E-commerce is helping India achieve a more inclusive growth by creating large-scale employment opportunities, enabling first-generation entrepreneurs, skilling youth, empowering women, and formalisation and integrating MSMEs from tier-2 cities and beyond in national and global supply chains.
E-commerce provides new opportunities to a new generation of digital entrepreneurs, forced to start their own businesses following job losses during the pandemic. The popularity of online shopping, wider adoption of digital payments and increased use of social media such as Instagram, Facebook and WhatsApp for marketing have given many entrepreneurs the option to trade from home, without having to invest capital in renting stores or office spaces.
There have been some concerns that the online medium is hurting small sellers or offline retailers. However, we are seeing greater convergence of offline and online. While low footfall has shut down several brick-and-mortar outlets, retailers still need to store their goods in a way that allows them to fulfil the maximum number of online orders in the shortest time possible. More and more offline business are supplementing their business models by going online, and thereby increasing their market reach and access.
Entrepreneurship and employment
India faces an elephant-sized problem related to its workforce—creating enough jobs for the one million people who join the workforce monthly. India needs a massive expansion in small enterprises in the private sector over the next decade to absorb this growing labour force.
E-commerce is motivating first-generation entrepreneurs to start and expand businesses, given the greater ease of doing business and lesser investments in online compared to brick-and-mortar businesses.
Unlike the requirements necessary to run a business from a physical building, e-commerce does not require storage space or infrastructure investment on the part of the retailer. The sellers are no longer limited to their geographical location and can sell their products across the country including distant/new markets without the need for any physical presence. Thus, in a way, it gives them access to a bigger customer base which has a direct impact on their sales and incomes. It also creates millions of blue-collared jobs.
If Micro, Small and Medium Enterprises or MSMEs join an online marketplace of an e-commerce operator, they can focus on products and not worry about distribution. Many e-commerce platforms provide complete logistics and payments support to the sellers.
Access to funding with greater transparency
E-commerce operators provide greater transparency, traceability and real-time accounting, thereby ensuring better tax compliance with minimal compliance/ administrative cost.
The MSME sector, with 63 million units, constitutes about 90 per cent of all enterprises in India, employing over 120 million people, and contributes significantly to the GDP. This excludes the millions of small units operating from home, such as small boutiques, mom and pop stores etc., which are estimated to be over 15 million.
More than 70 per cent of these MSMEs are micro-enterprises, in active need of microfinance. MSMEs have limited access to funding, especially in smaller towns and villages, where they are primarily based, and have to resort to informal sources for debt such as family, friends, local moneylenders and chit funds. They end up paying higher rates on loans borrowed with high collateral. Most of them operate in the informal sector—barely possessing any recorded financial history—which affects their capability to borrow credit from organised lending sources.
With greater formalisation due to e-commerce, MSMEs will get better access to funding and growth markets. Digitization of small businesses will help formalise the economy and dilute geographical boundaries.
Women in workforce
More than two in three women in India are not part of the workforce. As more and more women use internet and social media, social e-commerce platforms such as Meesho are enabling aspiring women entrepreneurs (mostly homemakers) to start a business with zero investment from the safety of their homes.
This is hugely empowering for women—helping them gain business acumen and financial independence, improve their lifestyle and reduce gender inequality. E-commerce, thus, fits in well with various women-oriented welfare schemes started by the government, to promote up-skilling and entrepreneurship among them.
Skilling and upward mobilisation
It is estimated that more than 60 per cent of the young people joining the workforce have not completed college. Many e-commerce platforms offer training in soft skills to sellers, resellers and workers. Examples of such skills include complementary training in spoken English, customer-service aptitude, digital skills, effective smartphone navigation, business and entrepreneurship skills, financial management, self-defence, knowledge of the city, road safety measures, learning the processes of online safety, such as preventing cyberbullying or phishing attacks etc.
This helps entrepreneurs expand their businesses. These skills build the overall profile of the workers, which would be useful to them throughout their life personally, professionally and socially. This skilling enables horizontal mobility across jobs, thereby increasing the income avenues for young workers. They also provide vertical mobility, which will help them move up the career ladder to become an entrepreneur.
Increased formalisation of small businesses will help in better assessment of the country’s GDP and increase government revenue by way of higher tax collection. As more and more enterprises and individuals across the country adopt digital payments, it will slowly eradicate the informal sector, weaken the parallel economy and increase economic development in India.
DISCLAIMER: Smahi Foundation will be soon releasing its report, ‘B-Commerce Soars; Digitizing India’s Storefront Retail’. The author is the Head of Research at Smahi Foundation and a public policy professional based in Mumbai. She tweets @Ritu_twt. Views expressed are personal.