour and ease of access to strategic resources are critical. The ecommerce Marketplace platform like Flipkart, Amazon, etc. can be the perfect enabler to successfully address these critical issues from SME perspective.
In India, e-commerce Marketplace like Amazon, Flipkart, etc. have developed an ecosystem with multiple stakeholders that helps make the system work smoothly and efficiently. Though many among SMEs lack awareness of business possibilities through e-commerce and even lack basic business skills such as knowledge of excel or the importance of attractive packaging and product photos and information.
With ever expanding opportunities for SMEs from e-commerce more SMEs can benefit from the expected growth in online consumer demand in the coming years. Forecast by eMarketer made in 2015 indicated that retail e-commerce will increase from $1.3 trillion in 2014 to $3.6 trillion in 2019, and its share to total retail sales will more than double from 6.3 to 12.8 per cent between 2014 and 2019. Asia-Pacific, North America and Latin America are collectively expected to increase its share of retail e-commerce sales to 85 per cent by 2019.
As per a January 2018 eMarketer update, in 2017 itself, retail ecommerce sales worldwide reached $2.304 trillion, a 24.8 per cent increase over the previous year. In India there are still very few SMEs who are able to take advantage of the huge potential of e-commerce marketplace. Therefore, a big catching is to be done and if not done in time then we would be out of a competitive landscape for the Indian SMEs.
(The writer is former director on the Board of Central Bank of India, Mumbai)