By enabling MSMEs, e-tailers to shift to quality offerings

Amazon & Flipkart reaching out to SMEs in India has given a new push for the development of this sector as a whole. SMEs of all forms including cottage industries and Kiranas constitute the economic lifeline of India. Their revival and growth are core and is of utmost importance to the revival of the Indian economy. The scenario has changed drastically in the last five months since the first phase of unlocking, the online platforms had been onboarding SME vendors for the last few years.

There are reasons galore for the emergence of a new direct-to-customer business model in Covid times. The disrupted supply chain has created havoc for many established players rendering them incapable of meeting the pre- Covid level of demand. This unforeseen supply-demand gap can be fulfilled by these SMEs, some of them already supplying to the established players.

With social distancing being the norms of the day, Indian consumers’ purchase behaviour has transformed drastically as is evident from the rising number of cashless transactions and significantly reduced footfalls in stores. This transformation has led to a phenomenal increase of direct-to-customer business models of varied forms, some of them utilizing the social media platforms while others resorting to e-marketplaces like Amazon, Flipkart, and others. Those on social media may have limitations of credibility and time-bound delivery due to the absence of adequate infrastructure. This is why some vendors prefer using e-marketplaces for overcoming these limitations. Both models have their own pros and cons.

The vendors using social media platforms alone can control their cost of distribution and hence be competitive, but it is an uphill task to create their visibility to a large audience and establish credibility as a serious player. Moreover, as delivery to the customer is entirely the vendor’s responsibility, any inefficiency by the third-party logistics hampers their brand image. That is why it is observed that most of these SMEs cater to customers spread across small geography. This model may be suitable for kiranas, but would not be appealing enough for those SMEs who are in manufacturing or value addition business. Therefore, in order to scale up, these SMEs prefer to onboard any e-marketplace especially when the latter joins hands with social media players.

In the latter case, the cost of distribution goes up due to the presence of the intermediary, that is, e-marketplace player, but the volumes generated by on-boarding would increase exponentially as the SMEs would get the advantage of both the platforms.